As more and more brands enter the DTC race pumping money into the digital ad space, more dollars are needed to compete for the same impressions.
“When demand rises but the supply is steady, cost goes up. Brands should be concerned because the cost of acquisition is becoming higher than the average order value (AOV),” Pini Yakuel, CEO and founder of customer data platform Optimove, told Marketing Land on the long-term implications of rising customer acquisition costs. “This means that if a customer comes to your site or storefront once, makes a purchase, and never returns, your brand is losing money.”
We’ve simply reached a place where in many cases customer acquisitions cost (CAC) has reached a point where it’s outpacing customer lifetime value (LTV). Internet trend guru Mary Meeker touched on this issue in her 2019 Internet Trends report, deeming the rise in customer acquisition costs “unsustainable.” As a result, DTC start-ups are working together to build audiences by collaborating with brands that target similar demographics. Product drops, giveaways, and events all offer organic, inexpensive ways to acquire new customers.
“A lot of companies [are] hitting the Facebook wall—you’ll see more and more brands reach out in this way to figure out interesting ways to collaborate,” Andrea Hippeau, principal at venture fund Lerer Hippeau, told Modern Retail.
Spending your way to success acquiring consumers online may no longer be a viable option, so collaboration and partnerships are going to become an increasingly important part of a brand’s marketing mix. For examples of collaborations, read the full story on Modern Retail.
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