Awesome post, and great work dogfooding. The biggest issue I run into with many product and growth users is that they are not using the actual products they build to understand the issues at play. I know you are going to end up with a much more nuanced appreciation for the writers by doing this!
CLV and LTV are some of my favorite topics too. Particularly the interplay with Marketing spend. The biggest mistake I see is companies start to use the LTV of their organic customers to start forecasting/opportunity sizing customers brought in through paid channels.
The intent, in most cases, of customers brought in through paid channels will nearly always be lower and the LTV lower as a result (especially when you factor in acquisition costs). So making sure to separate out the cohorts of customers based on acquisition source becomes incredibly important (although harder due to tracking/attribution). So the balance is keeping it simple yet actionable in a way that gives you confidence in what you can scale up and what doesn't make sense.
I couldn't agree more with your point about segmenting CLV & CAC by channel. It can introduce some complexity, but a little effort can go a long way.
One thing that came to mind reading your comment... it's interesting to think about how attribution and sophistication can change as the marketing budget expands. Towards the end of my time at Crunchyroll, our annual marketing budget was ~$30M (started *way* lower ) and we had ~8ish folks managing the spend. At HBO Max, it was a totally different ballgame — the budget was ~20x bigger, the headcount was far more expansive, and the attribution models were way more sophisticated. If you're advising a company or joining a team, I think it's important to be aware of what's possible given the company's growth stage & resources.
I imagine you've seen a lot more of this spectrum than my personal experience. Would love to hear what you think.
And yes, the dogfooding has already been super valuable. It's so informative being on the other side of the table.
Great post Reid! Early on (too early on) I wanted to experiment with paid marketing for subs. A similar newsletter with a large subscriber base was recommended to me (recomendo which just moved to substack!). I paid $200 for a blurb and cta at the end of their weekly newsletter. The CAC was under $1 so I was thrilled! However months later taking churn into account that number CAC is much higher. So agreed - need to find the right balance
That's a great example of segmenting & looking at CAC relative to CLV based on how people found your product / newsletter.
As an aside, we almost always advise paid ads as an accelerant once a product has clearly found its audience / market. We see a lot of people use paid ads super early, and that can work, but more often it's not the best use of time / focus / resources.
This is an awesome breakdown. Something early operators struggle with when it comes to the inputs is getting the churn assumption right. It can be hard to be certain when you don’t have a ton of historical data. Keep up the great work
You nailed it. It can be super hard to measure "retention" early on, especially doing it properly (e.g., cohort-based and using successful payments). If you're somewhere b/w 3-6 months within launching, it's probably better if it's more engagement-based vs. revenue-based, or even qualitative (what are your users saying?).
What happens when the CAC becomes intertwined with peer relationships? Your morality of reciprocity is then potentially impacting the ARPU of your readers. How do you train people to see their "so-called competitors" as allies instead of rivals? You have to prove to them that collaboration will drive ROI.
Now try convincing them that paid subs and not flat-fee Ads or more lucrative courses is the best way to monetize?
Another helpful article. I'm still hoping there's some nuanced (or overt) concept I'm missing for how to convert LONG-TIME free subscribers to paid subscribers. Even though I'm in the middle of the "success threshold" I can't understand how I can have so many loyal free subscribers, some whom have been reading for 15+ years (and interacting with me) but who never elected to upgrade to premium when I joined Substack one year ago. I love their loyalty, but would also love to know if there's a step I'm missing that others use to help loyal "freemium" readers know just how much their contribution would help...?
Awesome post, and great work dogfooding. The biggest issue I run into with many product and growth users is that they are not using the actual products they build to understand the issues at play. I know you are going to end up with a much more nuanced appreciation for the writers by doing this!
CLV and LTV are some of my favorite topics too. Particularly the interplay with Marketing spend. The biggest mistake I see is companies start to use the LTV of their organic customers to start forecasting/opportunity sizing customers brought in through paid channels.
The intent, in most cases, of customers brought in through paid channels will nearly always be lower and the LTV lower as a result (especially when you factor in acquisition costs). So making sure to separate out the cohorts of customers based on acquisition source becomes incredibly important (although harder due to tracking/attribution). So the balance is keeping it simple yet actionable in a way that gives you confidence in what you can scale up and what doesn't make sense.
Love it, thanks Andre!
I couldn't agree more with your point about segmenting CLV & CAC by channel. It can introduce some complexity, but a little effort can go a long way.
One thing that came to mind reading your comment... it's interesting to think about how attribution and sophistication can change as the marketing budget expands. Towards the end of my time at Crunchyroll, our annual marketing budget was ~$30M (started *way* lower ) and we had ~8ish folks managing the spend. At HBO Max, it was a totally different ballgame — the budget was ~20x bigger, the headcount was far more expansive, and the attribution models were way more sophisticated. If you're advising a company or joining a team, I think it's important to be aware of what's possible given the company's growth stage & resources.
I imagine you've seen a lot more of this spectrum than my personal experience. Would love to hear what you think.
And yes, the dogfooding has already been super valuable. It's so informative being on the other side of the table.
Great post Reid! Early on (too early on) I wanted to experiment with paid marketing for subs. A similar newsletter with a large subscriber base was recommended to me (recomendo which just moved to substack!). I paid $200 for a blurb and cta at the end of their weekly newsletter. The CAC was under $1 so I was thrilled! However months later taking churn into account that number CAC is much higher. So agreed - need to find the right balance
Super interesting, thanks for sharing!
That's a great example of segmenting & looking at CAC relative to CLV based on how people found your product / newsletter.
As an aside, we almost always advise paid ads as an accelerant once a product has clearly found its audience / market. We see a lot of people use paid ads super early, and that can work, but more often it's not the best use of time / focus / resources.
Thanks again for sharing.
This is an awesome breakdown. Something early operators struggle with when it comes to the inputs is getting the churn assumption right. It can be hard to be certain when you don’t have a ton of historical data. Keep up the great work
Thanks CJ!
You nailed it. It can be super hard to measure "retention" early on, especially doing it properly (e.g., cohort-based and using successful payments). If you're somewhere b/w 3-6 months within launching, it's probably better if it's more engagement-based vs. revenue-based, or even qualitative (what are your users saying?).
What happens when the CAC becomes intertwined with peer relationships? Your morality of reciprocity is then potentially impacting the ARPU of your readers. How do you train people to see their "so-called competitors" as allies instead of rivals? You have to prove to them that collaboration will drive ROI.
Now try convincing them that paid subs and not flat-fee Ads or more lucrative courses is the best way to monetize?
Another helpful article. I'm still hoping there's some nuanced (or overt) concept I'm missing for how to convert LONG-TIME free subscribers to paid subscribers. Even though I'm in the middle of the "success threshold" I can't understand how I can have so many loyal free subscribers, some whom have been reading for 15+ years (and interacting with me) but who never elected to upgrade to premium when I joined Substack one year ago. I love their loyalty, but would also love to know if there's a step I'm missing that others use to help loyal "freemium" readers know just how much their contribution would help...?
Much appreciated! I'm very satisfied, but also looking to enhance this aspect of my career.