Monday 8th July 2024

What I learnt by marketing software to consumers.

Don't do it. That's the post. (light-heartedly, of course.)

Customer acquisition cost (CAC) is something that I'm pretty aware of and we like to track that along with our customer lifetime value (C-LTV). Fortunately, ours is pretty healthy (we currently have less than 2% churn so people stay with us for a while enabling us to recoup CAC pretty fast) but you can pretty much disregard that, because I have a business that sells to other businesses. If I was selling to consumers... well, actually, I just wouldn't do that.

It costs lots and lots and lots of money to reach people and the conversion rates are low. Not only that, but you have to account for x% of the paid user CAC to acquire free users. I'm not a fan of freemium for this reason and the added support burden.

Of course, if you have $x million in investment and want to spank it on ads, I guess that's a different story. If you're bootstrapped, I would avoid B2C. It's worth noting though that plenty of people have provded me wrong here and will probably continue to do so. I have particularly liked watching TripBFF grow.

Lessons:

  1. Know your CAC and C-LTV metrics.
  2. Know how soon after onboarding a new customer you recover your CAC (CAC payback time).
  3. Marketing software to consumers is (usually) very hard unless you're supported by lots of cash from other people.