The Economics of Customer Acquisition
Profitable growth is heavily dependent on Customer Acquisition Cost (CAC), one of the most closely followed metrics for startups and their investors.
Friends and family are critical for startups, especially in enterprise B2B; some align very closely with channel partners; and some have fierce product market fit like OpenAI ChatGPT; but for most, customer acquisition begins with paid advertising.
Where to begin? Setup rigorous data transmission with high match rate conversion tracking. Determine if the product category has demand or if you need to create it; the former relies on paid search, the latter paid social; find the right balance. Test a diverse set of audiences, conversion signals, messaging, and visuals including but without over-reliance on AI products like Meta Advantage+ Shopping Ads and Google Performance Max Ads. There will be volatility as experimentation and learning periods (for ad servers) are utilized until winning strategies and tactics are discovered in an iterative process.
When scaling spend, some winning strategies will struggle. Expand testing in focused areas of opportunity, new creative angles (especially User Generated Content (UGC) & Influencer) with most promising audiences and placements. Expand winning strategies to other social & search channels. Navigate the experimental volatility to the next efficient frontier of paid advertising.
The nature of paid advertising and growth is facing struggles along the way. Overcoming these is part of the process. Some bigger tactics include seasonal scale up, offline channels, multichannel “brandformance” campaigns, biz dev partnerships, new product launches, and channel/retail partnerships.
Increasing allowable CAC enables scale. This is possible by finding high LTV customers through analytics can enable its also possible by building organic acquisition can take a while but is well worth the investment. Branded content that audiences eagerly await. Community that shares extensive UGC including product tips & tricks. Using search engine optimization (SEO) to align these efforts where people are searching. Launching product flavors and accessories that customers are excited about.
These concepts can help with CAC forecasting and management; execution relies on key details such as measurement approaches and tactic selection. Since marketing tactics evolve relentlessly, it’s important to have a team with experience in all of the above to improvise together. This is why GMA enjoys serving as a trusted performance marketing partner to an ambitious portfolio of high-growth brands.
Enjoy the journey and contact us if you’d like to explore collaborating with a seasoned & passionate partner.
