The Ecommerce Enterprise Scaling Guide

The Ecommerce
Enterprise Scaling
Guide:
How to Build a +$50M Growth Plan
What got you where you
are won’t get you where
you want to be.
Rationally, we know this.
But the instinctive part of our brains tells us something else:
Facing a hypercompetitive landscape and
“JUST KEEP DOING

ever-more aggressive growth goals, enterprise
retailers find themselves leaning on well-worn
WHAT YOU’VE BEEN

tactics. Particularly those from the days of
Facebook arbitrage and lockdown’s online surge.
DOING. IT WORKED It works … until, somewhere around $50 million

in annual sales, ecommerce brands hit a wall.
BEFORE. WHY Having scaled through product-market fit,

one or two dominant channels, and favorable
WOULDN’T IT WORK conditions … the business plateaus.
AGAIN?”
In the past, the answer was simple: Increase
efficiency. When growth stagnates and efficiency
slips, do whatever it takes to get ROAS up.
Here’s the thing: That won’t work.
The solution to $50M+ growth is so counterintuitive

it simply doesn’t occur to most marketing directors.
You have to embrace crumbling efficiency. Learn to love it. Learn to harness it
wisely and transform it into the fuel that ignites breakthrough growth.
1
The Ecommerce Enterprise Scaling Guide:
The Trap, the Truth &
the Solution
The investors, board, and executive team all agree on this year’s goal:
25% revenue growth year over year (YoY) without negatively affecting
EBITDA or enterprise value.
Exactly how that growth is supposed to happen seems like an afterthought.

The only real consideration? Dollars in, dollars out. Make a positive return on
whatever you spend.
You and your team are incentivized to use ROI-boosting tactics like:
• Pushing more and more of your social budget toward remarketing
• Doing likewise on paid search through branded campaigns
• Inundating your email and SMS lists with one-off sales
In other words, you start spending most of your money advertising to your
existing customers. And, because they already like your product, they’re happy
to buy.
Revenue goes up; ROAS looks better. Leadership, happy
YOU’LL EVENTUALLY
with your performance, asks you to employ the same
strategy again next month. And the next month. And the
RUN OUT OF EXISTING

next.
But those numbers mask a terrible truth. Because you’re

not acquiring new customers, you’ll eventually run out
of existing customers, too. CUSTOMERS
The reason brands at this level succumb to the trap?
Their customer base is large enough that this strategy works for months and
months on end. By the time the finance team notices topline revenue is down,
it’s too late.
Companies that avoid this trap and grow at this critical stage have three
things in common. They …
• Spend 50% or more of paid media spend on new customer acquisition
• Increase customer value over the next 60-180 days to break even
(or better) on every first purchase
• Forecast and set targets to quickly identify when they’re wrong
Nailing this sweet spot can only be done by responsibly evaluating and then
mastering your business’ inputs to better control its outputs.
2
Contents
Part 1. Set a Foundation to Measure & Align on What Matters......................................................4
The Hierarchy of Metrics............................................................................................................................................................................5
Never Judge Performance By a Single Metric
Net-Active Customers...............................................................................................................................................................................12
Fill the Sponge Before You Squeeze It
Three Revenue Layers................................................................................................................................................................................17
Grow Predictable Revenue First
Part 2. Model Cohorts to Multiply Customer Lifetime Value......................................................... 23

Baseline Value............................................................................................................................................................................................... 25
First Order vs. Lifetime
Time to Value................................................................................................................................................................................................. 29
Cash Multiplier > ‘Lifetime’
Cohort Value....................................................................................................................................................................................................31
By Time, Product (SKU), Offer & Beyond
Part 3. Forecast Growth to Map Your Future & Stay on Track...................................................... 36

Step 1: Ecommerce Inputs..................................................................................................................................................................... 39
What Are Your Historical Realities?
Step 2: Financial Projections................................................................................................................................................................ 83
What Can You Forecast Based on Them?
Step 3: Growth Inputs to Outputs.....................................................................................................................................................88
What Needs to Change to Get Where You Want to Go?
3
PART 1.
SET A FOUNDATION TO MEASURE &

