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  • Writer's pictureNoopur Sane

‘KPI’-ing it real : Understanding key D2C metrics

Updated: Jul 12



I distinctly remember my first week as an Analyst at a D2C brand. I went armed with my enthusiasm for problem-solving, eternal love for math and logic, and the confidence of a fresh post-graduate. It was a performance marketing review meeting, and the team casually used multiple acronyms and oh-so-many jargons. I was expected to be only a spectator, but my curiosity almost killed me that day! Fast forward to a kind colleague who inducted me into the world of performance marketing metrics - right from impressions to CTR and CPM to ROAS. One week down, and I was part of the acronym-using, jargon-jolting cult. 😛


Whether you work in performance marketing, social media, design, or finance, it is likely that you have heard terms such as CAC, repeat rate, and ROAS. We also spoke to a number of fabulous first-time founders who confessed that they invest a lot of time understanding performance metrics to make sense of their biggest capital-sucking channel.  

In part 1 of ‘KPI’-ing it real, we try to simplify performance marketing metrics for beginners and first-time founders. Let’s dive straight into it, shall we?


Firstly, what is performance marketing? As opposed to traditional marketing where brands mostly pay a fixed amount of money for an advertising space (for eg, a front page ad on a newspaper costs a certain amount), performance marketing is results-driven, i.e. brands pay based on actual performance of their ad campaigns (typically modeled as Cost Per Click or Cost Per Thousand Impressions).

Surely, we all understand clicks (that’s how you reached this blog) but impressions? Impressions are nothing but advertisements being displayed on your screens. Therefore, an impression occurs anytime users open a website/ app and an ad is visible.


It’s likely that in any given period of time, you see the same ad by a brand multiple times. Because unlike in real life, the first impression is not the last impression (geddit? 😉). Say you saw the same advertisement by Fab Oils 3 times today - in technical terms, we’d say that the ad reached 1 individual with a frequency of 3. This is how you define reach and frequency in digital marketing. In mathematical terms, Reach x Frequency = Impressions

Now coming to my favourite jargon! Short acronyms that marketers use as frequently as they say hello. 


CPM - Cost per mille or Cost per thousand impressions. This can be calculated as the advertising spend per 1000 impressions (number of times your ad appears on a particular platform). CPM is also a pricing model where advertisers pay for impressions. Therefore, conversely, the amount of times your ad is showcased depends on the advertising money spent. 


CPC - Cost per click. This can be calculated as the advertising spend per click. As opposed to the CPM model where you would pay to display your ad, with the CPC model you only pay when a user clicks on your ad. Therefore, on a like-for-like basis, it is not difficult to imagine why the Cost Per Click would be typically more expensive than the Cost Per Impression.


CTR - Click Through Rate. This can be calculated as the Number of Clicks / Impressions and is typically represented as a percentage. It denoted that of the number of times your ad was displayed, and how many times it was clicked. It is safe to assume that this ratio should be as high as possible for optimal performance. CTR is typically used as a proxy for creative and audience performance, i.e. it measures the ability of the ad creative & targeting to generate clicks.


CAC - Customer Acquisition Cost. Your investors’ darling metric. It is the amount spent to acquire a new customer to your website. This is one of the most critical metrics for early and growth-stage brands and typically requires concentrated, omni-channel efforts to keep this under control. If your CAC is giving you sleepless nights, just send an email to meet@thebuildinc.com with the subject line ‘Burn Control’ and we’d be happy to set up a free 30-minute call to discuss a few actionables for your brand.


CPT - Cost per Transaction. This can be calculated as the Amount Spent / Number of Transactions. So if you spend INR 10,000 on advertising and get 10 orders on your website, the CPT would be INR 1,000. 

Looking at CAC or CPT in isolation could be massively misleading. Let’s look at 2 scenarios. Scenario 1: Apparel Brand 1, CPT: 600, Average Order Value (AOV): 600Scenario 2:  Apparel Brand 2, CPT: 1000, Average Order Value (AOV): 3000

See how looking at CPT alone would have led to the conclusion that Brand 1 is doing significantly better than Brand 2? This is also why we closely look at ROAS as a power metric. If there were only ONE METRIC you could look at as a business head, let that be the ROAS.  


ROAS - Return on Ad Spends. Calculated as Revenue Generated / Amount Spent. A little bit of math suggests that it is the same as  (Revenue Generated / Number of Transactions) / (Amount Spent / Number of Transactions) i.e. AOV / CPT. In the above scenarios, therefore, Brand 1 would have a ROAS of 1 and Brand 2, a ROAS of 3.


Brands who want to improve their bottom line always aim to keep improving their ROAS. We’ve laid out the different things that impact your ROAS in another blog, so you understand this power metric well. Hope this was helpful. If it was, share it and help us get some more impressions, please?



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