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How to Measure Marketing ROI: ROAS, CAC and Payback Explained
The few numbers that show whether marketing is paying for itself: ROAS, cost per lead, acquisition cost and payback, with worked examples.
Most small businesses either track nothing or track everything. You need about five numbers. Here they are, with examples you can work through on the back of an envelope.
In this article
1. Cost per lead (CPL)
Ad spend divided by enquiries. If you spend £1,500 and get 15 enquiries, a lead costs £100.
It’s the first number to watch, because it shows how well the ad and the page are working together.
2. Conversion from lead to customer
Of your enquiries, how many become paying customers? If 3 of those 15 buy, that’s 20%.
Marketing often gets the blame for this number, but sales follow-up, pricing and fit matter just as much.
3. Customer acquisition cost (CAC)
Spend divided by new customers. £1,500 and 3 customers gives a CAC of £500.
Include everything it took to win them, not just ad spend: agency fees, tools and creative are all part of it.
4. Return on ad spend (ROAS)
Revenue from ads divided by ad spend. If those 3 customers spent £6,000 in total, ROAS is 4 (£6,000 ÷ £1,500).
ROAS is useful but misleading by itself. A ROAS of 4 sounds great, but if your margin is thin, you may not be making a profit.
5. Payback period
How long until a customer’s profit covers what it cost to win them. If you earn £800 profit per customer in the first month and it cost £500 to win them, you’re paid back in the first month. If it takes a year, you need cash to wait.
Work out your break-even
Break-even ROAS is 1 divided by your profit margin. At a 25% margin, break-even is 4. Anything above that makes money, anything below loses it. Know this number before you judge a campaign.
Make sure the tracking is right
Numbers are only useful if they’re accurate. At minimum:
- Set up conversion tracking for form submissions, calls and purchases
- Use UTM tags so you can tell channels apart
- Record in your sales tracker where each enquiry came from, and whether it became a customer
Without that last step you’ll know your cost per lead but never your cost per customer. For setup, read our guide to conversion tracking in GA4.
Look at trends, not single days
Daily results bounce around. Review weekly, decide monthly. A campaign needs a few weeks of data before you can judge it.
What good looks like
There’s no universal benchmark. A good result is one where cost per customer is comfortably below what a customer is worth, and you can repeat it. If you can’t yet say that about any channel, the first job is to find one where you can.
A worked example
Imagine a small studio spends £2,000 in a month on Google Ads.
- The ads bring 40 enquiries. Cost per lead: £50.
- 8 enquiries turn into proposals, and 2 become clients. Lead-to-customer rate: 5%.
- Each client is worth £5,000 in fees, with a 40% profit margin, so £2,000 profit each.
- Total revenue from the ads is £10,000. ROAS: 5.
- Total profit is £4,000 against £2,000 of spend. The campaign more than paid for itself.
- CAC is £1,000 per client, and each client brings £2,000 in profit, so payback is within the first project.
Notice what you can see here that you couldn’t from clicks alone: the number of enquiries is high, but the number that become clients is what pays the bills.
Don’t just track the cheap numbers
It’s easy to focus on metrics that are simple to see but don’t show profit:
- Impressions and reach show visibility, not value
- Click-through rate shows how appealing the ad is, not whether it works
- Followers and likes show attention, not sales
- Cost per click matters only in relation to what the click brings
Use them to diagnose problems, but judge success on enquiries, customers and profit.
Long sales cycles
If your clients take months to decide, ads in October may produce clients in February. Judge campaigns on enquiries and qualified leads in the short term, then look back at customers three to six months later and connect them to their original source. Record the source in your sales tracker when the enquiry arrives, so you aren’t guessing.
Attribution: who gets the credit?
Customers rarely act after one ad. They might see a social post, search your name, read a guide and then enquire. Different tools give credit differently:
- Last-click gives all credit to the final step, usually search
- First-click credits whatever introduced them
- Data-driven models share credit across steps
None is perfect. Compare more than one view, and ask people how they found you. A simple “How did you hear about us?” box on the form tells you things analytics can’t.
A one-page monthly report
Keep it short:
- Spend by channel
- Enquiries by channel
- Cost per enquiry
- Customers won, and their value
- Return on ad spend and payback
- One thing to change next month
If you can fill that in, you’re measuring marketing better than most businesses.
Frequently asked questions
What’s a good ROAS?
It depends on your margin. Work out your break-even first, then aim above it with room to spare.
What if I can’t track sales online?
Ask every enquiry how they found you, and record it. It’s rough, but it’s far better than nothing.
Can you set this up for us?
Yes, it’s part of our performance marketing work. Talk to us.