ALIGN ON WHAT MATTERS
If a myopic focus on channel-specific metrics — particularly
ROAS — is a recipe for failure, what’s the alternative?
A growth-oriented strategy anchored on three

principles …
1. Never Judge Performance By a Single Metric

2. Fill the Sponge Before You Squeeze It
3. Grow Predictable Revenue First
These principles will help you achieve your fundamental goal

as a marketing director:
Taking the highest CAC possible while remaining

profitable.
PRINCIPLE 1: NEVER JUDGE PERFORMANCE BY A SINGLE METRIC
The Hierarchy of Metrics

ROAS WAS NEVER
For years, ROAS functioned as a proxy for
ecommerce success. If ROAS was good, the
RELIABLE AS A
business was healthy. If it was bad, you were in
trouble.
SINGLE SOURCE OF iOS 14.5 shattered that illusion.
TRUTH, ESPECIALLY Of course, ROAS was never reliable as a single

source of truth, especially for businesses as a
FOR BUSINESSES whole.
AS A WHOLE.
And especially because no single metric ever
could be.
What you need is a hierarchy — a method to understand how each part of your
marketing stack affects the whole.
The value of all data hinges on context; its role in a cast

of inputs. Metrics only matter relative to expectations.
The hierarchy we’ll follow breaks down into four tiers …
1. FINANCIAL 2. BUSINESS 3. CUSTOMER 4. CHANNEL

METRIC METRICS METRICS METRICS
Are your marketing efforts Are your core drivers Are your active customers Are platforms spending your
winning or losing? creating enough value? growing or shrinking? money effectively?
Contribution Margin Order Revenue, Ad New Customers, nCAC, ROAS & Costs
Spend, MER & AOV aMER & Repeat Rate (CPM, CPC, CPA)
5
1. Financial Metric
Are your marketing efforts winning or losing?
Although there is no “one metric to rule them all,” the closest thing we’ve got is
also the only key financial metric: Contribution Margin (CM).
CM is measured as a number, not a percentage.
Contribution Margin (CM) = Net Sales - Cost of Delivery (COD) - Ad Spend

• Net Sales = Gross Sales - Discounts - Returns
• Cost of Delivery (COD) = Product COGS + Variable Costs
• Ad Spend = Every dollar intended to generate online sales
Screenshots taken
from the Growth Map
you’ll build in Part 3.
Why use Cost of Delivery rather

than Cost of Goods Sold?
Your ability to scale ad spend depends on

the business’ ability to support all the costs
associated with increasing sales volume
(variable costs). Product COGS only includes
costs up until the sale.
COD includes post-purchase costs like

shipping, pick-and-pack, payment
processor fees, and more. Anything that
affects your ability to move more units.
6
THE ECOMMERCE Contribution
Margin
1 METRIC
PYRAMID OF SUCCESS
“The Scoreboard”
As marketers, this is our closest proxy
to profit.
Contribution margin is a number, not a

percentage.
As a marketer, CM is your closest proxy for profit. Because marketing efforts

don’t impact an organization’s operational expenses (fixed costs), it’s
unreasonable to hold yourself accountable to something like operating
income.
CM is the scoreboard — the ultimate goal you’re pushing toward. If you’re

hitting your CM target, you’re winning. If you’re not, you’d better figure out what
to do about it quickly.
There may be months where the goal is for this number to be small, zero, or
negative; regardless, it paints the clearest picture of marketing’s contribution
to the business’ value creation.
However, it is not enough to simply track CM month-over-month. Without

further decision-making context, there will be serious consequences for your
ability to produce future profit.
Tracking this number eliminates …
Bulls***
You’re held to a goal that ensures marketing efforts are translating
to real, actual dollars
Product-demand disconnect
CM allows marketing to anticipate inventory issues and operations
to purchase inventory based on demand
7
Margin
1 METRIC
PYRAMID OF SUCCESS Order Revenue,
Ad Spend, MER & AOV
“The Business Metrics”

Understand the generative value of my
marketing at a business level.
All metrics only matter relative to expectation
2. Business Metrics
Are your core drivers creating enough value?
The second tier contains four inputs that drive CM and enable healthy growth.
If CM is losing, this is where you look for the problem.

