Perpetual Traffic Podcast Summary

Episode: How to Acquire New Customers Profitably Using The nCAC Calculator
Release Date: April 29, 2025
Hosts: Ralph Burns & Lauren E. Petrullo
Guest: Nick Miller, Head of Traffic at Tier11

1. Introduction

In this episode of Perpetual Traffic, hosts Ralph Burns and Lauren Petrullo delve into the intricacies of acquiring new customers profitably using the nCAC (New Cost to Acquire a Customer) Calculator. With Lauren absent due to her conference commitments, Ralph introduces Nick Miller, the Head of Traffic at Tier11, highlighting his transition from a professional guitarist to a marketing expert.

Notable Quote:

• Ralph Burns (00:02): “...we have head of Traffic at Tier 11, Nick Miller, the best guitar player I know by the way...”

2. Guest Introduction: Nick Miller

Nick shares his unique journey from music to marketing, emphasizing how promoting his band's music on platforms like Meta Ads sparked his interest in digital marketing. As a longtime listener of Perpetual Traffic, Nick has now become a pivotal part of the Tier11 team, bringing firsthand agency experience to the discussion.

Notable Quote:

• Nick Miller (01:32): “...discovering the power of meta ads from promoting my band's music and my music and thought, wow, I really like this. I want to maybe try it with some non music businesses.”

3. Overview of the nCAC Calculator

Ralph introduces the nCAC Calculator, a tool developed to help businesses determine the maximum amount they can afford to spend to acquire a new customer profitably. The calculator is available for free at Tier11.com and is complemented by instructional videos on their YouTube channel.

Notable Quote:

• Ralph Burns (02:06): “...if you acquire a customer at a certain cost, what does that mean for you in three months time, six months time, 12 months time, what is that going to mean for your revenue?”

4. Importance of nCAC Over ROAS

Nick discusses the limitations of traditional metrics like ROAS (Return On Ad Spend), especially in an omnichannel marketing landscape where ROAS becomes less reliable. He emphasizes shifting focus to nCAC to gain clearer insights into customer acquisition profitability.

Notable Quote:

• Nick Miller (03:36): “...the evolution from ROAS... ROAS became less and less of a reliable metric to use for building a business.”

5. Step-by-Step Guide on Using the nCAC Calculator

Step 1: Calculating Lifetime Value (LTV)

The first step involves determining the Lifetime Value (LTV) of a customer, which represents the average revenue a customer generates over a specific period (commonly 12 months). Nick explains how to source LTV data from platforms like Shopify or through Tier11's Data Suite.

Notable Quote:

• Nick Miller (16:25): “...starting with LTV gives us that top line, you know, breaking down the average revenue per customer over time.”

Step 2: Identifying Costs of Sales and OPEX

Next, businesses must identify Cost of Sales (variable costs that change with sales volume) and Operating Expenses (OPEX) (fixed costs). Nick advises accurately categorizing these expenses to ensure precise calculations.

Notable Quote:

• Nick Miller (19:27): “...it's going to vary with each individual business... it's a judgment call whether or not you put something into COGS or whether you put it into OPEX.”

Step 3: Setting Paid Media Spend and Desired Profit Margin

Users input their current Paid Media Spend and Desired Profit Margin. The calculator then determines the maximum allowable nCAC, ensuring that customer acquisition costs align with profitability goals.

Notable Quote:

• Nick Miller (29:27): “...we're taking the first time order value of $99 and we're taking out this 38% cost of sales...”

Step 4: Estimating Impact on Profitability

The final step involves projecting the Net Profit or Loss based on different scenarios, such as varying OPEX or adjusting nCAC. This helps businesses visualize the long-term financial impact of their customer acquisition strategies.

Notable Quote:

• Nick Miller (33:02): “…we can add $30,000 OPEX cost. Now we can see the impact that has on the estimates.”

6. Real-World Example: E-Commerce Client Case Study

Nick walks through a practical example using an e-commerce client. Starting with an LTV of $99 and a cost of sales at 38%, they input a Paid Media Spend of $150,000. Initially, the model shows zero net profit due to ongoing OPEX. However, when a 15% desired profit margin is factored in, profitability improves significantly over time, highlighting the effectiveness of maintaining a profitable nCAC.

Notable Quote:

• Ralph Burns (34:26): “...net profit estimate looks like by the end of the year, which is almost $600,000.”

7. Challenges with Ad Platforms and Attribution

The conversation shifts to the pitfalls of relying solely on ad platform metrics. Nick points out that platforms like Meta and Google often include returning customers in their metrics, leading to inflated ROAS and inefficient media spending. He stresses the importance of distinguishing between new and returning customers to maintain media efficiency.

Notable Quote:

• Ralph Burns (30:47): “...you might be paying double, triple, quadruple sometimes to acquire the same customer over and over again.”

8. Best Practices and Recommendations

• Focus on New Customer Acquisition: Prioritize strategies that target first-time buyers to maximize nCAC effectiveness.

• Accurate Cost Categorization: Ensure that all variable and fixed costs are correctly classified to avoid skewed profitability projections.

• Utilize Data Suite Tools: Leverage Tier11's Data Suite for precise LTV calculations and deep-dive analytics.

• Regularly Review Metrics: Continually assess nCAC and other key metrics to adjust strategies and maintain profitability.

Notable Quote:

• Nick Miller (42:46): “...if you get this right, it just has a domino effect of everything else that happens afterwards.”

9. Closing Remarks

Ralph and Nick conclude by emphasizing the critical role of the nCAC Calculator in driving data-driven, profitable growth. They encourage listeners to download the calculator from Tier11.com and follow their YouTube channel for visual guides. Nick expresses his willingness to return as a regular guest to further explore the application's integration with Tier11's Data Suite.

Notable Quote:

• Ralph Burns (46:15): “...figure out what you can afford or willing to pay to acquire a customer with a profitability that works for you.”

Key Takeaways

• nCAC vs. ROAS: Transitioning from traditional ROAS metrics to nCAC provides a more accurate measure of customer acquisition profitability.

• LTV is Fundamental: Understanding the Lifetime Value of customers is essential for determining how much can be spent to acquire new customers.

• Accurate Cost Tracking: Proper categorization of variable and fixed costs ensures precise profitability calculations.

• Focus on Acquisition Over Retention: While retention strategies are valuable, initial acquisition should prioritize new customers to avoid inflated advertising costs.

• Data-Driven Decisions: Utilizing tools like the nCAC Calculator and Tier11's Data Suite empowers businesses to make informed, profitable marketing decisions.

For a comprehensive understanding and practical application, listeners are encouraged to download the nCAC Calculator from Tier11.com NCAC and visit the Perpetual Traffic YouTube Channel at perpetualtraffic.com YouTube for detailed instructional videos.

Stay Connected:

• Website: perpetualtraffic.com
• YouTube: perpetualtraffic.com YouTube
• Calculator Download: tier11.com/ncac

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