Principle of growth:
A business model works at scale when the cost to acquire a new customer is less or equal to the customer’s order value and less than the customer’s lifetime value.
2 ways to look at designing profitable growth:
1 – Focus on “order value” first and then “lifetime value”
• Order value forces you to look at your customer’s first engagement with you, typically a front-end offering.
• With a front end offer you can create opportunities to help customers at a higher level with backend offerings, increasing LTV
• This gives you flexibility in an environment of rising costs to acquire customers.
2 – Focus only on LTV (typically if your business only has 1 offering)
• You’ll have always to maintain low costs to acquire customers
• Your fulfillment will have to create ways to increase and extend LTV to maximize customer value and your CAC to LTV ration
• To maintain scale, your main goal will be to create consistent sales (high volume)