A Healthy Business Metric

If I asked you the following question, would you be able to answer it?

• For every twelve-month buyer you earned through the end of 2025, how many marketing dollars will you spend speaking to the customer in 2026?

I'm willing to bet the following:

• Fewer than 1 in 2 readers could come up with a credible estimate. And a credible estimate is a good thing ... it will immediately tell you if you have a marketing problem.
• Fewer than 1 in 40 readers have actually measured the metric (email me kevinh@minethatdata.com) if you have actually measured the metric ... we'll determine if my estimate is correct.

Why is this metric important?

The metric is a measure of business health. 

The best businesses generate "some" volume from marketing, especially via their customer acquisition efforts. These businesses frequently have a 10% ad-to-sales ratio. The brand might spend $5.00 per year marketing to the twelve-month buyer ... with most marketing dollars spent acquiring customers AND the merchandise is so compelling that the customer willingly purchases on her own with minimal prompting (AND the prompting is email / organic social which costs next to nothing).

Many profitable ecommerce businesses generate considerable volume from marketing. These businesses frequently have a 20% ad-to-sales ratio. The brand might spend $12.00 per year marketing to twelve-month buyers. They spend a lot of search and paid social, and unfortunately those dollars reach indecisive twelve-month buyers considering shopping from the competition ... the marketing dollars are a tax the brand pays because their merchandise isn't compelling enough. Vendors and Agencies will tell you that the marketing expenditures lead to increased profit. They tell you this for a good reason ... "they" increase their own profit. The higher level of ad-spend most likely leads to more profit dollars for you, sure, but it is at a sub-optimal rate, a tax you pay for not having compelling merchandise.

Then we have those catalog marketers with ad-to-sales ratios between 25% and 30%. They're disconnected from modern ecommerce. The acquire half or more of their customers via traditional lists and co-ops. They send 20 catalogs a year to their twelve-month buyer file. Their email marketing metrics look awful (and worse, an agency convinced the brand to attribute email orders to catalogs). They cut-and-paste catalog creative on Instagram then say that Instagram "doesn't work". Paid Social is considered a "waste". Paid Search orders are attributed to Catalogs. These brands spend $20 per year marketing to their twelve-month buyer file, making it very difficult to achieve a robust business that yields a 10% pre-tax EBITDA.

• If you are trying to sell this business ... good luck. Few people want to purchase advertising-dependent businesses. Even fewer want to buy advertising-dependent businesses catering to 72 year old customers via paper.

Are you spending $5.00 per year per twelve month buyer?

Are you spending $12.00 per year per twelve month buyer?

Are you spending $20.00 per year per twelve month buyer?