[Live Demo] How to Determine an Membership/eComm Biz’s nCAC

Summary

Perpetual Traffic Podcast Episode Summary
Episode: [Live Demo] How to Determine a Membership/eComm Biz’s nCAC
Release Date: March 28, 2025
Hosts: Ralph Burns and Lauren Petrullo
Guests: John Moran (Chief Strategist), Nick Miller (Media Buying Director), TJ (Sales Specialist)

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Introduction to the Episode

In this insightful episode of Perpetual Traffic, hosts Ralph Burns and Lauren Petrullo delve deep into the intricacies of determining the New Customer Acquisition Cost (nCAC) for businesses operating both membership and e-commerce models. The episode features a live demo with key team members from Tier 11, including John Moran, Nick Miller, and TJ, who collectively unravel the complexities of calculating and optimizing nCAC to enhance profitability and scalability.

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Overview of the Client's Business Model

Ralph introduces the episode by highlighting a client with a dual business model encompassing both a membership site and an e-commerce store. This unique combination allows the client to leverage community engagement to boost e-commerce purchases, thereby enriching the overall business ecosystem.

Notable Quote:

“If you have a membership site, if you sell digital products, if you sell community, there's a little something for you in here...”
— Ralph Burns [02:30]

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Understanding and Calculating NCAC

The core focus of the episode revolves around understanding NCAC—New Customer Acquisition Cost—and how to accurately calculate it to ensure sustainable growth. The team emphasizes the importance of integrating various financial metrics such as Lifetime Value (LTV), Cost of Goods Sold (COGS), and contribution margins to derive a precise NCAC.

Key Points:

• Definition of NCAC: The maximum amount a business is willing to spend to acquire a new customer.
• Components: Includes LTV, COGS, operating expenses, and desired profit margins.
• Purpose: Helps in setting scalable and profitable ad spend strategies.

Notable Quote:

“NCAC is the cost to acquire a customer that is a new customer for you. What are you willing and able to pay to acquire a new customer?”
— Ralph Burns [06:00]

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Financial Review and Data Analysis

John Moran and Nick Miller lead a detailed discussion on reviewing financials to determine an appropriate NCAC. They examine historical data, dissecting metrics from both the e-commerce and membership segments to identify trends and areas for optimization.

Key Points:

• Historical NCAC Analysis: Reviewing past data to establish benchmarks.
• Data Segmentation: Separating e-commerce sales from membership acquisitions for accurate analysis.
• Tools Utilized: Customer LTV Lifespan COGS worksheet, Shopify data, and Samcart for subscription metrics.

Notable Quote:

“We're looking at our NCAC target of the subscribers at a profitable level. We know our NCAC targets and NCAC payback models... we're measuring it to make sure it's there.”
— Nick Miller [19:50]

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Strategies for Reducing NCAC and Increasing LTV

The discussion transitions into strategic approaches for minimizing NCAC while maximizing LTV. The team explores optimization techniques in paid media, emphasizing the importance of targeting new customers effectively and leveraging data-driven decisions.

Key Points:

• Optimizing Ad Spend: Focusing on profitable customer acquisition channels.
• Enhancing LTV: Implementing strategies to increase customer retention and average order value.
• Churn Management: Addressing customer churn through improved engagement and value propositions.

Notable Quote:

“If we do get that wrong and we scale, we're losing money at a faster rate. So this is where we look at our profit per new customer.”
— Nick Miller [21:59]

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Importance of Memberships in Business Growth

Lauren Petrullo underscores the pivotal role of memberships in driving business growth. She articulates how a strong membership base not only ensures steady revenue streams but also enhances customer loyalty and lifetime value.

Key Points:

• Membership as a Foundation: Prioritizing membership acquisition to stabilize and grow the customer base.
• Integration with E-commerce: Utilizing the community aspect of memberships to boost e-commerce sales.
• Long-term Vision: Focusing on sustainable growth through a loyal and engaged membership community.

Notable Quote:

“Our mission statement and our vision... you don't see the word equipment or Shopify or E Comm anywhere in there. It's never mentioned.”
— Lauren E. Petrulo [34:34]

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Tools and Recommendations

Nick Miller introduces practical tools and integrations that can aid in calculating and optimizing NCAC. He highlights the utility of platforms like Data Suite and suggests leveraging machine learning for better targeting and data synchronization.

