Philip Pages’ Post

-$87.98 profit per new customer 😅 That’s our target though, the client’s happy, and we’re scaling. Sounds insane, right? Losing money for each customer? It doesn’t seem to make sense at first. Let’s break down how this brand is not only losing money per customer but actually scaling with this loss: 1. The Math of Retention This brand has a 67% retention rate month over month for new customers. Here’s how that works: Let’s say we acquire 1,000 new customers in Month 1, each at a loss of $87.98. That’s a total loss of $87,980 upfront. Painful, right? But with a 67% retention rate, 670 of those customers will make a second purchase in Month 2. If the second purchase generates a profit of $150 per customer (since there’s no acquisition cost any more), that’s $100,500 in profit. By Month 2, we’ve not only recovered the initial loss but are actually $12,520 in profit: Initial loss: -$87,980 Profit from returning customers: +$100,500 2. Backend Profitability The secret sauce here is that while the first purchase results in a loss, every subsequent purchase drives profitability. Once a customer is acquired, the retention strategy ensures that they keep coming back, generating profit without the heavy acquisition cost. 3. Retention and Loyalty The real win comes from customer retention. With a solid retention strategy in place, we ensure that 67% of customers come back for their second purchase and beyond. This isn’t just about selling a product once — it’s about building a relationship and fostering loyalty. A loyal customer can be worth several times their initial purchase value over their lifetime. Investing in retention is how we turn those early losses into long-term gains. Brands that focus on nurturing relationships with their customers end up driving much more value over time. By understanding this, scaling a brand becomes less about the initial sale and more about maximizing customer lifetime value. Understanding max CaC, LTV, churn and the trailing metrics on platforms like Google and Meta will allow you to scale your media with confidence, even if it doesn't actually look profitable. What do you think? Would you be comfortable losing money upfront for big returns in the next month? Let me know in the comments 👇 #ecommerce #dtc

It doesn’t matter how high your average customer lifetime value is. If LTV is not proportionate to CAC, your acquisition program is never going to scale 😬 By maintaining an LTV to CAC ratio of around 3:1, you can ensure that you recoup acquisition costs and generate cash flow. If your ratio is too low, you may be spending too much on acquisition. If it’s too high, you're likely not spending enough and missing valuable opportunities to capture more of your target market. Three things you can do to improve LTV to CAC ratio: 🛒 Improve retention and engagement 💵 Review your pricing 👩💻 Improve advertising conversion rate Learn more about LTV to CAC and understand how to get your ratio to the sweet spot: https://lnkd.in/dJ3SCjYm

The business was growing fast, but something wasn’t right. Sales were pouring in, customer acquisition was on fire, but…profits? They just weren’t following. The company was bleeding cash faster than it was making it. This was 2014, I started my marketing agency helping startups access affordable consulting services. The CEO called me, frustrated. “We’re spending all this money to acquire customers, but we’re barely breaking even. What are we doing wrong?” So I dug into their numbers. Their customer acquisition cost (CAC) was $53 per customer. Sounds reasonable. But when I looked at their customer lifetime value (LTV), it was only $107. Here’s the thing: When your LTV is barely double your CAC, you're not leaving enough room to cover anything else—operating expenses, overhead. The math simply doesn’t work if you want to scale. So I asked the CEO one simple question: “What’s your LTV/CAC ratio?” He stared at me blankly. Here’s the deal—if you’re an e-commerce company, your LTV/CAC ratio is your lifeline. If you're not obsessing over it, you're flying blind. What we uncovered next was even more revealing: - Churn was much higher than they realized. - Repeat purchases were way lower than industry standards. - Customers weren’t coming back often enough to justify the money they were spending to acquire them. They were stuck in a cycle of paying for customers who only came once and never returned. So, we changed the game. Instead of pumping more money into customer acquisition, we worked on increasing their LTV: - Loyalty programs to bring customers back more often. - Personalized email marketing to keep customers engaged. - Cross-selling to increase the average spend. - Within a few months, their LTV jumped from $107 to $191, and suddenly, the math worked. Their LTV/CAC ratio skyrocketed to 3.6:1, and for the first time, they were making money while scaling sustainably. That’s the power of knowing your LTV/CAC ratio. Most e-commerce companies get so caught up in chasing customer growth that they ignore the real secret to scaling: maximizing the value of every customer you acquire. So, next time you’re looking at your growth strategy, ask yourself: Are you just spending money to acquire customers, or are you truly maximizing their lifetime value? #Ecommerce #LTV #CAC #ScalingSmart #CustomerRetention #BusinessGrowth #CFO #GrowthMetrics

