Dynamics of User Profiling: Diversifying Customer Acquisition to Balance the CAC, AOV and Payback Periods.

Read time: 3 minutes.

Welcome to the 34th edition of The Growth Elements Newsletter. Every Monday, I write an essay on growth metrics & experiments and business case studies.

Today’s piece is going to 5100+ founders, operators and leaders from businesses like Shopify, Google, Sage, Hubspot, Servcorp, Zoho, Apollo & more.

Happy Monday!

Last week, my Growth team and I were working on refining the User Profiles.

Commercial and Retention teams shared that user activation and retention went down.

One of the qualitative feedbacks also shared by teams was that non-business email user acquisition was the culprit.

I wasn't convinced!

I tasked my Growth folks to do a ‘Quant Analysis’ of the users acquired in the last 180 days, group them by two RAW profiles (business and non-business emails) and map it from two sides:

• Left side 1: Acquisition location, keyword themes and terms.

• Right side 2: Activation rate %, CAC, AOV and LTV.

• The central axis is two profiles.

Some of the Strategic Insights

[1] As we started scaling the acquisition, the ratio of business and non-business email acquisitions slightly changed.

[2] The conversion rate of business email was much higher than non-business email.

[3] CAC of non-business email was way lower than business email.

[4] LTV of business email was higher than non-business email.

[5] AOV of non-business email was higher than business email.

To simplify this, we now have two Narrowed Profiles

[1] Business email users converting faster, but CAC is higher. Giving high LTV but lower AOV.

Ultimately, the Payback period to LTV ratio is 3:12. Giving me 9 folds of gross AOV revenue.

[2] Non-business email takes longer to convert, but CAC is cheaper. Giving low LTV but higher AOV.

Ultimately, the Payback period to LTV ratio is 1.8:8. Giving me 6.2 folds of gross AOV revenue. Note that - AOV is higher here.

It gave me a clear viability that both profiles are valuable in each way if we need to scale systematically and, most importantly, maintain our blended CAC and payback periods.

So, now that we know user profiles' unique attributes and behaviours, next steps?

What's the next step?

[1] My Growth team cleverly rebalanced the budget allocation ratio.

[2] Dismantled the campaigns and rejigged so we can control its spending fuel.

[3] Putting the budget cap on the acquisition location, themes and keywords, thus balancing the ratio of user profile acquisition despite the increase in top-level budget.

[4] C-Suite customer feedback campaign, connecting C-executive with new business/customers regardless of User Profile. Enhancing NPS, generating product feedback and most importantly, offering exclusive Management Annual offer.

Takeaways

If we had put the stop without crunching the numbers and understanding the dynamics of profiling, we would have potential repercussions in the coming months, giving higher CAC and lower AOV.

[1] Diversified acquisition and balanced approach to growth.

[2] Ensuring long-term sustainability and profitability by leveraging the strengths of each profile while mitigating their weakness, ultimately leading to a healthier BOTTOM LINE.

That's it for today's article! I hope you found this essay insightful.

Wishing you a productive week ahead!

I always appreciate you reading.

Thanks,
Chintan Maisuria