The more CAC the better! Wait, what?

Let’s change the way you think about acquisition costs

So, think about this:

You and your competitor have the exact same Customer Acquisition Cost Payback (CAC:PB) of 12 months.

But: your competitor is operating on a much higher Customer Acquisition Cost (CAC).

Who’s going to win?

In this case, it’s your competitor.

Sounds counterintuitive right?

I mean, we’ve all been trained to think of lower CAC as a sign of efficiency.

A metric to obsess over.

A benchmark to wow investors.

(And alternatively, a metric that’s somewhat useless).

But if you stop and think about it, a higher CAC might actually be a competitive advantage.

Think about it like this:

If one party has a higher CAC than the other but the same overall Payback what that really means is that one of them is much more efficient. Either by being able to sell for much higher prices or having a much more efficiently converting funnel. 

The reason why that matters is that with a higher CAC, they have more money to spend.

That means they can spend more on acquiring leads.

And hire better and more expensive talent.

Think about it on a smaller scale.

If your competitor is selling for 50k ACVs (average contract value), they can afford steak dinners and face-to-face sessions with their prospects. 

If you are selling for 5k instead, you can’t “even” afford an SDR team. 

Your competitor will simply out-bid you on most markets (Google Search) where they can and in some “markets” like SDR Outbound or Face-to-Face sessions, you won’t even be able to join.

So, instead of trying to starve your way to growth with the leanest and meanest CAC, focus rather on the efficiency of the funnel, then you can overspend - and potentially - gain a competitive advantage in doing so.