The first step to knowing how to improve CLV
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.
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
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
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...?