Excerpt from a Jason M. Lemkin talk (YouTube) criticizing common marketing metrics and practices. Lemkin argues CAC is a flawed, oversimplified metric because customer acquisition costs vary widely (viral/word-of-mouth vs expensive paid programs), and that treating marketing programs uniformly as high-cost leads many companies to under-invest or do nothing—risking failure.
Because the problem in marketing, Harry, is everything has crappy roi. If you want to talk about marketing, here's the problem. This is why CAC is such a flawed metric. Because if your cost, let's say your average deal size is 5k, 5k your customer, you're. You're actually not going to have anything that, where you can spend $5,000 to get a $5,000 customer. You're going to have a lot of stuff that's viral, that's free, that's word of mouth, that's people telling their friend that that cac, the marketing's close to zero, right? Even with other works. And then frankly, your average customer is going to cost you like 10 grand to get 5 grand, right? And if they stay 5 years, you're ahead. If they refer their friends your head, if you steal it from a customer, you're ahead. If you hit your plan and raise the round, you're ahead. But all of these marketing programs are too expensive. And so if you view them too simplistically, you just don't market. And that's what people are doing. They're just doing nothing, and it's going to fail them.
