Essential Marketing Metrics and Profitability Formulas

1. New Followers

Formula: New followers = Final followers - Initial followers

Use it when: The case provides follower counts at the beginning and end of the year.

Meaning: Indicates the total number of new followers generated by the campaign.

2. Cost per New Follower

Formula: Cost per new follower = Campaign cost / New followers

Meaning: Shows the acquisition cost for a single new follower.

Interpretation: A lower cost per follower indicates higher campaign efficiency.

3. New Customers from Followers

Formula: New customers = New followers × Conversion rate

Meaning: Calculates how many followers converted into actual customers.

4. Customer Acquisition Cost (CAC)

Formula: CAC = Campaign cost / New customers

Interpretation: A lower CAC is preferred as it signifies lower spending to acquire each customer.

5. Purchase Frequency per Year

If customers buy once every X months:

Formula: Purchase frequency = 12 / Number of months between purchases

Examples:

• Once every 4 months: 12 / 4 = 3 purchases per year
• Once every 6 months: 12 / 6 = 2 purchases per year
• Once every 3 months: 12 / 3 = 4 purchases per year

6. Annual Revenue per Customer

Formula: Annual revenue per customer = Average transaction value × Purchase frequency

Meaning: Represents the total revenue generated by one customer in a single year.

7. Gross Margin

If the case provides COGS (Cost of Goods Sold):

Formula: Gross margin = 100% - COGS % (or 1 - COGS in decimals)

Example: If COGS = 40%, then Gross margin = 100% - 40% = 60% (0.60).

Meaning: The percentage of revenue remaining after production costs.

8. Gross Profit per Customer

Formula: Gross profit per customer = Annual revenue per customer × Gross margin

Meaning: Profit generated by one customer before subtracting campaign costs.

9. Breakeven Customers

Formula: Breakeven customers = Campaign cost / Gross profit per customer

Interpretation: If actual new customers exceed the breakeven point, the campaign is profitable.

10. Retention and Attrition

If the case provides the attrition rate:

Formula: Retention rate = 100% - Attrition rate (or 1 - Attrition rate in decimals)

Example: If attrition = 15%, then Retention = 85% (0.85).

Meaning: Attrition represents lost customers; retention represents kept customers.

11. Active Customers per Year

Year 1: Active customers = New customers Year 1

Subsequent Years: Active customers = (Previous year active customers × Retention rate) + New customers this year

Meaning: Total active base including retained customers and new acquisitions.

12. Total Revenue

Formula: Revenue = Active customers × Annual revenue per customer

Meaning: Total sales generated by the customer base.

13. Gross Profit

Formula: Gross profit = Revenue × Gross margin

Meaning: Profit after production costs, excluding marketing expenses.

14. Net Profit After Campaign Cost

Formula: Net profit = Gross profit - Campaign cost

Meaning: Final profit after accounting for marketing campaign expenses.

Final Interpretation Template

• The campaign is profitable if the gross or net profit exceeds the campaign cost.
• Decreasing CAC improves campaign efficiency.
• High customer retention increases the long-term value of the campaign.
• Increased average transaction values boost revenue and profit per customer.
• Success is achieved when acquisition, retention, and spending cover marketing costs.