How to measure marketing: the funnel, attribution and CAC by channel.

If you cannot see which activities produce customers, every marketing decision becomes a matter of opinion. Measurement does not need expensive software. It needs agreed definitions, consistent tracking and a monthly review where decisions are made. Investors will also ask for these numbers when you raise, so it pays to start early.

Step 1: define your funnel stages

Agree in writing what each stage means. A typical B2B funnel: visitor, lead (identified contact), marketing-qualified lead (matches the ICP and showed intent), sales-qualified lead (sales accepts it after a call), opportunity, customer. A self-serve product might use visitor, sign-up, activated user, paying customer. Fewer, clearer stages beat many vague ones.

Step 2: track source consistently

• Tag every campaign link with consistent source and campaign parameters.
• Record the original source on every lead in your CRM, and do not overwrite it.
• Ask “how did you hear about us?” as an open question on forms and calls. Self-reported answers catch the word of mouth, podcasts and LinkedIn conversations that tracking misses.
• Make sure analytics and cookies comply with UK GDPR and the rules on cookies; the ICO has guidance.

Step 3: choose a simple attribution approach

Attribution decides which channel gets credit. First-touch credits the channel that found the customer; last-touch credits the final one before conversion. Multi-touch models spread credit but need a lot of data. For an early tech startup, report first-touch and self-reported source side by side. Where they disagree, talk to customers. Treat attribution as a guide, not the truth.

Step 4: calculate CAC by channel

Customer acquisition cost is total sales and marketing cost in a period divided by new customers won in that period. Calculate a blended figure, then by channel, including people’s time, tools and agency fees, not just ad spend. Compare it with lifetime value and payback period. A widely used rule of thumb is an LTV:CAC ratio of around 3:1 or better and payback within about 12 months for SMB customers, though the right target depends on your cash position. Use the unit economics calculator to model it.

Step 5: review monthly and decide

Hold a 45-minute monthly review. Look at volume and conversion rate at each stage, CAC and payback by channel, and the biggest drop-off. Agree one or two changes and record them. Weekly, track only a handful of leading numbers: new conversations, qualified leads and meetings.

Keep the reporting in one place: a single spreadsheet or dashboard with the same layout every month, so trends are obvious. Feed the headline figures into your SaaS metrics dashboard and your board or investor update.

Worked example

Quaylytics, the fictional Liverpool logistics tech startup, spent £3,000 a month on LinkedIn ads and believed they drove growth because last-touch reports credited them. When it added a “how did you hear about us?” field, most customers named a port industry association event and the founder’s posts. Calculating CAC including time showed events and founder content were far cheaper per customer. Quaylytics cut the ad budget sharply, put the money into association sponsorship and saw CAC fall over the next two quarters.

Common mistakes

• Measuring vanity numbers like impressions and followers instead of qualified pipeline.
• Leaving salaries and time out of CAC, which makes every channel look cheap.
• Changing funnel definitions every quarter, so trends mean nothing.
• Collecting data and never making a decision from it.
• Judging a channel on one month of results when your sales cycle is three months long.

What to measure

• Leads, qualified leads, opportunities and customers per month, by channel.
• Stage-to-stage conversion rates and time in stage.
• Blended and per-channel CAC, LTV:CAC and CAC payback.
• Marketing-sourced share of new MRR.