The Key to Lowering CAC? Margaritas

In my companies and in many friends companies, the key to unlocking growth is simple — have your customer acquisition costs (CAC) be lower than the gross margin of sales. However, this is part of startups that are often screwed up and are difficult to fix.

Many founders and agencies spend their days trying to tune Facebook ad settings and Google search parameters to optimize costs. However, this is a futile effort as internet companies are constantly increasing their ARPU and thus charging advertisers (YOU) more money to show your ads. Optimizing against this is like swimming upstream, you can do this for some time but eventually, something will break.

So what is the key to unlocking growth? You need margaritas in your marketing. Margaritas are a simple drink — tequila, lime, orange liqueur. Just like your essential marketing mix is simple — owned media (email), earned (PR and social), and paid media (ads). But just as each restaurant has its own take on the margarita, each business has its own take on its mix.

The key is figuring out your own margarita recipe. Seeing what has worked at other similar companies is a great place to start but no restaurant can be successful by just hijacking the recipes from others — they must innovate to create your own.

Common Marketing Cocktail Mistakes

Too Much Tequila

A common problem I see when walking into clients is a total reliance on paid ads. Paid advertising is an extremely powerful tool and can be scaled up rapidly. However, if you are completely reliant on paid, you are subject to what the platform will charge you to show your ads to potential customers. As you spend more, bidding for those customers becomes more competitive and ad costs naturally rise. Founders need to balance paid media with scalable owned & earned media to make continuous growth happen.

Not Choosing the Right Citrus

Another problem is copying and pasting another brand's organic, SEO, PR, email, or other non-paid strategy into their marketing. It is a very good thing to be inspired by others, but you need to tweak what has worked for a different company to match your target customers and channels. The most common problem I see here is SEO. Often times…