The Most Overlooked Metric in Paid Ads (That Fixes Everything)
A guest blog by Dario Markovic, Growth Strategist and Digital Marketing Coach
Happy Monday! This week on the All About Digital Marketing blog we have an article from Dario Markovic, Growth Strategist, Digital Marketing Coach and CEO of NMM Media, a leading eCommerce brand specializing in luxury accessories. With a background in digital marketing and SEO, Dario helps DTC brands grow through performance-focused strategies and systems. Outside of work, he enjoys hiking, playing guitar, traveling with his family, and taking care of a growing collection of rare tropical plants.
Over to Dario…
Most ecommerce and Direct to Consumer (DTC) paid ad conversions land squarely on Return on Ad Spend (ROAS) and cost per click (CPC). Everyone’s obsessed with these metrics and as a result running endless creative tests, tweaking audiences, and chasing the next shiny targeting hack.
But here’s the brutal truth: most of these brands are missing the metric that moves the needle on long-term profitability.
Let’s talk about the most overlooked metric in paid ads: Blended customer acquisition costs versus average order value across lifetime value segments.
Why Return on Ad Spend and Cost Per Click Don’t Tell the Full Story
Return on ad spend is a great efficiency metric, but it’s just a snapshot. It tells you how much revenue your ads drove but not whether you’re building a profitable business. The cost per click is even more myopic—it’s just about clicks, not customers or cash.
Both ignore the real question: are you paying less to acquire a customer than they’re worth over time?
Most brands optimize for short-term wins, ignoring the lifetime value of their customers. They celebrate a 3:1 return on ad spend while bleeding money on repeat purchases because their blended customer acquisition costs are out of whack with their average order value (average order value) and lifetime value (lifetime order value).
The Core Ratio: Blended Customer Acquisition Costs vs. Average Order Value Across Lifetime Value Segments
Here’s the counterintuitive truth: the real magic happens when you look at your blended customer acquisition cost compared to your average order value and lifetime value—segmented by customer cohorts.
● Blended customer acquisition cost: The average cost to acquire a customer, including all marketing channels and overhead.
● Average order value: The average order value per transaction.
● Lifetime value segments: Grouping customers by their predicted lifetime value (e.g., first-time buyers, repeat buyers, subscription customers).
Most brands look at customer acquisition cost and average order value in aggregate, but this hides the truth. Some customer segments are goldmines (high lifetime order value, low customer acquisition cost), while others are money pits (low lifetime order value, high customer acquisition cost).
By segmenting, you see which audiences actually drive profit—and which are just vanity metrics.
The Hard Numbers: Why Most Ecommerce Brands Are Missing the Point
If you’re running paid ads, you’ve probably heard this advice a thousand times: “Optimize for return on ad spend!” But the data tells a different story—one where focusing on blended customer acquisition cost, average order value, and lifetime order value by segment is what actually moves the needle on profitability.
Blended customer acquisition cost: The Real Cost of Growth
● Blended customer acquisition cost Defined: Blended customer acquisition cost (customer acquisition cost) is the average cost to acquire a new customer across all channels, including marketing, advertising, and sales efforts.
● Industry Example: Consider a fashion ecommerce brand spending $50,000 on marketing and sales in a month, acquiring 1,000 customers. Their blended customer acquisition cost is $50 per customer.
● Trends: Over the past five years, customer acquisition cost has increased by 50% across many e-commerce sectors, making efficiency more critical than ever.
● Impact: If your blended customer acquisition cost is higher than your average order value (average order value), you’re losing money on each first purchase—unless you have a strong repeat purchase rate.
Average Order Value: The Hidden Lever
● Average order value: average order value is the average amount customers spend per order.
● Current Benchmarks: In 2025, the global ecommerce average order value is about $127.43, with regional and industry variation. Home and furniture brands see average order values as high as $256, while the Americas average $108.
● Growth: average order value has risen by 31% in the past year, driven by inflation and changing shopping habits.
● Strategic Value: Increasing average order value by just 10% can dramatically improve margins and offset rising customer acquisition cost.