Let’s talk about the razor-thin margin between acquiring customers and keeping them. You ever make that decision to invest heavily in marketing to bring in new customers, only to watch your retention rates drop? It happens more than you think. In my time at Quuu, we experienced this firsthand. We ramped up our ad budget to attract a flood of new users, high on the idea that a bigger customer base would mean a bigger bottom line. Spoiler alert: it didn’t work out quite like that. Sure, we saw an increase in sign-ups, but our churn rate skyrocketed. We realized that while it’s sexy to chase new customers, it's retention that fuels real growth. Here’s where we tripped up. We were so focused on top-line growth that we neglected the health of our existing customer relationships. Metrics like customer lifetime value and churn rates went unchecked, leading us to miss crucial insights. If we had invested equal energy into keeping our current users engaged, we’d have saved ourselves both money and heartbreak. The lesson? Before you splash cash on new customer acquisition, dig into your retention metrics. Are your existing customers satisfied? Are they upgrading, renewing, and recommending you? If not, you need to reevaluate your strategy. At 5 Minute Founders, I break down these principles into digestible insights—because no one has the time for a deep-dive business book on retention strategies. Remember, bringing in new customers is cool, but keeping them around is where the real game is won.

How To: Drive Customer LTV from Your First Sale Early-stage startups should already be seeing 20-40% of new revenue generated from existing customers (upsells, renewals, expansions, referrals, etc.). Here’s how ⬇️ 1. Customer Onboarding That Wows Did you know that 63% of prospects choose products based on onboarding? And up to 74% of your recently won Customers are willing to switch to other solutions if the onboarding process is complicated? Finally, after 2-3 months of using your product, your customer is *still* 45% likely to churn if TTV is delayed. In short... this is not the ball to drop. 2. Dedicated Account Management  Companies with dedicated support models see a 30-50% boost in upsell/cross-sell opportunities, increased CSATs, and improved retention rates. Why? Account Management delivers personalized, proactive support. 3. Impactful Quarterly Business Reviews (QBRs) QBRs have the power to make renewals predictable, gather high-impact product feedback, and open opportunities for upsell/cross-sell. When you accept that auto-renewal clauses don’t equate to recurring revenue, the QBR becomes indispensable. Hint: QBRs are especially useful if your end user and decision-maker are not the same person. 4. Data-Driven Customer Segmentation We’ve all gotten personalized recommendations that are way off the mark and others that have us pulling our credit cards out or binge-watching a new show for 12 hours. Be sure to take advantage of your existing customer data to deliver the right recommendations at the right time. Companies that use data-driven segmentation for personalization see up to 76% higher customer retention rates and significant LTV uplift. 5. Customer-Centric Product Roadmaps If your PMF and TAM are clearly defined, let your early customers’ feedback directly influence product iterations and the product roadmap. This not only improves user experience but it makes customers feel invested in your success, making them more likely to refer other customers, stay onboard, and consider long-term partnerships. 6. Tailored Value-Added Services Offer customer solutions or premium features that encourage long-term commitment and improve CSATs. Bonus points if those add-ons tie into your product roadmap or resolve a common customer request. If you’re not seeing revenue growth from your existing customers, you’re leaving money on the table and (likely) delivering a suboptimal customer experience to boot. What am I missing? Drop your favorite methods for boosting LTV in early-stage startups below! #RevOps #CustomerSuccess Sources: Koru UX Design https://lnkd.in/gh9MJ38v Rocketlane https://lnkd.in/gNVbeCxh Inturact https://lnkd.in/gSV3tNAp

