How much should I invest?

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This is a very general question, since the investment will vary from one business to another.
However, with some data you can get an approximation of how much is the ideal amount to invest in digital marketing .

Lifetime Value (LTV) is one of the most important factors in determining the present and future success of your company.

By measuring the net profit you'll make over cell phone database the course of your entire relationship with a customer, you'll be able to deduce exactly how valuable they are to your business.

You can calculate it by multiplying the average sales revenue x the gross margin percentage of a sale x retention rate.

Average sales revenue: What is the average revenue from a new customer in your business?
% Gross margin of a sale: is the profit margin percentage.
Retention rate: This rate is obtained by multiplying the average number of purchases in the year, the average number of years a customer lasts and the retention percentage, which would be 1-.
% Churn Rate (how many go to the competition or stop buying).

The CAC metric is important for two parties: companies and investors .

The first part involves external, early-stage investors who use it to analyze the scalability of new Internet technology companies.

They can determine a company's profitability by looking at the difference between how much money can be extracted from customers and the costs of extracting it.

The CAC is calculated by adding up all your investment in Digital Marketing (professional fees, advertising costs on Google Adwords, advertising costs on Facebook, server costs, etc.) , and dividing it by the number of clients acquired in that period of time, due to the investment and efforts made.

LTV:C AC is a way you can measure the efficiency of a crucial part of your business, the sales and marketing funnel.

It's a matter of asking a simple question: is a customer worth more (LTV – Lifetime Value) than it costs to sell them (CAC – Cost to Acquire a Customer)?

For investors, this can help provide answers to important questions like how much to invest in digital marketing .

Keep in mind that to make decisions about what to do next, it's important to know how much LTV the next CAC unit will result in, whether you spend another $1,000 on Google AdWords or hire a new sales rep.

You must take into account that the CAC cannot be more than three times the LTV and, on the other hand, it must be considered that the CAC is composed of marketing + sales costs.

In conclusion, LTV:CAC is used to make predictions about future results, based on past results, and as we mentioned before, the CAC cannot exceed three times your LTV to invest in digital.

But how much is the ideal amount to invest?

When making a decision for your business, consider these points:

Digital marketing budgets are increasing across the board.
Marketing spending is shifting from traditional advertising channels to digital channels
Social media , mobile, email and search marketing account for the majority of the digital marketing budget
Total marketing budgets are between 4% and 12% of total credit.
Smaller businesses spend more on marketing as a percentage of their total revenue.
B2Cs and online businesses spend more on digital marketing compared to B2Bs.