• Order Revenue = Gross Sales - Discounts before Returns $
• Ad Spend = Every dollar intended to generate online sales
• Marketing Efficiency Ratio (MER) = Order Revenue ÷ Spend
• AOV = Gross Product Revenue ÷ Total Transactions *
$
This ensures that you’re tracking marketing effectiveness, not post-purchase dissatisfaction.
* Provides a window into per-SKU revenue generation. This is especially important for setting per-SKU CAC targets.
Taken together, these metrics give you a snapshot of marketing’s combined

performance, from paid social to email to organic.
Again, this is not enough context to understand the effect of that performance in
the long run. For that, you’ll have to drill down a step further …
8
Margin
1 METRIC
Ad Spend, MER & AOV
“The Customer Metrics” New Customers, nCAC,

Protect future outcomes. aMER & Repeat Rate
Stop squeezing the value out of your existing

customer base to meet an efficiency goal.
3. Customer Metrics
Are your active customers growing or shrinking?
These inputs help determine whether or not your short-term goals are
compromising desired future outcomes:
• New Customers = Total Number of First-Time Orders
• New Customer Acquisition Cost (nCAC) = First-Time Orders ÷ New-
Customer Ad Spend*
• Acquisition Marketing Efficiency Ratio (aMER): New-Customer Revenue ÷
Total Ad Spend
• Repeat Purchase Rate = Total Transactions ÷ Returning Customers
$
New-Customer Ad Spend excludes remarketing to existing customers as well as branded search campaigns.
The purpose of the third tier? Counteracting

the “Shrinking Sponge,” which we’ll explore in
the next section.
As blended numbers, they reveal the composition of your revenue in any given
month as well as protect future outcomes.
If you miss on customer metrics, but win in the tiers above, there will be
consequences in the following months.
9
Margin
1 METRIC
Ad Spend, MER & AOV
“The Channel Metrics” New Customers, nCAC,

Align my measurement with the platform’s aMER & Repeat Rate
optimization.
Historical ROAS ≠ Future ROAS
Return on Ad Spend (ROAS) &
Costs (CPM, CPC, CPA)
4. Channel-Specific Metrics
Are Facebook, Google, etc. spending your money effectively?
In-platform performance comprises the fourth and final

tier. These metrics — namely, ROAS along with costs like
CPM, CPC, and CPA (cost per acquisition) — are, at best, THOSE NUMBERS
proxy metrics.
ARE NOT ACCURATE
PERFORMANCE
They represent poorly what the metrics we’ve just
reviewed represent clearly.
Ironically, most marketing teams treat them as their

North Star.
INDICATORS
Post-iOS14.5, Facebook’s reported ROAS provides an even more
out-of-focus picture. Why should you track it in-platform?
It’s not because those numbers are accurate performance indicators.
It’s because they’re how the platform makes decisions

about how to spend your money.
As such, restrict your measurement to click-only, in-platform ROAS.

• Click-only because other attribution settings are even more unreliable.
• In-platform because Facebook and Google can’t optimize against third-
party attribution
10
The reliability of in-platform data is almost inconsequential.
Facebook and Google have to spend your money based on the data available
to them; and you, in turn, have to make account decisions based on the way
the platforms actually spend your money.
WHY NOT? WHAT

What Does It All Mean?
DANGERS DO THE
The Hierarchy of Metrics gives you a sense of
what you should be measuring.
HIERARCHY OF But if Principle 1 is “Never Judge Performance by

a Single Metric,” the question remains:
METRICS HELP YOU Why not? What dangers do the Hierarchy of
AVOID?
Metrics help you avoid?
Simply put, the Hierarchy aligns your entire marketing team around profit …
forcing every other metric to ladder up into it.
Still, there’s an even more complex and revealing answer …
Coming up ...
The Growth Map you’ll eventually build in

