Jagadeesh J.’s Post

CAC based modelling when you are starting out, or launching fresh in newer geographies as the objective is to build traction, customer base at effective costs. LTV when you’ve gone past the start - up phase & when your CAC has been largely stable and when you begin to look beyond just acquisition and more in terms of loyalty, retention, profitability etc.

How many D2C customers are loyalists? I'd imagine a very few. So the CAC and LTV both are going to be bad. Of course, it is all relative, so if a D2C brand doesn't have ambitions to become the next boAt or MamaEarth or BSC, then sure, they can live a happy life thereafter - but many will be VC funded with high ambitions, which will force them to get more customers, and in turn, kill the business :)

Beautifully put. While CAC and LTV both are important, and are complementary, I believe in the early stage, one should go about with the CAC based model. Because at this point, you are looking for immediate returns to get your early set of customer so as to get your product market fit. Also it also depends on the niche you are operating. If isn’t driven by repeat behaviour, the CAC based might be a good thing to start with. Coming to LTV based,to me it usually works when you have achieved some scale and a high repeat rate. Eg nutrition based, consumables, supplements and categories like fashion. In the end both are equally important and cannot be separated. But every brand starts with CAC and comes to LTV after a certain scale. Cac model focuses on short term wins, LTV model focuses more on building relationship with your loyalists Cac model is like a flash sales, gets your immediate dopamine, LTV model is like growing a garden. You won’t see the seed or the plant blooming, but you know if you keep nurturing it, you know the seed would bloom, and would convert into a blossoming fruit! To sun up, the success of any business is established when CAC< Payback period < LTV!

As far my Understanding CAC based modelling be used for Early Stage Startups and startups looking for benchmarking policies when  compare their acquisition costs against industry standards or historical performance, guiding strategic adjustments. where as LTV-Based Modeling Are in a stage where they focus in a stage where their business will be in a so called maturity running stage as theor brand and organic reach is little bit is established and looking for multiple purchase from a single is achieved and Long-Term Strategy: Businesses which are aiming for sustainable growth focus on LTV to understand customer retention and the long-term value generated by each user. Investment Decisions: When considering investments in customer retention strategies or product improvements, LTV provides insights into potential returns based on existing customer behavior

CAC based modelling when the purpose is on immediate acquisition efficiency more suitable for early growth stage cos looking for rapid acquisition. LTV modelling when the goal is high value customer segments, improving retention & ensuring mktg aligns with long term profitability

IMO, LTV Based Modelling works when - 1. Have a high repeat frequency; at least once in 1-2 months. The idea being that you can quickly measure if repeats are happening and iterate if required. 2. You have enough capital in the bank to survive till you reach your payback period (or a high-conviction plan to raise debt/equity funding to be able to do so). CAC works if - 1. You are in a low repeat frequency category 2. Bootstrapped companies / if you don't have a clear plan to survive till you hit your payback period.

Would beg to differ a bit here, there's a reason that folks are focusing on content and then distribution, rather than adopting a performance hinged growth model. When we take an optimization lens to growth in the context of early stage D2C, it's not playing on the consumer connect by way of content and driving discoverability. Any new brand who wants to establish the consumer connect first. I think it's a myth that loyalty cannot be built amongst gen z with fast changing desires. Loyalty is a by-product of the consumer connect which happens through carefully crafted content marketing & great range of products. CAC & LTV takes care of itself once consumer connect is built and loyalty at scale is achieved in a dynamic market. I believe it is time to shift from this optimization lens of growth marketing and focus very deeply on consumer journeys and behaviours. Sustainable Growth will be delivered by the consumer, not by the platform.

These are some great insights, my man Jagadeesh J.. In my view, the choice between CAC and LTV really depends on where the brand is.  For early-stage brands with limited distribution, focusing on CAC makes more sense to track customer acquisition costs. As the brand grows and customer loyalty builds, LTV becomes key to maximizing long-term value. It’s all about finding the right balance at each stage.

this question seems to be somewhat on the same lines where Byron Sharp tries to throw light on behavioral loyalty versus emotional connection. Which indicates that considering emotional connection as dominant factor in purchase/repeat purchase from same brand influences preference. And if it takes backstage, behavioral loyalty takes over with less regards to emotional connection. Firstly, we need to give respect to the the fact that among the above 2 factors, which one would be the dominant factor for a specific brand. For example, for a brand like Apple and its flagship products, emotional connection holds true. The same may not be true for a product where behavioral loyalty is dominant with emotional connection at backstage. Example, if Surf Excel is not available Ariel would do the work. So for different kinds of product-usecase-market-brand-buying cycle combinations, the proportion of behavioural loyalty versus emotional connection would need to be gauged to decide if CAC-based modeling or LTV-based modeling will be ideal. In rare cases, if strong emotional connection and behavioral loyalty index are both higher, it would allow room for higher margin as well as repeat purchases.

For D2C brands, consider two growth strategies: 1. CAC (Customer Acquisition Cost)-based: Focuses on efficient user acquisition, ideal for high-cost marketing and low-purchase frequency products. 2. LTV (Lifetime Value)-based: Prioritizes maximizing customer value, suitable for high-retention rates and frequent purchases. Combine both for a balanced approach, and consider additional metrics for optimal growth.