Why Misunderstanding Startup Metrics Can Cost You Your Business
Mark Suster
69042

This a a critical point for all marketers:

“If you acquire 10 customers a month at $100 per customer and this scales to 100 customers at the same price you may make assumptions about 1,000 customers that don’t hold. The reality of CAC is both that when you scale your acquisition “channel,” costs usually go up plus when you find a great channel others notice it and drive up the costs as they compete with you in that channel.”

A perfect example: You’re doing Google AdWords and getting a full loaded Cost Per Lead of $100. Now you want to double the number of leads, but doing so requires you to increase your list of keywords to ones that are less profitable, raising your costs. Now you scale further, and the lead quality goes down, driving CAC up further. This can apply to any marketing channel (tradeshows, paid search, paid lead programs, etc). You often spend more money to chase lower quality leads.

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