Compare Channel ROI

Double down on outreach that pays back.

What this recipe is for

Identifying which customer acquisition channels deliver the best return—so you invest where the money grows instead of where activity feels busy.

What you’ll get

True ROI per channel (not just traffic or leads)

Clear ranking of profitable vs. draining sources

Actionable reallocation rules

Tests to validate emerging opportunities before scaling

Key inputs

Spend per channel (ad budget, outreach costs, etc.)

New customers acquired per channel

Customer Lifetime Value (CLV) or expected revenue per customer by source

Conversion rates along the funnel for each channel

Retention or repeat behavior per channel

Gross margin (to convert revenue into contribution)

Core logic

Raw volume lies. ROI = (Value from customers) / (Cost to acquire them). Channels with high cost and low downstream value destroy capital even if they bring traffic. Aim for channels where CLV : CAC ≥ 3 : 1 and the payback period fits your cash needs. Shift spend away from underperformers into scaled winners, while testing promising new channels with limited risk.

Step-by-step actions

Step 1: Attribute customers to channels

Track which channel led to each new customer (first touch, last touch, or weighted attribution depending on complexity).

Step 2: Calculate per-channel unit economics

For each channel:

CAC (cost spent / customers acquired)

CLV (average expected value per customer, adjusted for margin)

ROI ratio and LTV : CAC

Step 3: Rank channels

Order by profitability and payback:

Channels with LTV : CAC ≥ 3 : 1 and acceptable payback are priority.

Channels with poor ratios get paused or optimized.

Step 4: Diagnose underperformers

If a channel has volume but poor ROI, test:

Funnel optimization (higher conversion)

Offer alignment (better fit for that audience)

Audience refinement (narrowing or retargeting)

Step 5: Test new channels carefully

Allocate a small test budget, measure early CAC and retention, compare to your target efficiency before scaling.

Step 6: Reallocate dynamically

Move spend toward rising ROI channels and away from declining ones. Set periodic reviews (weekly or biweekly) to catch shifts.

Decision thresholds / guardrails

LTV : CAC < 3 : 1 → Cut or fix before scaling that channel.

Payback period too long for cash constraints → Deprioritize even if ratio is borderline.

Conversion drop while spend increases → Audit funnel or audience fatigue; refresh creative/offers.

Retention from a channel falls → Quality decline—pause scaling until stabilized.

Examples

E-commerce:

Email campaigns bring repeat buyers with high CLV at low incremental cost—top ROI. Paid social drives volume but with poor retention and LTV:CAC of 1.8:1—shift budget away.

Service:

Referral partners produce fewer leads but clients stay longer and spend more, giving 4:1 LTV:CAC. Cold outreach brings one-offs with high churn—limit or rework that channel.

Local business:

Google Ads converts at high cost but yields loyal customers; community events bring lower immediate volume but higher lifetime value—balance by funding both according to cyclical needs.

Thinking checks

Are you measuring ROI per channel in the same units (net value after margin)?

Is spend still concentrated in declining or unprofitable sources?

Are new channel tests isolated and compared against your efficiency guardrail?

Do shifts in retention or customer quality trigger re-evaluation?

If the answer is no…

Re-attribute properly; sloppy attribution hides real winners.

Normalize CLV calculations across channels before comparing.

Pause spend on the worst offenders and reallocate to proven winners with defined scale criteria.

What to track (minimum)

CAC and CLV per channel

LTV : CAC ratio

Payback period

Volume vs. efficiency trend

Retention/quality per source