Why your CAC gets worse when you spend more, and what to do about it

Sadly, you can't spend into infinity and get infinity customers. If you could, we'd all have done it by now, and the only constraint left brands would be inventory.

The reason you can't is that each additional customer costs a little more than the last one. That's basically a law of nature in paid media. The pool of people who want your product this week is finite, and Meta finds them in roughly the order of who's easiest to convert — the cheapest conversions go first. The further in you go, the more expensive the next customer becomes. Past a point you're showing your existing ads to the same people more often, and/or reaching people those ads don't really speak to... and both of those cost you $$.

The relationship between total spend and CAC is a curve, not a line. Every dollar you put in buys a little less than the dollar before it, and the curve gets steeper the further out you go.

That's a pretty basic idea, but I'd argue it's one of the most important concepts to understand when you are trying to scale a brand. To understand why, let's start with this reality: I can get you almost any CAC you want, tomorrow.

You want a $5 CAC? Slash your budget to almost nothing. You'll get your $5 CAC. The tradeoff is that you're not growing. You want a $500 CAC? Hand me a boatload of dollars each month and the ads you're already running. You'll get  more customers out of that, and depending on your margins you may also be lighting money on fire on your way to bankruptcy. All I did was move you along the curve.

Which means "our CAC is $XX" doesn't really mean anything by itself. A CAC only means something with a spend level and a P&L attached to it.

So where do you stop on the curve?

Wherever your unit economics and your goals for the business say you should.

If you want the business at a 10% EBITDA margin, you can work backwards from that: what's left for customer acquisition, and what blended CAC does that translate to? That's your stopping point on the curve. Then the job is running your ad accounts so total spend lands as close to that level as you can get it.

There's real work behind that sentence, and it is tricky — understanding your P&L, how incremental each platform actually is, how much organic and direct volume you're getting "for free" — and each of these are topics for their own posts. For now, say you've done it.

Say you're an ice cream brand called Tuesday Creamery, and the math says you can pay about $40 to acquire a customer. Your curve tells you what spend level that corresponds to. Anything past it and you're buying customers your P&L can't afford.

Are you stuck there forever?

No! You don't have to accept the curve you've got. What you want is to move the whole curve — spend at the same level of profitability and get more customers for it.

There are a handful of ways to do that. Launch a new product, and you pull in people who were never buyers of the old one. Create a marketing moment — something like a collab, a drop, a campaign that gets people paying attention all at once — and the pool temporarily swells. Invest in brand and upper funnel, and the audience you're advertising into is warmer, so the same ad converts more cheaply.

Those all work, and I'd do all of them. But they're episodic, or they take a long while to pay you back. A launch is a launch, a moment is a moment, and brand pays back over quarters and years rather than weeks.

The lever you can build a repeatable process around — and therefore the one worth setting up a real system for, because you'll run it every month forever — is ad creative. More of it, and more different kinds of it. Here's why that works.

Two people and one ad

Say you have two potential customers.

Person one is obsessed with coffee ice cream and thinks of it as a small reward at the end of a hard day. Person two only eats ice cream on their birthday or some other special occasion (I know, sad!!), and they always put sprinkles on it.

You have one ad. It's a creator saying she loves treating herself after a long day, scooping a little coffee ice cream into a bowl and eating it on the couch.

Person one sees it and thinks: yes. That's me, I both need and deserve this little treat. You barely have to spend anything to find her, and almost nothing to convince her.

Person two sees the same ad and thinks: that looks good, but it isn't my birthday and I haven't really earned it. Also it would be a lot more convincing with sprinkles on it. She might come around eventually, but you're going to pay more to find her and more to convert her, because the ad isn't for her.

Now imagine a second ad. A bowl of ice cream absolutely buried in sprinkles, and the line is: it isn't your birthday but you should have this anyway. Person two sees it and feels seen. It gives her permission to buy because it SEES her and validates her emotionally.

She was always in market. She was always affordable.  But she was unreachable at a reasonable budget, because nothing you were running was talking to her.

Every genuinely different argument you put in the account opens a pocket of people who convert cheaply, because the message actually fits them. Which pushes the expensive part of your curve further out.

What that does to the numbers

Toggle the arguments on. People light up who were always in market and always affordable and were simply never spoken to. And the curve slides right.

Start with the one ad and you're reaching about a quarter of the people who are in market this month. Add the second argument and you're at half. Keep going and the curve keeps sliding — for Tuesday, four live arguments roughly doubles the spend the account can absorb before CAC hits $40. Twice the customers every month, at the same CAC. Nothing about the economics changed. The only thing that changed is how many different people the account is capable of talking to.

I've drawn it as if each new argument opens a genuinely new pocket, with diminishing returns as they stack, so the fourth adds less than the second. How big the effect is for your brand is an empirical question and you find out by doing it. What I'd bet on is the direction, because I've seen it time and time again: more, diverse ad creative improves your efficiency and allows you to scale.

Reading this and wondering... ok, but where do I start?

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