Reducing CAC: For High Growth Brands

Hey,

It’s Sunday once again. And this one has a lot of mixed emotions for me. There’s a lot happening personally with my friends & family. But I’m trying my best to wire in and distract myself constructively.

The reason you’re receiving this newsletter is because of one of these two reasons:

1. We’ve either connected in the past, or
2. Someone you know has added your email address on to my subscriber list

This however, is a closed list of subscribers who I reach out to, every fortnight, to share my insights & experiences of interacting with consumer businesses. The good news is that I started with 100 subscribers last month. Today, I’m on 400 and I count that as progress.

It’s totally possible to make internships a mutually-valuable exercise, without money needing to change hands. Although, that’s always a nice touch!

Today’s newsletter is about a 7 minute read, worthy of every word I assure. Before we dive into more serious things: we launched a new e-commerce store in the US last week, Steep & Mellow. Check them out and in case you’re looking to buy, here’s a discount code that you could use to avail a flat 20% off on their products: SMLIGHTSOUT20

Also, my latest podcast with Raul Rai, Founder of Nicobar, is out and gaining momentum. Check it out on Spotify: Secrets from the house of Nicobar.

Now on to the crux of this edition.

In my last newsletter, I spoke about “Marketing Basics for 0 to $1M”. Today, we’re on to HIGH GROWTH BRANDS. Most interactions that I have on a day to day basis are with founders or marketing teams of high growth companies. And our discussion often revolves around reducing CAC. So here are some punches that have worked best for businesses who we’ve advised on acing customer acquisition:

I) Acquisition via Ads is one, but what really matters is retention & engagement

• Since you’re spending to increase traffic, why not focus just the same on conversion? If real estate is about location, conversion optimisation is all about testing, and lots of it. So you’re relying on concrete data (as opposed to hypotheses) and that’s going to make you successful in the long run. In fact, you ideally should have a person or team whose job is to only do testing, such as A/B testing. Test these on a regular basis:

1. spaces on your landing pages for targeted CTA’s
2. Copies across ads & landing pages
3. Social proofing (testimonials, mentions in other digital publications, conversion funnels. There’s no guarantee that a 2 click buying process is better than a 3 click one. It totally depends on the brand)
4. Play with colors & gradients

• Focus on repeat customers. Even if they're on to your site for the 2nd time, incentivise them. Personalise your message via email campaigns. They have the potential to give higher LTV not only by purchasing your product, but also by bringing in new customers. Higher LTV can help lower CAC in the longer run. It’s as simple as that.
• Make this customer / or a set of them feel acknowledged. Not just with discounts, but also with their inputs on how to better your communication, ads, referral programs. Engage with them actively. For larger DTC brands, if your customer engagement isn’t on point, you’re only spending through the roof to acquire more customers.
• I’m not a big fan of celebrity endorsements because they only help ‘acquire’ customers. Wouldn’t name any brands, but only spending on acquisition and not retention or engagement is criminal. Create a club or a community for repeat buyers. It will pay off.

Focus on the WHY aka the feeling / benefit the customer receives. Too often, ads focus on benefits and value props, when instead, they need to focus on outcomes or how the product will help someone live a better life at the end of the day.

Some other easy examples of this:

• When building Kapiva as a wellbeing brand, we focussed on how it got you higher immunity or better sleep at night vs the ingredients (ayurveda) that it has.
• While working on Steep & Mellow, we focussed on how the morning tea (which had cordyceps for focus + rhodiola for energy) got you the perfect morning kick to start your day.
• Collaborator & Influencer Videos: I’d probably bet really high on this one. Here’s what my advice would be: Find a creator platform that works best for you (say Instagram)and have someone on your team manage putting out briefs to content creators. Can you image the power of multiplicity & content creation that can be raked in. And yes, go niche. Don’t go for mega or macro influencers. And back your influencers through their growth journey. Ashwajeet once told me in conversation that he backed Ronnie & Barty as partners of Sleepy Owl, when they had just 15K followers on Youtube. It paid off through the growth of both brands.
• Education & Awareness Videos: The more customers understand how to use your products, the more satisfaction they’ll get out of them and want to come back in future. Facilitate this by creating product-focussed educational content for your audience.

Example:

• This Tego Product has 2K+ views. I feel that’s great organic reach by a relevant collaborator

While I’ve spoken enough about ad copies above, here are a few things you could do to optimise your website:

• One stellar piece of advice that Zach Stuck gave me was to test pain point in ad and carry that over to the landing page.

Eg: If you’re selling sleep supplements, your ad hook would be “melatonin isn’t for everyone, try X instead” And then your LP copy would include explaining the above concept in more detail, have visuals + explain why the ingredients in your product are better + showcase reviews”

• Audit your site often, with internal stakeholders and a closed community of customers who would give you feedback. Run it past some outlier customers who could become a new TG for you - see if they can navigate it well enough.
• Try and keep your conversion funnel crisp. Your TOFU (top of funnel) could have a bunch of places where leads come from, but your BOFU (bottom of the funnel) should be able to concentrate relevant customers. Lesser clicks, clear information and optimised purchase flows.

Also, I tweeted about this on my handle and here’s what some top DTC experts responded with: Your SINGLE piece of advice to high growth brands, to lower their CAC.

Saksham Mendiratta @sakmendirattaWhat's your SINGLE piece of advice to high growth brands, to lower their CAC?

@mrsharma @zachmstuck @jakeXbjorseth @peeplaja @ShaanVP12:18 PM ∙ May 4, 2021

Well, thats all for now. I've created a repository for all of my newsletters & more. Watch out THIS SPACE for interesting information.

Until next time, sending good vibes to all of you.

With gratitude,

Sak.