5 Approaches to Keep CAC Under Control While Scaling Spend

5 Approaches to Keep CAC Under Control While Scaling Spend
  • Here at Superbolt, our core objective is to help the brands we partner with scale. We do this in part by driving repeat orders but mainly by introducing their brands and products to large pools of potential customers. In order to reach these large audiences, an increase in ad spend is typically required. A common and well-known conundrum in the marketing world is that of a natural and inevitable rise in Customer Acquisition Cost (CAC) and other similar metrics when scaling spend.

  • Indeed, when broadening the reach of your brand and targeting marginally less interested audiences, a slight decrease in efficiency is to be expected. Marketers must often weigh the advantages of widening reach and allowing for a natural increase in CAC versus the risk of losing a campaign’s efficiency.

    As a growth agency, we’ve had ample opportunities to observe this tendency and to develop several methods to increase spend while keeping CAC under control. It is part of our mission to guarantee long-term sustainable growth for our clients while maintaining efficient campaigns. The method we will discuss here relies on identifying the early signs of channel fatigue and bringing in additional channels to diversify the media mix.

  • For most of our brands, we build a growth strategy balanced between discovery (push) channels and Intent (pull) channels.

    As their name suggests, discovery channels involve pushing your product in front of audiences. The audience hasn’t shown any clear intent for our products but thanks to audience targeting we can push our products to an audience that we think will be interested in discovering them.

    In an intent channel, we pull an audience that is actively seeking products in a brand’s product category. We want to answer that intent by making it easier for them to reach their goal (e.g: you are searching to buy a coffee machine, Google will show you ads from brands selling coffee machines).

    As we’ll discuss below, the way we scale differs greatly between the two types of channels.

  • Discovery Channels

    Most campaigns use Facebook Ads as the main discovery channel because between Facebook and Instagram, almost everyone is reachable. In addition, FB Ads’ granular targeting options and wide range of creative formats makes it the most efficient and scalable discovery channel.

    Within Facebook, we make sure to scale efficiently by carefully tailoring our audiences and showing them best-in-class ads.

  • However, Facebook Ads campaigns can face various challenges that affect performance. Within Facebook Ads, we see that CAC increases progressively with audience expansion. This means that there's no clear inflection point where the CAC gets off track, but it's best practice to define a threshold with clients. We’ll explore below a few of the techniques we follow to maintain high overall account performance.

  • When scaling, Facebook accounts can plateau at three distinct moments. When we see a struggling Facebook account, we look at the symptoms and try to treat the likely causes by diversifying the media mix with other discovery channels, expansion, and retargeting channels.

    Let’s take a look at the three plateaus and how we’d treat them:

  • First Facebook Ads plateau

    Approach #1 to control CAC

    The account shows a strong Click-Through-Rate (CTR), but the traffic is not converting efficiently. To address this issue, we like to add a retargeting channel such as Quantcast or Criteo to have an extra mid/bottom-of-the-funnel touchpoint.

  • Second Facebook Ads plateau

    Approach #2 to control CAC

    Adding a retargeting channel will help for a while, but eventually, one might reach a second plateau when the account exhibits a CTR that is showing signs of fatigue (decreasing). We can then anticipate any issues and improve performance by adding an awareness channel like YouTube to make the brand more noticeable.

  • Third Facebook Ads Plateau

    Approach #3 to control CAC

    After some time, we might see that the CAC is sharply increasing or is already higher than our threshold, which tells us the overall Facebook account is no longer scaling efficiently. This is the perfect opportunity to add another discovery channel based on target demographics and audience insights, for example Snapchat if the demographic is younger, or Pinterest if the audience is women over the age of 30.

  • To summarize, we can diversify the media mix with channels that either support or supplement Facebook Ads in order to make sure campaigns are performing well and CAC is kept low.

  • Intent Channels

    Google Ads tends to be our main intent channel due to its scope and pertinence. By showing ads tailored to search relevant search terms, Google Ads enables brands to get in front of the right people at the right time. Google is by far the leading search engine and has a sophisticated ad platform, making it the most efficient and scalable intent channel.

    When we scale within Google Ads, we keep a few techniques in mind to maximize performance:

    • We establish granular campaign structures that allow us to cut unwanted traffic and double down on winning terms

    • We optimize ads and creatives that capitalize on the format of Google Ads and match the most searched-for terms

  • However, even with Google Ads’ great potential, it is possible to reach the inflection point when incremental spend leads to lower efficiency. This point is easy to predict and observe: it is found when we reach the upper limit of search volume for our keywords. In contrast to a discovery channel where audience expansion is virtually infinite, each term on Google Ads is limited by search volume. If we take the example of one of our clients, Harmless Harvest, we can expect around 3,000 searches a month for “Organic Coconut Water”. When targeting lower-intent keywords with broader audiences, we observe that the CAC can increase by large increments, so it’s important to closely monitor performance and assess whether the move makes sense:

  • When we reach this point, there are two key types of expansion options that can be pursued, but it’s important to keep in mind that they have limited potential and smaller impact because they are smaller than Google Ads.

  • Google Ads Expansion Option 1

    Approach #4 to control CAC

    To diversify from Google Ads and bring in additional traffic, it’s possible to add another intent channel such as Bing Ads, Quora, or Reddit.

    While Bing is an ad platform built on the back of a search engine, Quora and Reddit are community engagement platforms. Reddit is increasingly becoming an important intent channel, as it has inbuilt audiences that are highly engaged with their topics of interest. Some brands that have good product fit with these themed audiences (such as our Military-based client Bravo Sierra) can find strong success with Reddit.

  • Google Ads Expansion Option 2

    Approach #5 to control CAC

    To help convert mid-intent keyword traffic, it’s smart to add a retargeting channel that supports Google Ads, such as Quantcast or Criteo. This allows us to supplement our strategy with an additional touchpoint and capitalize on previous prospect searches that show intent for the products we are advertising.

  • These various options help us diversify the media mix to keep CAC low.

  • Conclusion

    When establishing a long-term, sustainable growth strategy, it is essential to act early and use all the marketing resources under your belt to maintain a low CAC. Once channels start to show signs of fatigue, it’s often time to diversify the media mix and add additional touchpoints for prospects. It’s also essential as with all marketing initiatives to rely on strong creatives in order to make the most of audience targeting efforts.

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