Part 3 will roll up into a 12-month forecast
centered squarely on this exact Hierarchy
of Metrics.
11
PRINCIPLE 2: FILL THE SPONGE BEFORE YOU SQUEEZE IT
Net-Active Customers:
The ‘Shrinking Sponge’
Imagine your customer base as a sponge filled with water.
Without a defined strategy for reaching new customers, brands fall back on
selling more to existing customers. The more aggressive the targets, the more
often and aggressively they squeeze.
But, when companies squeeze the sponge without adding more water — new
customers — each squeeze risks being the last before wringing the sponge dry.
Hence, “The Shrinking Sponge.”
In this metaphor, the “sponge” is active customers —

the key to long-term revenue growth.
NET ACTIVE
January February March April
CUSTOMERS
New Customers
Reactivated Customers
Net Active Customers
Active Customers
Time
Lapsed Customers
Net Active
Customer Rate
“The Shrinking Sponge”
In this metaphor, the “sponge” is active

customers — the key to long-term revenue
growth.
12
While it’s tempting to look at your customer
file as a homogeneous group, that’s a
dangerous illusion. In fact, you’ll need to LOOKING AT YOUR
break your customers into four segments:
•
CUSTOMER FILE AS A
HOMOGENEOUS GROUP IS
Active customers
• Lapsed customers
•
A DANGEROUS ILLUSION
Reactivated customers
• New customers
As we define each, we’ll also build an example of how the sponge grows or shrinks.
Net Active Customers 1. Active Customers

The first is the most important segment: customers still
Active Customers Reactivated Customers
Lapsed Customers New Customers
within your average repurchase window. They’re your
most-valuable, most-predictable source of revenue.
1. Active 200 active customers in Jan.

Customers
200
Time
200 active
customers in Jan.
2. Lapsed Customers
These are the customers who have moved beyond the
January
repurchase window. For example, if the average time
between purchases is 90 days, a lapsed customer is
2. Lapsed anybody 25% beyond that period — 120 days.
Customers
200
500 customers lapsed in Jan. from previously active
500 customers Time
lapsed in Jan. from

previously active
3. Reactivated Customers
500 January
This group is composed of previously lapsed
customers that have moved back into “active
3. Reactivated customer” status. Typically, through intentional
Customers 300 remarketing via paid or owned channels — email,
100 lapsed
200
Time
SMS, etc.
customers
reactivated in Jan. 100 lapsed customers reactivated in Jan.
500 January
4. New Customers
4. New 500 New customers are exactly that — first-time
Customers 300 purchasers of your product. They’re by far the most
200 new customers
200
Time
expensive to acquire. But, as we’ll see, not acquiring
were acquired in them is even more expensive.
Jan.
200 new customers were acquired in Jan.
500 January
13
Once you’ve sorted your customer file into these categories, you’re set to
determine Net Active Customers. This metric helps you determine whether or
not your sponge — the number of active customers — is growing or shrinking:
Net Active Customers = Active + New + Reactivated - Lapsed

• >0 = Growth
• <0 = Shrinkage
If this number is greater than zero, you have sponge growth.
Less than zero; shrinkage.
The Short-Term Squeeze

Sponge shrinkage isn’t inherently bad. But it causes
SPONGE
major problems if you’re not keeping an eye on it.
After some digging, the finance team realizes that
SHRINKAGE ISN’T Jan.’s CAC was high, affecting the company’s P&L. As
a result, you’re directed to maximize profitability in Feb.
INHERENTLY BAD. To improve marketing efficiency, you pull back on new

customer acquisition and push toward maximizing
revenue from your existing customer base.
The problem is not necessarily that your sponge

shrunk. It’s that nobody noticed because ROAS and
MER looked fantastic.
January February
Active Customers Calculating Your Net Active Customer Growth
Lapsed Customers
450 Reactivated Customers Using the numbers above:
400 New Customers
Net Active
200 (Active) + 200 (New) + 100 (Reactivated) - 500 (Lapsed) = 0
200 Customer Rate
Active + New + Reactivated - Lapsed = Net Active Customers
Time
You broke even on Net Active Customer growth in January.
At the end of Feb., another 500 customers lapse. Despite the fact
-50 Net Active that you successfully reactivated some customers, your Net Active
Customers Customer base went down 50.
200 (Active) + 50 (New) + 200 (Reactivated) - 500 (Lapsed) = -50
500 Active + New + Reactivated - Lapsed = Net Active Customers

