We’ve looked at a few different customer acquisition cost strategies : F1 racing, Zappos’s mistake, and P.S. I love you, from Hotmail.
The CAC ideal is to acquire the best customers for free. That’s ideal. L.L. Bean started when Leon Bean mailed his catalog to out-of-state hunters. Michael Dell sold newspaper subscriptions, but sourced his leads from the “Just Married” records. Both men found pretty-good customers for a pretty-good price.
Customer acquisition might be the most interesting puzzle in business because the lower the CAC the more flexible the business model. Today we’ll add two more.
About Mike Wolfe, of American Pickers:
“He would go from barn to barn and buy some cheap stuff, something sold in the store for fifty bucks. We would buy something like an old motorcycle that was art which we could sell for twenty grand. And each day all these people, from all over the country, would come into the store and we would probably sell five-thousand-dollars worth of items and probably thirty-thousand-dollars worth of t-shirts.” – Sam Parr, My First Million, August 2021
The American Pickers television show is the customer acquisition vehicle for selling merchandise. Brilliant right? Okay, the second one.
“Growing a financial services company is so brutally difficult, and the growth is so restrained by customer acquisition costs that it is literally worth it to start flying people around the country. That is the most cost effective way to sign people up for credit cards, and the credit card business is so lucrative it is actually worth it.” – Byrne Hobart, World of DaaS August 2021
The business model of airlines is to operate a hub location that allows for network effects and to maximize the capacity of each plane because each additional customer costs, per Hobart, a drop of fuel and bag of nuts. Hobart’s whole interview is wonderful.
Finding customers has evolved over time. When customers were rural, catalogs ruled the day. As customers moved to cities, it was the department store. Then customers got cars, and the mall and big box retail came to be. The most recent step then is to the internet. It’s the same question Bean bandied in 1912: where the customers for what I am selling?
bonus: look for ‘lost’ monetization opportunities, like Matt Levine’s Money Stuff Bloomberg email.