Challenges of Heavy Marketing Spend and Customer Acquisition

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Exploring the downsides of depending too much on marketing spend to acquire customers, including rising costs, declining efficiency, and the value of organic users over purchased ones. The chapter also emphasizes the benefits of providing direct value to customers and enhancing customer experience instead of solely focusing on marketing tactics.

Episode 119: LTV, or lifetime value, has become the gold standard for startups, specifically how they measure the effectiveness of their various marketing channels. LTV does have merit, and it is a helpful proxy to prioritize marketing and understand the economics of each customer you acquire, but if relied on entirely, it can be misleading at best and harmful to your business at worst. I’ve found what I believe to be one of the best pieces on the internet about the challenges of this methodology, a 12-year-old essay by investing legend Bill Gurley that is as relevant today as it was then.

The Dangerous Seduction of the Lifetime Value (LTV) Formula: https://abovethecrowd.com/2012/09/04/the-dangerous-seduction-of-the-lifetime-value-ltv-formula/

DTC Metrics, Explained: https://www.nasdaq.com/articles/dtc-metrics-explained-2020-02-12

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