CAC MER
14
As for your P&L? It looked even better. Worse, it will continue to
YOU’LL HAVE look amazing … while your Net Active Customer pool continues
to dwindle.
TO CONVINCE Here’s why this is such an insidious problem: Shrinking the
EVERYONE TO
sponge generates numbers so good that it feels insane to
change course.
TANK EFFICIENCY! But the longer you shrink the sponge, the harder it is to reverse
the damage.
Let’s say you catch the problem in May and identify the core issue. You realize
that the only way to fill the sponge again is to acquire customers via expensive
paid channels.
The more unchecked shrinkage, the more you’ll have to spend to counteract
month-over-month churn.
And that means … you’ll have to convince everyone to tank efficiency!

Good luck.
In all seriousness, though, the point of this guide is to give you the tools to
convince your team to align around efficiency degradation. Because …
Even though short-term profitability might be

adversely affected, future profit is contingent on the
growth of your active customer file.
NET ACTIVE CUSTOMERS

January February March April
New Customers
Reactivated Customers
Active Customers
Net Active Customers
Lapsed Customers
Time
Net Active
Customer Rate
“The Shrinking Sponge”
Future profit is contingent on the growth of

your active customer file.
15
The question your organization needs to ask itself is:
“In what window of time do we need to maximize profit?”
The answer may look different depending on the specifics of your goals.
However, the answer is definitely not …
“Always, all the time, no matter what.”
Unfortunately, that’s the mindset most businesses instinctively adopt. Short-

term goals pitted against long-term expectations.
How do you counteract this

knee-jerk mindset?
By building accurate forecasts that
demonstrate how short-term losses lead to
long-term wins.
The Growth Map you’ll build in Part 3 roots

itself in both new and existing customers.
Your ability to aggressively acquire the
former depends on the stability of the latter.
16
PRINCIPLE 3: GROW PREDICTABLE REVENUE FIRST
Three Revenue Layers

An accurate forecast is not about
THE USEFULNESS OF ANY guessing what will happen. It’s about

creating a map of what should happen.
FORECAST COMES FROM Or rather, what is most likely to happen.
HOW MUCH IT’S WEIGHTED

The usefulness of any forecast
comes from how much it’s weighted
IN PREDICTABILITY.
in predictability. Not all revenue is
equally predictable.
Picture your customer base as a “layer cake” made of three tiers that gradually
increase in size.
🎂• Top Layer
New customers from paid channels comprise your smallest, most volatile tier
🎂• Middle Layer
Owned audiences reachable through “free” channels like email, SMS, SEO,
and organic social media
🎂• Bottom Layer
Existing customers (repeat purchasers) form the base, the foundational tier
upon which the other rest
The further you move up the cake, the less predictable

the revenue becomes.
The strength of your bottom layer allows you to accept more volatility on the
higher layers.
17
Layer Cake as a Metaphor
for Ecommerce Revenue
Top Layer: Most volatile, especially
during peak seasons
Data full of unknowns like CPMs, conversion rates,
and how customers will respond to your offer.
Predict the amount of money you’re going to Paid Acquisition
spend, and calculate the CAC on that spend.
New Customers
Middle Layer: Where you can reach

non-customers for free
Data driven from your organic strategy, not
subject to the volatility of CPMs or the ad market. Owned Audiences
Predictions come from channel-by-channel
Email, SMS, Organic Search & Social
based on the number of organic views and
revenue per view.
Bottom Layer: Most predictable

base for forecasting
Data you already have, and it can be
extremely accurate in predicting future Existing Customers
revenue. Use a cohort of your previous Cohort LTV
weeks, months, and quarters.
Variability in Revenue
Less Variable More Variable
18
Top Layer: Paid Acquisition
In the ecommerce world, paid acquisition primarily happens in two places —
Facebook and Google.
It’s the most unpredictable source of revenue because …

