Three Direct-to-Consumer Marketing Metrics NEDs and Portfolio Managers Should Challenge
You sit on the board of a high-potential digital direct-to-consumer brand. Perhaps you’re a Non-Executive Director (NED) or a Portfolio Manager representing investors. The product is flying off the shelves. The marketing team is busy. The CCO tells you things are on the up.
✅ Customer Acquisition Cost is falling
✅ Marketing Efficiency Ratio looks steady
✅ Return on Ad Spend is rising
And yet… the P&L tells a very different story. Margins are tightening. EBITDA is sliding. Cash is burning faster than expected.
So what’s really going on?
Marketing dashboards often tell a compelling story—one that doesn’t always square with commercial reality. For board members overseeing D2C businesses, the challenge is knowing which questions will expose the real dynamics behind the numbers.
Here are three key metrics that deserve a deeper probe—plus the boardroom questions that will help you get to the truth.
Customer Acquisition Cost (CAC) – Are We Acquiring the Right Customers?
What it is:
CAC is the average cost of acquiring a new customer, calculated by dividing total marketing spend by the number of new customers acquired in a given period. It reflects how much the business is paying to grow its customer base.
Why it looks good:
Falling CAC implies it’s cheaper to bring in new customers. Great—if those customers are valuable.
Why it could be misleading:
- Lower CAC often equals lower-value buyers, who churn quickly or buy once and disappear.
- Paid CAC can look fine while brand-driven organic CAC is quietly in decline.
- Lag between acquisition and monetisation can distort the picture.
Smart boardroom question:
“We see CAC improving—great. But how does this correlate with Customer Lifetime Value (LTV)? Are we acquiring customers who actually stick around and spend more?”
Follow-up:
“Can we see CAC segmented by first-time buyers vs. returning customers? Are we seeing acquisition improvements, or just shifting costs around retention?”
Marketing Efficiency Ratio (MER) – Is Margin Being Sacrificed to Preserve Revenue?
What it is:
MER is calculated by dividing total revenue by total marketing spend. It shows how much revenue is being generated per £1 of marketing investment—often seen as a top-line measure of efficiency.
Why it looks good:
A steady MER implies a balanced return on marketing investment.
Why it could be misleading:
- MER can disguise discount-driven growth and eroding profitability.
- It often excludes key costs like affiliate commissions, campaign fees, or fulfilment incentives.
- It measures revenue, not profit.
Smart boardroom question:
“MER looks good, but can we see a breakdown of new customer revenue vs. repeat customer revenue? Are we growing the customer base, or just leaning harder on loyalty?”
Follow-up:
“If MER is steady but the P&L is weakening, where is the leakage? Are we discounting more, or is the cost to serve climbing?”
But What About Brand Spend, Events and Campaigns With No Immediate ROI?
It’s a fair concern—how does a board know whether activities that don’t drive immediate sales (like events or brand campaigns) actually create value?
The temptation is often to cut anything that isn’t directly attributable to revenue. And when challenged, the CCO may respond with something like:
“If we cut that spend, top-of-funnel activity will drop—and we’ll feel it in six months when sales soften.”
They may be right. But without clarity and evidence, that defence becomes a blank cheque.
Boards should respect the long-term importance of brand and awareness-building—while still demanding a disciplined explanation of:
- What it’s intended to achieve
- How it’s expected to influence performance
- What will be tracked to gauge effectiveness over time
Here’s how a board can get more confident about this kind of spend:
1. Ask for Clarity on Objectives
Not all marketing is meant to convert today. Some investments are about building awareness, repositioning, or reinforcing customer trust. Boards should ask:
“What strategic behaviour is this activity designed to influence, and over what timeframe?”
2. Track Proxy Indicators
Even if the revenue link isn’t direct, signals like the following can offer valuable insight:
- Uplift in branded search volume after a campaign or event
- CAC improvements following brand activity
- Increased direct traffic or organic social engagement
- Shifts in net promoter score (NPS) or sentiment
- Improvements in pipeline quality or average order value post-event
3. Encourage Pilot Testing
Run events or campaigns in limited formats and track how key metrics respond. Use control groups or historical comparisons. Boards should ask for this kind of structured evaluation—not just high-level post-rationalisation.
Bottom line? Boards don’t need to default to cutting this spend—but they should insist that the CCO brings forward clear thinking, testable assumptions, and a plan for measuring long-term impact.
This way, creative marketing remains grounded in commercial sense—and boards can make decisions with confidence, not guesswork.
Return on Ad Spend (ROAS) – Are We Just Re-Targeting the Already Convinced?
What it is:
ROAS measures the revenue generated from advertising spend, typically expressed as a ratio (e.g. £5 returned for every £1 spent). It’s commonly used to assess the effectiveness of paid media campaigns.
Why it looks good:
The CCO reports a healthy ROAS—£5 back for every £1 spent. But is this driving real business growth?
Why it could be misleading:
- ROAS often reflects low-risk activity like retargeting and branded search.
- It may be propped up by discount-heavy tactics that damage profitability.
- If performance collapses the moment spend is paused, the brand lacks resilience.
Smart boardroom question:
“ROAS looks strong, but what percentage of our budget is going toward new customer acquisition vs. retargeting existing customers?”
Follow-up:
“If we paused paid spend for 30 days, what proportion of sales would we still expect to see?”
A Visual Reality Check
CAC and ROAS improve each quarter—while EBITDA drops. A common pattern: marketing metrics look sharp, but the business is quietly becoming less profitable.
What We See at NorthCo
We recently supported a £25m lifestyle brand reporting strong CAC improvements. On the surface, the team was hitting targets.
But the new customers were low-LTV, promotion-led buyers. Return rates spiked. Support tickets rose. Profit slipped. On deeper review, we uncovered a large brand-building budget that was not being tracked or measured. The CCO was confident it was ‘protecting the funnel’, but no one could point to a framework or set of indicators to assess whether that spend was having the desired effect.
Once we linked CAC to customer quality and adjusted the budget to focus on measurable, high-value acquisition, the business returned to sustainable, profitable growth within two quarters.
This kind of pattern-recognition and course correction is at the heart of our Operational Advisory work with private equity portfolio businesses. reporting strong CAC improvements. On the surface, the team was hitting targets.
But the new customers were low-LTV, promotion-led buyers. Return rates spiked. Support tickets rose. Profit slipped.
Once we linked CAC to customer quality and adjusted budget focus, the business returned to sustainable, profitable growth within two months.
Key Takeaways for Board Members:
Before your next board session, ask:
✅ Are we acquiring high-value customers—not just cheap ones?
✅ Is marketing spend protecting margin, or eroding it?
✅ Are we building a resilient customer base, or just renting demand from paid media?
If the answers aren’t clear, it’s time to look beyond the dashboard.
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