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3 steps to reduce CAC for your SaaS
Hello friends, welcome to GrowthShot #58. Today’s theme is:
The 3 steps to reduce your SaaS CAC- all in less than 250 words
Let’s dive in
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CAC is customer acquisition & is measured via a simple formula.
CAC = ($$$ spent in marketing & sales + labor)/number of customers acquired. Over time period “t”.
Your $$ spent in marketing/sales is directly proportional to your CAC. And the number of customers you acquire is inversely proportional to the CAC.
The more customers you acquire at a constant $$$ marketing/sales spend, the lower your CAC gets. So how do you get more customers at the same $$$ spend?
A good rule of thumb is to recover your CAC in 12 months.
Step 1: Quantify your customer persona - Your pricing tier is probably split across 3 personas. And each tier’s CAC is different. Quantify and measure your LTV: CAC ratio for each of the tiers. Aim for a LTV:CAC ratio of 3:1.
Step 2: Identify customer-channel fit - Use data in Step 1 above to identify the relevant distribution channel corresponding to the persona. These can be both sales/marketing channels depending on your customer persona & whether your SaaS is high-touch or low-touch.
Step 3: Optimize your channel - Track, measure and optimize your acquisition channels across your personas. Set up KPIs and revisit them each quarter.
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