• Costs rise and fall due to factors outside your control
• Plus, new customers are a harder sell than existing customers
These are cold, hard facts.
But it gets worse. As your business gets bigger and bigger, reaching further
afield from your original target audience, it becomes harder and harder to sell
into new audiences.
They become more and more expensive.
Translation? Your paid social CAC will always go up as you grow.
You’ll still have to forecast spend and CAC. But that forecast is highly unlikely
to be accurate. If you’re relying on your paid media team to hit their targets to
survive next month, you’re in trouble.
It’s no wonder that media buyers are sorely tempted to move budgets toward
remarketing, especially if their job is merely to “get the same (or better) CAC as
last month.”
Since revenue from paid acquisition is both necessary and unreliable, you
have to build a base of reliable revenue to support it.
19
Middle Layer: Owned Audiences
An owned audience is any channel where you can reach non-customers for free:
• Email and SMS
• Organic social
• Organic search
Without the unpredictability of ad costs, forecasting revenue from owned

channels is far easier than paid.
Essentially, divide your sends, shares, and keywords by revenue from email +
SMS, organic social, and organic search.
Take the resulting average revenue per send and multiply it by the number of
planned sends in the month you’re forecasting. Voila! You have a rough sense
of how much revenue to expect from this tier.
As long as your channel groupings are tightly constructed and your UTMs
managed with discipline, send more, share more, rank more … earn more.
By combining Google Analytics and your ecommerce platform, Statlas lets you
easily track channel performance.
Owned audiences underwrite New Customer Acquisition Cost (nCAC) and

provide a more reliable stream of revenue than paid.
By themselves, however, they don’t have the reach of the top layer nor the
revenue stability of the bottom layer …
20
Bottom Layer: Existing Customers
Finally, we have the foundation. This tier corresponds to the sponge we discussed
in Principle 2.
Existing customer revenue is predictable. Not only because active customers

purchase more frequently, but because you have years of data on when, how
many, and how often.
Let’s take a simplistic example that will be unpacked in full during Part 3,
when you construct your Growth Map.
Say you’re forecasting revenue for November.

Revenue Forecasting:
Start by looking at the amount of new-customer
revenue you acquired in August: $100k. Next, look Aug. Sept. Oct.
at the amount of revenue those same customers $100k $30k $15k

produced in September and October. Usually,
something like this:
At this rate of retention, you can predict with a high degree of certainty that this
cohort will return $8k in Nov. We’ll get into the specifics of why a little later.
Assume you also made $100k in new revenue during Sept. and Oct.
That means new customers from Sept. will reliably

provide $15k in Nov., and Oct.’s first-time buyers will
Revenue Forecasting:
provide $30k. Add it all up, and you can reasonably
forecast at least $53k in Nov. revenue without relying Aug. Sept. Oct. Forecast
on any other tier than the bottom.
$100k $30k $15k $8k
Knowing the amount of money you’ll make from existing $100k $30k $15k
customers is as close to a sure thing as you’ll get in $100k $30k
ecommerce. The bigger that sure thing is … the more
volatility — and money — you can commit at the top.
Avoiding the “Ecommerce Upside-Down Cake”
The revenue layer cake works because building on a solid, Paid Acquisition
predictable foundation minimizes volatility while you expand
the top layer with new customers.
However, many businesses make their cake upside-down,

pouring themselves into the most volatile portions of revenue
Owned Audiences
generation without reliable targets supporting them from the
bottom up.
Obviously, your business is exposed to a great deal more risk if

Existing Customers
the bulk of your revenue is subject to uncontrollable volatility.
21
Part 1 Recap
Ecommerce success relies on three core principles:
Principle 1: Never Judge Performance by a Single Metric

Instead, use a hierarchy of interconnected metrics.
Principle 2: Fill the Sponge Before You Squeeze It

Avoid shrinking your base of active customers in pursuit of short-term
profitability.
Principle 3: Grow Predictable Revenue First

Protect yourself from the volatility of acquisition by building a layer of reliable
revenue.
HOW DO YOU MAP THAT LAYER OF RELIABLE REVENUE?

