It's Easier To Do the Hard Work!

Recently I was speaking to a CPG (consumer packaged goods) startup who had some success but their growth had stalled out. We talked about their customer LTV (lifetime value) and CAC (cost-to-acquire a customer), and they said they knew those numbers but what they really needed was an investor to give them a huge ad budget. They went on to say growth is like a casino so you can’t play $5 dollar tables, you gotta go BIG with a huge budget from Day One!

I couldn’t disagree more...

Since not every Google & Facebook ad are effective when a campaign starts, many successful companies run small tests to determine their audience and messaging before increasing their budget. So why spend a ton of (someone else's) money at this point? Because this company wanted growth to come easy, and it rarely does.

I've never worked with a company that sourced more than 45% of their clients directly from advertising. Successful CPG startups understand this and know that word of mouth is essential to reduce CAC, so like Tom's Shoes (for every pair of Tom's Shoes that's purchased, they give the same pair to someone in a third world country) they build marketing into their product.

If CPGs bypass or minimize this step and jump directly into advertising, they've entered a race to the bottom competing solely on price with the likes of Amazon and Wal-Mart.

So instead of wasting time and money, do the hard work of running tests to prove your target audience, what their pain points are, and how your product not only addresses them but puts your customers in a better place. This data will put you in a great position to scale your business and profit margin!

By the way, I'd love to hear about your approaches to building marketing into your product or service!