Skip to main content

Which came first – CAC or ASP?


Got a little chicken or the egg situation here. Except in this case, we’re talking about CAC or ASP (cost of acquisition vs. average selling price). More context…

My company’s recent little pivot is called Burner Rocket. We help B2B companies break through the noise to reach key decision makers. Our secret sauce? We send burner phones. Yes, a little like that scene from The Matrix when Neo gets a phone and gets an immediate call from Morpheus.


It’s crazy effective (~65.5% turn-ons and 75.3% conversation rate)
… and fun (you can’t help but feed off the fun energy from “folks recording personalized videos” to “recipients turning on the phones”).

This isn’t the cheap direct mail piece like coffee mugs or keychains. Sometimes, you gotta go big to break through the noise these days.

When I pitched a local entrepreneur recently, he immediately said, “wow, your customers must have a high ASP”. I thought he would, for sure, go with “wow, your customers must have a high CAC”. It’s a chicken or egg situation where you could ask which came first?

In the world of ASP vs. CAC, they both influence each other. My focus on CAC is to isolate the cost and difficulty of acquiring a customer. I want to focus on the customer, and her buying cycle. The burner phones really cut out a ton of time, especially, when it comes to breaking through to net-new leads. They also get conversations because of the novelty (prospects may now associate the brand and product to be novel).

ASP should take into account CAC, too. However, ASP does not cover the longer-term revenue that could come from a customer – lifetime value (LTV). ASP may not actually cover cost of servicing a customer. Instead, the lifetime of the customer should take service into account.

Our new business may not influence ASP, or LTV for that matter. Instead, our new business can accelerate the pipeline via the top-of-funnel conversions (cold to conversations, to demos) and likely the mid-funnel with stalled opportunities. Thus, our phones can materially impact CAC.

Then again, I focus on all three metrics with a priority on both CAC and LTV before ASP. Prime B2B companies who have high CAC and LTV are good candidates + our other ideal customer profile (ICP) facets.

What are your thoughts? How are you considering your go-to-market strategy?

Comments

Popular posts from this blog

Vertical SaaS? Horizontal SaaS? It’s All News to Me

Not sure why, but I have only recently heard of a term called “Vertical SaaS”. Okay, there’s also “Horizontal SaaS”, too. Based on some light research, looks like vertical SaaS is also a growing trend and the number of companies fewer than horizontal SaaS providers.
Vertical SaaS borrows its moniker from the concept of vertical integration whereby there is more control over a supply chain from raw materials to point-of-sale. Here, vertical SaaS companies focus on a niche market (industry) offering a solution that enables more process control.
Horizontal SaaS providers get really good at a particular offering, and widen their market to reach scale. Their focus is on breadth of market, and thus, its sales and marketing strategies can require more resources.
Many vertical SaaS companies (such as Veeva Systems, Guidewire, Fleetmatics) are doing well usurping legacy systems of traditionally slow-tech-adoption industries. Here, vertical companies develop a best-of-breed product, and focu…

My Life-Defining Moment Happened When I Failed to Make Varsity in High School

Ever stop to think about who you are? What makes you tick and tock? How about what you truly enjoy and what you’re good at vs. not good at? Or what/ who has shaped you into the person you are today?
I’m at this stage of figuring out whether to continue independent consulting while iterating on ideas for the next startup or take on some full-time employment (consulting, product management, or otherwise). My recent post about my daily/ weekly schedule was an interesting exercise in stepping back and recognizing what I’m actually doing in a day, and made me really think at the macro level.
In one of my recent reflections, I thought about defining moments in my life. One of those watershed events that truly transformed me was my failure to make the Varsity soccer team in high school. I won’t rehash the whole story here – shared the story almost a year ago in my post titled “Getting Through Dark Moments and the Most Vulnerable Story I've Ever Told Publicly”. It’s this moment that I w…

Role of A Startup Advisor

Over the last year or so, I have become an Advisor for a couple startups. It’s been a great experience for me to teach and continue learning as an entrepreneur. I do meet with several startups and entrepreneurs weekly, but not officially as an Advisor save for a couple.
During (and especially after) Body Boss, I realized the importance of having Advisors. Advisors help startups and the executive team navigate the go-to-market waters bringing specific experience to the table – industry, technology, etc. With that comes connections, too.
The role of a startup Advisor includes: Guiding the startup on its directionProvide valuable insight into the industry, competition, market, etc.Share connections to move the company forward – prospects, new hire candidates, otherEstablish cadence around metrics for progress In exchange for devoting time and attention (and reaching success, hopefully), startups typically provide stock or cash to Advisors. This ensures both parties are aligned on objecti…