Now that we’ve got the core philosophy down, we can go deeper on the secret
sauce of ecommerce growth: modeling cohort-specific lifetime value.
22
PART 2.
MODEL COHORTS TO MULTIPLY

CUSTOMER LIFETIME VALUE
Let’s quickly return to your main goal:
Taking the highest CAC possible while remaining

profitable.
To do so, you need to front increasing CAC with predictable

revenue from your existing customers.
And to do that, you must reliably model the timeframe over

which existing customer value is realized.
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The Ecommerce Enterprise Scaling Guide

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The Ecommerce

But the instinctive part of our brains tells us something else:

Facing a hypercompetitive landscape and

“JUST KEEP DOING

WHAT YOU’VE BEEN

DOING. IT WORKED It works … until, somewhere around $50 million

BEFORE. WHY Having scaled through product-market fit,

WOULDN’T IT WORK conditions … the business plateaus.

Here’s the thing: That won’t work.

The solution to $50M+ growth is so counterintuitive

Exactly how that growth is supposed to happen seems like an afterthought.

Revenue goes up; ROAS looks better. Leadership, happy

RUN OUT OF EXISTING

But those numbers mask a terrible truth. Because you’re

Part 2. Model Cohorts to Multiply Customer Lifetime Value......................................................... 23

Part 3. Forecast Growth to Map Your Future & Stay on Track...................................................... 36

SET A FOUNDATION TO MEASURE &

A growth-oriented strategy anchored on three

1. Never Judge Performance By a Single Metric

These principles will help you achieve your fundamental goal

Taking the highest CAC possible while remaining

The Hierarchy of Metrics

SINGLE SOURCE OF iOS 14.5 shattered that illusion.

TRUTH, ESPECIALLY Of course, ROAS was never reliable as a single

FOR BUSINESSES whole.

The value of all data hinges on context; its role in a cast

The hierarchy we’ll follow breaks down into four tiers …

1. FINANCIAL 2. BUSINESS 3. CUSTOMER 4. CHANNEL

CM is measured as a number, not a percentage.

Contribution Margin (CM) = Net Sales - Cost of Delivery (COD) - Ad Spend

Why use Cost of Delivery rather

Your ability to scale ad spend depends on

COD includes post-purchase costs like

Contribution margin is a number, not a

As a marketer, CM is your closest proxy for profit. Because marketing efforts

CM is the scoreboard — the ultimate goal you’re pushing toward. If you’re

However, it is not enough to simply track CM month-over-month. Without

Tracking this number eliminates …

“The Business Metrics”

If CM is losing, this is where you look for the problem.

Taken together, these metrics give you a snapshot of marketing’s combined

“The Customer Metrics” New Customers, nCAC,

Stop squeezing the value out of your existing

The purpose of the third tier? Counteracting

“The Channel Metrics” New Customers, nCAC,

In-platform performance comprises the fourth and final

Ironically, most marketing teams treat them as their

It’s not because those numbers are accurate performance indicators.

It’s because they’re how the platform makes decisions

As such, restrict your measurement to click-only, in-platform ROAS.

WHY NOT? WHAT

HIERARCHY OF But if Principle 1 is “Never Judge Performance by

METRICS HELP YOU Why not? What dangers do the Hierarchy of

Still, there’s an even more complex and revealing answer …

The Growth Map you’ll eventually build in

Hence, “The Shrinking Sponge.”

In this metaphor, the “sponge” is active customers —

“The Shrinking Sponge”

1. Active 200 active customers in Jan.