Lifetime Value: The Profit Multiplier
● Lifetime order value: Customer lifetime value (lifetime order value) is the total revenue a customer generates over their relationship with your brand.
● Industry Insights: The cost of acquiring a new customer is five times higher than retaining an existing one.
● Retention Impact: A 5% increase in customer retention can boost profits by 25% to 95%.
● Lifetime order value: customer acquisition cost Ratio: The ideal lifetime order value: customer acquisition cost ratio is at least 3:1—meaning you should be getting back $3 for every $1 spent on acquisition.
● Segmentation: Not all customers are created equal. For example, a fitness apparel brand found that customers buying running shoes had a 60% higher lifetime order value than those buying gym accessories.
The return on ad spend trap and scaling reality
● Return on ad spend vs. Scaling: When you scale ad spend, return on ad spend often drops as you reach less-efficient audiences. Doubling ad spend can see return on ad spend fall from 10x to 6x or 7x, with customer acquisition cost rising in tandem.
● Profitability vs. Growth: Brands must choose between maximizing short-term return on ad spend and pursuing aggressive growth—trying to do both often leads to inefficiency and wasted spend.
Putting It All Together: The 3-Metric Dashboard
Here’s how the numbers stack up for a typical 7-figure DTC brand:
Note: Repeat buyers and subscribers may have a higher blended customer acquisition cost if you invest in retention marketing, but their higher lifetime order value more than compensates.
● Key Insight: If you only look at blended customer acquisition cost and average order value for first-time buyers, you might think you’re breaking even or losing money. But when you segment by lifetime order value, repeat buyers and subscribers are the real profit drivers.
● Actionable Stat: Brands that focus on increasing lifetime order value and segmenting their marketing can scale revenue by 40% or more without increasing ad spend, simply by shifting budget to higher-lifetime order value audiences.
How We Audit Ad Accounts (and Fix Everything)
When we audit a paid ad account, we start by slicing the data three ways:
Blended customer acquisition cost: Total ad spend / total new customers.
average order value by Segment: What’s the average order value for first-time buyers, repeat buyers, and subscription customers?
lifetime order value by Segment: What’s the predicted lifetime value for each group?
Here’s a real, anonymized example from a 7-figure direct to consumer (DTC) brand we worked with last year:
● Initial State: Blended customer acquisition cost was $45. average order value was $60. lifetime order value (first-time buyers) was $120. Repeat buyers had an lifetime order value of $400.
● Problem: The brand was spending $45 to acquire a customer who would, on average, spend $60 on their first order. But most of their profit came from repeat buyers and subscribers.
● Fix: We shifted ad spend toward audiences that converted to repeat buyers and subscribers, even if it meant a higher initial customer acquisition cost. We also optimized for average order value by bundling and cross-selling at checkout.
● Result: Within 3 months, the brand scaled revenue by 40% without increasing ad spend. Their blended customer acquisition cost rose to $50, but average order value and lifetime order value skyrocketed because more customers became repeat buyers and subscribers.
The 3-Metric Dashboard You Can Implement This Week
You don’t need to be a spreadsheet junkie. Here’s the simple dashboard every marketer should track:
Track the Blended customer acquisition cost, Average Order Value by Segment and Lifetime Order Value by Segment weekly. If your blended customer acquisition cost is creeping above your average order value for any segment, you’re in trouble. If your lifetime order value is 3x or more your customer acquisition cost for repeat buyers, double down on those audiences.
The Takeaway
Return on ad spend and CPC are table stakes. The real game is in blended customer acquisition cost vs. average order value across lifetime order value segments. Segment your data, track these three metrics, and you’ll see where your marketing math is broken—and how to fix it without drowning in spreadsheets.
This approach separates the brands that scale profitably from the ones that just burn cash. Stop chasing clicks. Start chasing customers that matter.
Thank you Dario! If you would also like to share your marketing wisdom right here on the All About Digital Marketing blog - and get some free publicity in the process, comment below or get in touch via louisaguiseauthor@gmail.com.