How To Calculate CAC Payback in Marketo | Arithmix

Calculating CAC payback is an important metric for any business looking to understand the profitability of their customer acquisition efforts. In this article, we'll explore what CAC payback is and when it's valuable to calculate. We'll also provide a step-by-step guide on how to calculate CAC payback, so you can start using this metric to optimize your business's growth.

What Is CAC Payback?

CAC payback is a metric that measures the amount of time it takes for a business to recoup the cost of acquiring a new customer. In other words, it's the length of time it takes for a customer to generate enough revenue to cover the cost of acquiring them. This metric is important because it helps businesses understand the profitability of their customer acquisition efforts.

For example, if it costs a business $100 to acquire a new customer, and that customer generates $50 in revenue per month, it would take two months for the business to recoup the cost of acquiring that customer. After that point, the customer becomes profitable for the business.

When Is It Valuable To Calculate CAC Payback?

Calculating CAC payback is valuable for any business that wants to understand the profitability of their customer acquisition efforts. It's particularly useful for businesses that are looking to optimize their growth and scale their customer acquisition efforts.

By calculating CAC payback, businesses can identify which customer acquisition channels are most profitable and focus their efforts on those channels. They can also identify areas where they may be overspending on customer acquisition and adjust their strategies accordingly.

How to Calculate CAC Payback

Calculating CAC payback involves a few simple steps:

1. Calculate your customer acquisition cost (CAC). This includes all costs associated with acquiring a new customer, such as marketing and advertising expenses, sales commissions, and any other costs directly related to customer acquisition.
2. Calculate your average revenue per customer (ARPC). This is the average amount of revenue generated by each customer over a specific period of time.
3. Divide your CAC by your ARPC to get your CAC payback period. This is the length of time it takes for a customer to generate enough revenue to cover the cost of acquiring them.

For example, if your CAC is $100 and your ARPC is $50 per month, your CAC payback period would be two months. This means that it takes two months for a customer to generate enough revenue to cover the cost of acquiring them.

By regularly calculating and monitoring your CAC payback, you can identify areas where you may be overspending on customer acquisition and adjust your strategies accordingly. This can help you optimize your growth and scale your customer acquisition efforts in a profitable way.

How Do You Calculate CAC Payback in Marketo

Marketo itself isn't naturally geared towards letting you calculate complex metrics like CAC Payback. As an alternative, teams typically use products like Arithmix to import data from Marketo and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers you'll powerful yet easy to use. With Arithmix you can import data from systems like Marketo, combine it with data from other systems, and create calculations like CAC Payback.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating CAC Payback in Arithmix

Calculating metrics like CAC Payback is simple in Arithmix. Once you've created your free account, you'll be able to import your Marketo data, and use it to create natural language formulas for metrics like CAC Payback.

Arithmix is designed to give you the power to build any calculations you want on top of your Marketo data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.