In the #GrowthMarketing "pursuit of happiness", understanding the dynamics of Customer Acquisition Cost (#CAC) and Customer Lifetime Value (#CLTV) is paramount to unlock sustainable growth and maximize profitability. Here´s some thoughts why these metrics are really important and how they can elevate your #growthstrategy: 1️⃣ Decoding Customer Acquisition Cost (CAC): CAC represents the investment required to acquire a new customer. By meticulously tracking CAC across different #marketingchannels and campaigns, you gain invaluable insights into the efficiency and effectiveness of your acquisition efforts. Armed with this data, you can optimize your marketing spend, allocate resources wisely, and scale your customer base cost-effectively. 2️⃣ Unlocking the Potential of Customer Lifetime Value (CLTV): CLTV quantifies the total revenue a customer is expected to generate throughout their relationship with your business. By extending your focus beyond the initial transaction and nurturing long-term customer relationships, you can maximize CLTV and drive sustainable revenue growth. Strategies such as personalized #engagement, #upselling, #CRO and #retention initiatives can significantly enhance CLTV, ensuring that every customer becomes a valuable asset to your business. 3️⃣ The Balancing Act: While minimizing CAC is essential for profitability, it's equally crucial to prioritize CLTV optimization. Having the right balance between acquiring new customers at an acceptable cost and maximizing the business value from existing customers is the key to sustainable growth. By aligning your acquisition efforts with CLTV objectives, you can create a robust growth engine that fuels long-term success. eg. According to Wall Street Prep for some industries (like SaaS) the ideal LTV/CAC ratio is around 3x. 4️⃣ Data-Driven Decision Making: Data will be always your most potent weapon. Leverage analytics tools and attribution models can lead you to get actionable insights into CAC and CLTV metrics. It´s really important to monitor performance, experiment with different strategies, and iterate based on data-driven findings to refine your approach and drive superior results. 5️⃣ Driving Business Success: Ultimately, mastering CAC and CLTV empowers you to make decisions that drive business success. By optimizing your acquisition funnel, maximizing customer value, and prioritizing profitability, you can build a resilient growth engine that propels your business to new heights of success. Incorporating CAC and CLTV into your growth marketing strategy isn't just a choice—IT´S A NECESSITY for businesses trying to get the best out of today's competitive landscape. 💡📈 #GrowthMarketing #CAC #CLTV Share your thoughts and experiences with CAC and CLTV in the comments below! How have these metrics shaped your growth strategy, and what insights have you gained along the way? Let's spark a conversation and learn from each other's successes! 👇💬

🛍️ Do you know your CAC to LTV Ratio? You need to. Grasping the Customer Acquisition Cost (CAC) to Lifetime Value (LTV) ratio is essential for sustainable growth. Understanding a customer's value over a set period helps brands establish precise acquisition goals and allocate funds effectively. 👗 Here's a step-by-step guide to determine your CAC:LTV Ratio: → On average, a customer completes 3 transactions within a 90-day window. → Their Average Order Value (AOV) during this period stands at £40. → This translates to a 90-day customer Lifetime Value (LTV) of £120. → With a gross margin of 70%, the brand generates £84 per customer annually. → Consequently, the brand can spend up to £83 on customer acquisition while remaining profitable. ✅ This information should shape your brand's campaign structure, especially in your acquisition channels like Paid Search and Paid Social, ensuring profitability. Many brands overlook this. What's the standard benchmark? 1:3 If a customer's value is thrice the acquisition cost over 90 days, you can reinvest the surplus into other areas, scaling your new customer acquisition. This distinction can transform the difference between struggling for conversions and having faith in the process. Common errors when evaluating the CAC:LTV ratio include: ❌ Relying solely on Paid Ad spend for acquisition costs. ❌ Overlooking Agency fees and operational expenses. ❌ Including non-paying customers, such as free trials or samples. Incorrectly determining your CAC can distort your overall ratio, leading to less profitable decisions. 📈 Key Takeaway: Accurately calculating your CAC:LTV ratio enables precise budget allocation and predictable scaling. 💰

