TheUncomfortableMathsofCustomerAcquisition
Customer acquisition costs have increased 60% in the past five years across ecommerce.
More advertisers. More competition. Less attention. Higher CPCs.
Most brands are aware of this. Very few have done the maths on what it means.
The maths:
If your CAC was £30 three years ago and it's £48 now, that's an extra £18 per customer.
On 10,000 customers, that's £180,000 in additional acquisition costs.
If your gross margin is 40%, you need £450,000 in additional revenue just to cover that increase. That's 4,500 extra orders at £100 AOV.
Most brands didn't grow revenue 45% to offset rising CAC. They just got less profitable.
The LTV myth:
"We can afford high CAC because of LTV."
Maybe. Let's check.
- What's your actual repeat purchase rate? Not projected, actual.
- What's the time between first and second purchase? Can you afford to wait?
- What's the contribution margin on repeat purchases? (Often lower due to retention marketing costs)
- What percentage of your "high LTV" customers were acquired via expensive channels versus cheap/organic?
LTV is often calculated optimistically and deployed to justify CAC that doesn't work.
The uncomfortable reality:
Some products can't be profitably advertised anymore. The maths doesn't work. No amount of optimisation will fix unit economics that don't support the CAC environment.
Some categories are in an arms race where everyone loses except the platforms.
Some brands are growing broke, acquiring customers at a loss hoping for repeat revenue that never comes in sufficient quantity.
What to do:
- Calculate your true sustainable CAC by product
- Accept that some products shouldn't be advertised
- Focus acquisition spend on products with economics that work
- Build retention strategies that actually increase LTV, not just assume they will
- Consider whether scale at current CAC makes sense, or whether profitable smaller is better
The maths is uncomfortable. Ignoring it is more expensive.