Causes of rising CAC
Is your Customer Acquisition Cost on the rise?
These are the six most common reasons your customer acquisition cost could rise:
Your paid media campaigns don’t contain a strategic full-funnel approach that warms your audience to convert
The quality of the audiences you are targeting has declined
You’re not taking advantage of marketing automation within paid media
Your remarketing campaigns are hitting fatigue
Your messaging doesn’t communicate the values that your customers align with
Your vertical is becoming more competitive as more players enter, raise funding, etc., and therefore you are competing with more brands
That being said, the lowest hanging fruit that will increase your CAC is:
Rework your creative and messaging so that it resonates with your audiences. Sounds like a good time for an A/B test if you ask me.
Here is a simple checklist to determine what to change in your creative and messaging strategy:
Review the metrics on the media platforms you are running. Review the metrics of your ads side by side, analyzing their engagement and quality metrics. Look for commonalities among the top and lowest ads, and summarize the findings.
Use library tools to uncover ads from 3-4 competitors. Do the same with 3-4 other industry movers that are less competitive (think complementary brands that your customers likely also purchase from). Summarize the similarities.
Land on 3 new creative concepts to test and 3 new messaging concepts to test (ad copy).
Once assets are ready, this is how you flight it!
As you are ready to go live (and depending on the platform you are using) you will have a total of 9 variations to play with: 3 creative concepts, and 3 messaging concepts.
Push them live with a very clean naming convention (you’ll thank me for this in the analysis phase).
Run every ad variation until it hits a minimum of 1K impressions (ideally 5K+ to get more statistical significance).
Pause down the losing variations, notate where they lost (what campaign and audience). Hypothesize on their loss.
Repeat this exercise over and over until you get a CAC to meet your business objectives.
Don’t forget to sell your CMO on the value of awareness
Just because CAC is declining, this is not your tell-all sign to curb your paid media spend.
“When it comes to CAC, there’s the marketing optimization where we’re fine-tuning our landing pages and messaging and design and campaign targeting, all these things. But there’s also the other thing, companies buy from companies they’ve heard of and they know. And so brand as a differentiator on brand awareness, the saliency of being in the consideration set is huge.”
I couldn’t agree more.
Customers give more attention to brands they’re familiar with. Make sure your messaging is on target and your brand is ubiquitous. Use a mix of marketing approaches and channels, supported by great attribution so you know what's working and what's not.