Hot Takes

Your problem is not the CAC, it’s the LTV


In the post-apocalyptic (aka iOS 14) world we’re living in, one of the questions I get more often is along the lines of “My cost to acquire a customer is too high and I cannot afford it. How do I lower it?”

I get it. SaaS is a super competitive space, everyone has a lot of capital available to deploy on users acquisition and they want to grow fast.

On the other side, privacy laws and Apple changes to iOS have reduced the effectiveness of advertising drastically increasing CPC up to XX%.

Still, I don’t care. And you’re asking the wrong question.

Don’t get me wrong, it sucks that acquisition costs are skyrocketing. And stocks are crashing as of today. Yet no one asks me how to make the stock market bull again. Because you can’t.

The same is for advertising and most other marketing channels. They are open markets. Costs will go up and down and there’s nothing you can do about it. Sure you can overoptimize and get a 5%, 10% decrease in costs, but it’s likely gonna be short-lived.

How to lower the cost of acquisition is not the right question. Because it’s not something you can control.

But you know what you can control? The lifetime value of your customers.

The question that should keep you up at night is “How can I increase the revenue generated by each customer so I can afford the current market prices to acquire them?”

As the markets will become more and more competitive, the companies that will survive and thrive are not those that will be able to spend the least to acquire a customer but those that will be able can afford to spend the most to acquire a customer because they have the highest lifetime value. 

Revenue Optimization is your new secret weapon in this market; behave accordingly.