Marketing terms, in plain English.

Return on investment ROI

What an investment returned after its cost, as a percentage of that cost. In marketing, the honest version uses profit (or contribution), not revenue, and only counts sales the marketing actually caused.

ROI = (gain − cost) ÷ cost × 100

Example: Sales that leave $15,750 of contribution, on $10,000 of spend: ($15,750 − $10,000) ÷ $10,000 = 58%.

Return on ad spend ROAS

The revenue an ad platform credits to your ads, divided by what you spent on them. It measures revenue, not profit, and each platform credits sales its own way. Compare it with your break-even ROAS.

ROAS = attributed revenue ÷ ad spend

Example: $45,000 attributed revenue ÷ $10,000 spend = 4.5x, sometimes written 450%.

Marketing efficiency ratio MER also called blended ROAS

Your total revenue divided by your total ad spend. Because it uses your own sales figures, it doesn’t depend on any platform’s attribution. It’s still a revenue ratio: it doesn’t subtract costs.

MER = total revenue ÷ total ad spend

Example: $60,000 total revenue ÷ $10,000 total ad spend = 6.0x.

Break-even ROAS

The ROAS at which ad spend is just covered by what the sales contribute, with nothing left over. Below it, the ads lose money on those sales, however good the ROAS looks.

Break-even ROAS ≈ 1 ÷ contribution margin before advertising

Example: A 37.5% contribution margin needs about 1 ÷ 0.375 = 2.7x just to cover media.

Contribution margin

The share of revenue left after the variable costs that rise with every sale (product, shipping, payment fees, packaging, returns), available to cover fixed costs and profit. It’s usually a better starting point than gross margin for ad decisions.

Contribution margin = (revenue − variable costs) ÷ revenue

Example: An $80 order with $50 of variable costs contributes $30, a 37.5% contribution margin.

Contribution after acquisition

What a month (or an order) leaves after product cost, the variable costs of orders and the cost of acquiring customers, before fixed costs like salaries and rent. It isn’t net profit, but it’s the closest single number to whether marketing is paying its way.

Contribution after acquisition ≈ net sales − product cost − variable order costs − acquisition spend

Example: $100,000 − $40,000 − $25,000 − $20,000 ≈ $15,000.

Gross margin

The share of sales left after the direct cost of the goods sold. It ignores shipping, fees, discounts and other order costs, so it usually overstates what an order can afford to spend on ads.

Gross margin = (net sales − COGS) ÷ net sales

Example: $100,000 of sales with $40,000 COGS = 60% gross margin.

Cost of goods sold COGS

The direct cost of producing or buying the products you sold: materials, manufacturing labour and inbound freight, depending on how your books define it.

Net sales

What the business actually sold after returns, allowances and discounts. It’s the revenue figure to manage from, rather than what an ad platform reports.

Net sales = gross sales − returns − allowances − discounts

Example: $110,000 gross − $6,000 returns − $4,000 discounts = $100,000.

Average order value AOV

What a typical order brings in. A higher AOV can leave more contribution per customer, but discounting and product mix can raise AOV while lowering margin.

AOV = net sales ÷ orders

Example: $100,000 ÷ 1,250 orders = $80.

Unit economics

The revenue and costs of a single unit of the business, usually one order or one customer. If one order loses money after acquisition, selling more of them makes the problem bigger.

Incrementality

The sales that happened because of the marketing and wouldn’t have happened without it. Platforms report the sales they influenced; incrementality asks how many of those were truly added, usually tested by holding back ads from a comparable group.

Working capital

The cash tied up in running the business day to day, such as inventory and money customers still owe you, minus what you owe suppliers. Growth often consumes it, which is why revenue can rise while cash gets tighter.

Working capital = current assets − current liabilities

Customer acquisition cost CAC

What it costs to win one new customer. Always ask which costs are included and who counts as “new”: the same business can quote very different CACs depending on the definition.

CAC = acquisition cost ÷ new customers

Example: $20,000 ÷ 400 new customers = $50.

Blended new-customer CAC

Total acquisition spend across every channel, divided by the genuinely new customers the business added, counted from your own records rather than platform conversions. It’s the CAC an owner should watch.

Blended new-customer CAC = acquisition spend ÷ genuinely new customers

Example: $72,000 ÷ 1,600 new customers = $45.

Media CAC vs. all-in CAC

Media CAC counts ad spend only. All-in CAC adds the other costs of acquiring customers: management, acquisition-focused creative and directly related tools. When someone quotes “our CAC”, ask which one they mean.

Media CAC = ad spend ÷ new customers

Marginal CAC

What the extra customers from your latest spend increase cost. The average can look healthy while each additional customer gets much more expensive, which is why scaling decisions should use the marginal number.

Marginal CAC = added spend ÷ added new customers

Example: An extra $20,000 brings 350 more customers: $57.14 each, while the average only rises to $43.24.

Break-even CAC first-order

The most you can spend to win a new customer before their first order stops contributing anything. It’s a ceiling, not a target.

First-order break-even CAC ≈ first-order contribution before acquisition

Example: If a first order contributes $56 before acquisition, you can spend about $56 to win that customer.

