You can also use this formula to determine if a marketing campaign is a good idea before you invest in it. You can use estimated response rates and averages for close rates. If you want to determine what cost per acquisition you can afford for pay-per-click or other advertising, you can run this equation backwards:
Cost Per Acquisition = Life Time Value X Close Rate X Response Rate
Example: $10,000 X 0.90 X 0.01 = $90 per Lead
If you average client is worth $10,000 over the course of a year, you close 90% of your leads, and 1% of your clicks turn into legit leads, then you can afford to spend up to $90 on marketing to attract that client.
Conclusion:
If your total marketing profits are more than your investment in the campaign, it is probably a good idea. There are always intangible benefits too like brand recognition, residual leads after the campaign ends, and good will generated from the campaign, but generally a good marketing campaign will cover its costs within the first third of its run.
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