MBA Boot Camp: Digital Marketing & Metrics (5.3)
Concepts & Vocabulary
SEO (Search Engine Optimization): The process of organically (freely) improving your website to rank higher on Google.
SEM (Search Engine Marketing): Paying Google to put your website at the very top of the search results (Pay-Per-Click / PPC).
CAC (Customer Acquisition Cost): How much money you have to spend on marketing and sales to get exactly one new paying customer.
LTV (Lifetime Value): The total amount of money a customer will spend with your business over their entire relationship with you.
Core Lesson: The Golden Ratio (LTV:CAC)
Historically, marketing was famous for the quote: "Half the money I spend on advertising is wasted; the trouble is I don't know which half."
Digital marketing changed that. Today, everything is measurable. As an MBA marketer, you won't just pitch creative ideas, you will pitch the math. The most important math in digital marketing is the LTV:CAC Ratio.
If it costs you $50 in Facebook ads to acquire a customer (CAC = $50).
And that customer buys a $10 monthly subscription and stays for an average of 20 months (LTV = $200).
Your ratio is 4:1.
The MBA Insight: A healthy business wants an LTV:CAC ratio of at least 3:1. If your ratio is 1:1, you are losing money on every sale (because you still have operational costs). If your ratio is 10:1, you are actually under-spending on marketing and leaving market share on the table for competitors to steal.