Target CAC

What you aim to pay per new customer, set below break-even so each customer leaves the contribution you need.

Target CAC = contribution before acquisition − contribution you want to keep

Example: $56 − $20 = a $36 target.

Cost per lead CPL

What you spend for each enquiry: a call, form or booking request. A lead isn’t a customer; CPL only becomes meaningful next to your booking and close rates.

CPL = spend ÷ leads

Example: $3,000 ÷ 60 leads = $50 per lead.

Cost per acquisition CPA or cost per action

What you spend for each conversion you’re tracking, whether that’s a sale, a lead or a sign-up. Ad platforms report it; check what they’re counting as a conversion.

CPA = spend ÷ conversions

Payback period

How long it takes a new customer’s cumulative contribution to repay what it cost to acquire them. Longer payback means more cash tied up while you wait.

Example: CAC of $60; the first order contributes $35 and the next one $25. The customer pays back on the second order.

Customer lifetime value LTV also CLV

What a customer is worth over the whole relationship. Most useful measured as contribution, from real customer groups (cohorts), rather than projected. A forecast LTV shouldn’t justify today’s losses without evidence.

Measured LTV ≈ total contribution from a cohort ÷ customers in that cohort

Cohort

A group of customers acquired in the same period, tracked together over time. Cohorts show whether customers won in March are paying back the way January’s did.

Pay-per-click PPC

Advertising where you pay each time someone clicks your ad. Usually means search ads on Google or Microsoft, though the term is used loosely for paid ads in general.

Cost per click CPC

What you pay, on average, for each click. Set by the ad auction: competition, bids and how relevant the ad is.

CPC = spend ÷ clicks

Example: $2,000 ÷ 400 clicks = $5.

Cost per thousand impressions CPM

What it costs to show an ad 1,000 times. The usual pricing unit for social, display and video ads.

CPM = spend ÷ impressions × 1,000

Example: $1,500 for 100,000 impressions = $15 CPM.

Click-through rate CTR

The share of people who saw an ad and clicked it. A useful signal of how relevant the ad is to the search or audience.

CTR = clicks ÷ impressions

Example: 400 clicks from 10,000 impressions = 4%.

Conversion rate

The share of clicks or visits that turn into the action you want: a lead, a booking, a sale. Clicks with no conversions usually point to targeting, the landing page or tracking.

Conversion rate = conversions ÷ clicks (or sessions)

Example: 20 leads from 400 clicks = 5%.

Impression share

The share of the times your ads were eligible to show that they actually did. Low impression share means budget or ad rank is leaving searches on the table.

Impression share = impressions ÷ estimated eligible impressions

Example: 6,000 of an estimated 10,000 = 60%.

Quality Score

Google’s 1–10 rating of a keyword, based on expected click-through rate, ad relevance and landing page experience. It’s a diagnostic: a low score usually means the keyword, ad and page don’t match well.

Match types broad, phrase, exact

How closely a search has to match your keyword for the ad to show. Broad match reaches the widest range of related searches; phrase and exact match are progressively tighter. Broad match without close monitoring is a common source of wasted spend.

Negative keywords

Words or phrases you tell the platform not to show your ads for, such as “free”, “jobs” or a service you don’t offer. They stop budget going to searches that will never convert.

Search terms report

The list of what people actually typed before your ad showed, as opposed to the keywords you chose. It’s where wasted spend is usually found.

Smart Bidding

Google’s automated bid strategies, which set bids in each auction to chase conversions or conversion value. Useful with good data and clear goals; a liability when it’s optimising toward the wrong conversion.

Performance Max PMax

A Google Ads campaign type that runs across Search, Shopping, YouTube, Display, Gmail and Maps from one campaign, with Google’s automation choosing where the ads appear.

Google Shopping

Product ads with an image, price and store name, shown in Google search results and the Shopping tab. They’re built from your product feed rather than from keywords.

Merchant Center and product feed

Google Merchant Center is where an online store submits its product feed: the file of product titles, prices, images and availability that Shopping ads are built from. Feed quality has a direct effect on Shopping performance.

Global Trade Item Number GTIN

The product identifier behind a barcode, such as a UPC or EAN. Supplying correct GTINs in your feed helps Google match your products to searches.

Remarketing also retargeting

Showing ads to people who have already visited your website or engaged with you. Usually cheaper per result than reaching new people, but it mostly converts demand you already had.

Lookalike audience

An audience the platform builds from people who resemble a list you give it, such as past customers. A common way to reach new people on Meta.

Advantage+

Meta’s set of automated campaign, audience and creative options, which hand more of the targeting and placement decisions to Meta’s system.

Frequency and reach

Reach is how many different people saw your ad. Frequency is how many times each of them saw it, on average. Rising frequency with falling results is a common sign of creative fatigue.

Frequency = impressions ÷ reach

Example: 50,000 impressions to 12,500 people = a frequency of 4.

Creative fatigue

When an ad’s results decline because the same audience has seen it too often. Fixed with new creative or new audiences, not more budget.

Local SEO

Improving how a business ranks in local searches, both in the map pack and in the regular results beneath it. It covers the Google Business Profile, reviews, the website and local signals.

