http://www.daryllu.com/wp-content/uploads/2018/10/entrepreneurial-ninja_logo_sm.png 0 0 Daryl Lu http://www.daryllu.com/wp-content/uploads/2018/10/entrepreneurial-ninja_logo_sm.png Daryl Lu2018-03-28 11:41:002020-12-09 10:10:45Which 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 costand 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?