You are leaving SO MUCH contribution margin on the table if you have 25%+ Churn in the first month of your subscription based E-Commerce business. Here are the THREE Areas that you need to focus on and exactly how to fix them 1. Fix the ZERO month. You will see more churn in the first 60 days than pretty much any other cohort. A big reason of this is usually a big difference between your intro offer (example first month 80% off) Offers like this can work, I use 50% off first month quite often to be honest. However you really need to check your data and make sure your not killing your churn/LTV ratio. ### 2. CHURN SPIKING! (Important) Find the exact day your customers are most likely to churn. Send them a Email/SMS Offer letting them know that their next order contains a free test of another (Low cost) SKU. I recommend testing this with 20-30% of a cohort to see how much it reduces that churn spike. Additionally send an email/SMS letting them know they can swap their subscription out for a different SKU at no cost to them. 3. Figure out who your best COHORT is. Start with Acquisition right? Pay more for the better customer, Use LTV reports and find exactly the customer that hangs around the longest and has the best LTV. A/B test an audience on Meta to use this exact customer profile/avatar. ### **4. Does your cancelation flow suck?** - Offer incentives to stay example, a discount if they stick around another month start at 20% and have 3 downsells. - Enable pauses instead of cancel to let them AUTO rejoin in 30 days. And give them 30% off for doing this. - Manually have CSR reach out to customers with expired payment methods that can’t be auto dunned. Make this your number 1 focus over the next 30 days if you have a suibscription business. Churn reduction will take time to test since it applies to individual cohorts. Drop a comment/link if you’d like me to take a look inside your business and help you solve your LTV problems!~

Cost-effective customer acquisition: yes, it’s possible. And you don’t have to do all the out-of-the-box thinking. We’ve done it for you. In our newest blog, we’ve come up with 5 key ways to lower your CAC (without compromising lead quality). Stop throwing cash at impressions: https://lnkd.in/g43mMjQp

Are you investing cash or burning cash? Here's how to tell the difference: You need to know one of the key ratios most people don't talk about... LTV:CAC The ratio of your customer lifetime value to your customer acquisition cost. Here's what it means: First, let's break down its components... 𝗟𝗧𝗩 Customer lifetime value (LTV) is the estimated revenue you're going to get from a customer. Formula: LTV = (average revenue per account (ARPA) / customer churn rate) X gross margin % 𝗖𝗔𝗖 Customer Acquisition Cost (CAC) is how much you're paying to acquire a customer. Formula: CAC = total sales and marketing spend / (#) of new customers 𝗟𝗧𝗩:𝗖𝗔𝗖 LTV:CAC tells you if you’re spending too much to get a customer or if you’re missing opportunities from not spending enough. Formula: LTV:CAC = LTV / CAC 𝗟𝗲𝘁'𝘀 𝘀𝗲𝗲 𝗮𝗻 𝗲𝘅𝗮𝗺𝗽𝗹𝗲 𝗼𝗳 𝗮 𝗦𝗮𝗮𝗦 𝗰𝗼𝗺𝗽𝗮𝗻𝘆: • ARPA = $150 • Churn rate = 5% • Gross margin = 75% • Marketing spend = $5,000 • New customers = 10 LTV = ($150 / 0.05) * 0.75 = $2,250 CAC = 5,000 / 10 = 500 LTV:CAC = $2,250 / 500 =4.5x 𝗥𝗲𝘀𝘂𝗹𝘁 As a general rule, you want to aim for an LTV:CAC of at least 3. Anything below 1 means that you’re burning cash. You're spending more money to get new customers than they will pay you over their lifetime. LTV:CAC can be a complex and debated topic, but the above is a simple summary and should serve as a good starting point. A few caveats: 1. There are various ways to calculate LTV:CAC and different opinions as to which is the best. 2. I like to look at LTV:CAC in monthly cohorts. Because it gives me a sign of whether the money spent on advertising that month was efficient. 3. The example above is more suitable for SaaS, but you can change and adapt it to your industry. — If you have any questions on how to apply this to your business, send me a DM.