Google Business Profile GBP formerly Google My Business

The free business listing that appears in Google Maps and local search results, with your hours, services, photos, reviews and posts. For most local businesses it’s the most valuable listing they have.

Map pack also local pack

The group of local business listings, usually three, shown with a map near the top of local searches. For many service businesses it’s where most local calls come from.

Local Services Ads LSA

Google’s pay-per-lead ads for service businesses, shown above other results with a Google Guaranteed or Google Screened badge. You pay for leads, not clicks, and businesses must pass Google’s verification first.

Google Guaranteed and Google Screened

The trust badges on Local Services Ads. Google Guaranteed is generally for home services, Google Screened for professional services. Both require background, licence and insurance checks.

Relevance, distance and prominence

The three things Google says decide local rankings: how well a listing matches the search, how far the business is from the searcher, and how well known and well reviewed it is. Distance can’t be optimised; the other two can.

Service-area business

A business that goes to its customers, like a plumber or HVAC company, rather than serving them at its address. On Google Business Profile it can hide its address and list the areas it serves instead.

Citations and NAP

Citations are mentions of your business name, address and phone number (NAP) on other sites and directories. Consistent NAP details help Google trust that your listing is accurate.

Search engine optimization SEO

Improving a website so it ranks higher in unpaid search results for the searches your customers make. Results build over months, but don’t stop the day spending stops.

Organic

Unpaid. Organic search results and traffic are the ones you didn’t pay per click for; organic social is posting rather than paid ads.

Keyword and search intent

A keyword is a word or phrase people search for. Search intent is what they’re trying to do: learn, compare or buy. Matching intent matters more than matching words: “AC repair near me” and “how does an AC work” need different pages.

Backlink

A link to your website from another site. Links from relevant, reputable sites are one of the strongest signals of authority. Bought or manufactured links can do more harm than good.

Domain authority

A 1–100 score from the SEO tool company Moz that estimates how likely a site is to rank, mostly based on its backlinks. Useful for comparing competitors, but it’s not a Google metric.

Core Web Vitals

Google’s measures of real-world page experience: how fast the main content loads, how quickly the page responds to a tap or click, and how much the layout jumps around while loading.

Structured data also schema markup

Code added to a page that labels its content for search engines: this is a business, these are its hours, this is an FAQ. It can make listings eligible for richer search results.

AI Overviews

The AI-generated summaries Google shows at the top of some search results, citing sources from around the web. Being one of those sources is becoming its own kind of visibility.

Attribution

How credit for a sale or lead is assigned to the ads and channels that touched it. Each platform uses its own rules, which is why Google, Meta and your store can each claim the same sale.

Attribution window

How long after someone clicks or views an ad the platform will still credit the ad with a sale. Longer windows credit more sales to the ads.

View-through conversion

A conversion credited to an ad that the person saw but didn’t click. Some are genuinely influenced; others would have happened anyway, so view-through numbers deserve caution.

Conversion tracking

The setup that records when a visitor takes a valuable action (a call, form, booking or purchase) and reports it back to analytics and ad platforms. Without it, ad platforms optimise blind.

Call tracking

Using unique phone numbers to see which ad, campaign or page produced each call, often with recordings so lead quality can be reviewed.

Google Analytics 4 GA4

The current version of Google Analytics, which records website visits and actions as events. Its numbers rarely match ad platforms or your store exactly, because each counts differently.

Pixel

A snippet of code on your website that reports visitor actions back to an ad platform, such as the Meta Pixel. It powers conversion tracking, remarketing and lookalike audiences.

Conversions API CAPI

A way to send conversion data to Meta directly from your server or store platform, rather than only through the browser pixel. It’s less affected by ad blockers and browser privacy limits.

UTM parameters

Tags added to the end of a link (such as utm_source and utm_campaign) so analytics can tell where a visit came from.

Customer relationship management CRM

The system that holds your leads and customers and tracks what happened to each one. Connecting it to marketing data is how you see which leads actually became revenue.

HIPAA

The U.S. federal law protecting patients’ health information. For healthcare marketers, it limits what tracking tools can collect and send, because a page visit can reveal a health condition.

PHI and BAA

PHI is protected health information. A BAA, or business associate agreement, is the contract required when a vendor handles PHI for a healthcare provider. Not every analytics or ad tool will sign one.

Lead quality we call it lead fit

How well a lead matches the work you actually want: the right service, area, budget and timing. Cheap leads that don’t fit cost more than they look.

Booking rate

The share of calls or leads that become a booked appointment or job. Often the first place a service business loses revenue it already paid to generate.

Booking rate = booked jobs ÷ leads

Example: 45 booked from 60 leads = 75%.

Close rate

The share of quotes or estimates that turn into sold work.

Close rate = jobs sold ÷ quotes given

Example: 18 sold from 45 quotes = 40%.

Customer service representative CSR

The person who answers the phone and books the work. How CSRs handle calls has as much effect on booking rate as the marketing that made the phone ring.

Capacity

How much more work the business can actually deliver well, whether that’s technicians, trucks, production, inventory, fulfillment or cash. Buying demand past capacity creates problems, not growth.