The one predication I can univocally agree with is a “lowering CAC will get more attention in 2024.”
Renewed focus on organic customer acquisition.
The hope expressed by some managers and investors that they can generate a high valuations based on revenue growth but negative CLV will fade even more next year. Lowering CAC gets more attention.
This trend indicates a broader shift in how companies approach growth strategies, prioritizing long-term profitability and customer relationships over short-term revenue spikes. It will be interesting to see how this prediction unfolds and impacts various industries.
- Focusing on organic customer acquisition and the shift away from high valuations based on revenue growth with negative Customer Lifetime Value (CLV/CLTV).
- Emphasizing lower Customer Acquisition Costs (CAC) reflects a more sustainable and financially sound approach to business growth.
Focusing Lowering Customer Acquisition Costs will get more attention in 2024. These are the strategies:
- Build a strong brand,
- build a media company on top of your current company,
- or start out by becoming a creator.
Brand Reduces Dependency on CA Channels
Having a strong brand is one of the most effective strategies for organic customer acquisition.
A strong brand not only attracts customers but also fosters loyalty and trust, which are crucial for maintaining a healthy Customer Lifetime Value (CLV). By focusing on building a robust brand, businesses can reduce their reliance on expensive customer acquisition channels.
The right investment in your brand means prioritizing sustainability and long-term value over short-term gains. Building brand equity can significantly lower Customer Acquisition Costs (CAC) in the long run.
But not everyone has the resources for the “long run” to build consistent messaging, quality product or service delivery, and engaging with customers authentically. But if you want even one single of these, like engaging with your customers authentically, then you can't avoid starting to build a brand, even if it may take a little longer. Start today and be aware that the journey will take you at least 24 months of continuous effort.
There are a couple of business models who should become "media companies" themselves.
Become a Media Company Yourself
A compelling strategy some companies should think about becoming "media companies" themselves to be able to deliver great experiences themselves for the acquisition of and also while they are customers.
This essentially means you start creating and controlling your own content and channels of communication and foremost controlling the delivery of great experiences for leads, prospects, customers and all stakeholders alike.
Some companies have started with media or are transforming into "media companies" or have build businesses on top of being a media company. VCs have been dominating the internet since the 1990’s with blogs and content marketing securing them deal flow both from LPs, the limitep partners in a fund from whom they get the money, and startup founders, those they give the money to in pursuit of “making the world a better place.“
In the 2010’s prestigious VC firms like Andreessen Horowitz a.k.a. “a16z”, have been founded on the principles of a strong Media strategy and have moved on to create their own media because traditional media has turned from techno-optimist to an angle of overly techno pessimistic reporting.
This approach of strategically incorporating aspects of a media company in your customer journey can be particularly advantageous for businesses with high Customer Acquisition Costs (CAC) and those with high Customer Lifetime Value (LTV), as it allows them to engage directly with their audience, offering unique and valuable experiences.
Becoming a media entity requires investment in content creation and distribution capabilities but can pay off significantly by lowering CAC and strengthening brand equity.
Because with strong media you as a company can:
1. Control the Narrative
Directly shape how the brand is perceived without relying solely on external media, just like a16z.
2. Build Deeper Relationships
Create content that resonates with their audience, fostering loyalty and trust.
Stripe Press and Developer Documentation is a prime example of a technology company being a media company. They provide valuable resources and publications through Stripe Press, and its developer-friendly documentation has become a benchmark in the industry attracting their ideal tech-nerdy customers as well as developers, the scarce resource every employer branding campaign is after.
3. Increase Visibility
Regular, quality content can attract new customers and retain existing ones.
Consider Red Bull. Known for its energy drinks, Red Bull has become synonymous with extreme sports and high-energy events, effectively engaging with its target audience through sponsored events and its own media production.
4. Gather Insights
Direct interaction through owned media channels provides valuable feedback and data.
Visa has leveraged content marketing and partnerships to position itself as a forward-thinking, innovative brand in the financial sector by getting to know the consumption patterns of the customers of its clients. Although it is a B2B2C play it still is at the forefront in communicating with you, the consumer, not just their customer. They leverage their relationship with you to make other businesses offer their payment/credit solutions.
Over time, this strategy can be more cost-effective compared to traditional advertising.
HubSpot, known for its inbound marketing, effectively uses podcasts, blogs, and its own conference (INBOUND) to educate and engage with its audience.
These are just a couple of examples of how diverse companies have embraced the concept of becoming media companies to bolster their brand and customer engagement.
Creator Businesses, Brand and Media
While both traditionally Red Bull or Visa, and contemporarily Stripe or HubSpot have been a company with using media as a distribution and optimization strategy new businesses are built on top of creator first media companies.
Look at how Mr Beast's had to realize that in order for him to make the YouTube videos he wanted to make he had to monetize the attention he got on YouTube himself.
He could not rely on traditional companies recognizing the value he brought to the table but was forced to build businesses himself that resonated with his audience.
Mr. Beast (Jimmy Donaldson) is a prime example of leveraging media production for business success. His ventures, from YouTube channels to philanthropy and business, show the power of content in building a brand.
Prime by KSI and Logan on the other hand is a demonstration of leveraging personal brands and media presence to create successful business ventures.
These cases illustrate how integrating media and content creation into your business model will significantly enhance brand visibility, customer engagement, and loyalty. It shows a strategic shift from traditional advertising to creating meaningful, value-added interactions with audiences.
Will you start investing in a strong brand in 2024 to reap the benefits of organic customer acquisition?