Key Points:

• Data Suite Integration: Utilizing advanced tools to track and analyze customer acquisition metrics.
• Buy the Numbers Tool: A recommended tool for segmenting customers and enhancing targeting strategies.
• Automation: Implementing automated systems for syncing customer data to marketing platforms like HubSpot.

Notable Quote:

“There's a tool called Buy the Numbers... it gives you these preset segments that help with your targeting and your segmentation for those type of communications.”
— Nick Miller [23:47]

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Concluding Insights

As the episode wraps up, Ralph emphasizes the critical nature of accurately determining NCAC for business scalability and profitability. He encourages listeners to utilize the provided NCAC calculator and explore further resources on their YouTube channel for a more comprehensive understanding.

Key Points:

• Actionable Takeaways: Importance of setting and adhering to NCAC targets.
• Resource Availability: Free NCAC calculator available at tier11.com/NCAC.
• Future Episodes: Promise of upcoming discussions on managing customer churn and enhancing LTV.

Notable Quote:

“Make sure that you do download your NCAC calculator completely free from us at tier11.com/NCAC.”
— Ralph Burns [36:22]

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Final Thoughts

This episode of Perpetual Traffic offers a thorough exploration of NCAC within the context of a dual membership and e-commerce business model. The collaborative insights from Ralph, Lauren, and their expert guests provide listeners with a nuanced understanding of financial metrics essential for driving profitable growth. By integrating detailed data analysis with strategic marketing approaches, the episode serves as a valuable resource for business owners and marketing professionals aiming to optimize customer acquisition costs and enhance lifetime value.

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Additional Resources:

• NCAC Calculator: tier11.com/NCAC
• YouTube Episode: Available on perpetualtraffic.com YouTube Channel

Transcript

[Ralph Burns]

Our friends over at Appsumo started with one simple idea. The tools you need to grow your business shouldn't put you out of business. That's why they work directly with developers to get exclusive discounts of 80 to 90% off software, saving entrepreneurs like you over half of a billion dollars since 2010. Some of the biggest names in tech like Mailchimp, Zapier, Dropbox all got their start on AppSumo. With a rotating selection of hundreds of tools, the ones that you're using anyway and probably paying too much for, you'll find all the software you need to make your life easier in 2025. Plus, with a 60 day money back guarantee, you can try any tool risk free. Oh my God, What a deal. AppSumo rarely offers discounts, but they are going to offer a deal here for you. The perpetual traffic listener. Because prices are already so low, but we got the biggest discount we could possibly get from them anywhere. You get 13% off your first order with the code TRAFFIC13. These guys have been saving entrepreneurs like you and marketing people like you hundreds of millions of dollars since 2010. Don't miss out right now because they don't offer discounts like this. Head on over to appsumo.com enter the code traffic13 and get 13% off your first [e-mail] hey, it's Ralph here. Let me tell you about a lifestyle brand that we recently worked with where they grew their revenue by 14.49.8% year over year and hit eight figures in top line revenue for the very first time in their history and they are now on track for 25 million in revenue in 2025. We are so excited to be working with this company and the reason why is they started using Tier 11 data suite about a year ago and re reduced their unattributed traffic by 90%. That's right. They're unattributed direct unknown traffic that probably frustrates the hell out of you. Over in GA4 or one of those other crappy attribution tools, we reduced that unattributed traffic by 90%, uncovered $850,000 in hidden revenue and scaled their ad spend by over 3x. These results are not magic. The results of clean, accurate data and a system designed for today's privacy world where everybody is trying to block your data. If you want to see these kinds of results for your business, reach out and let's make it happen [e-mail] apply and discover how Tier 11 data suite can finally allow you to scale your business, acquiring new customers at a cost you can afford. Head on over to tier11.com apply hello and welcome to the Perpetual Traffic podcast. This is your host, Ralph burns, founder and CEO of Tier 11 and today's show. I absolutely, absolutely love these shows. The reason is, it's like these shows are the reason why we do what we do, not only tier 11 as a digital marketing agency, but also just do this podcast every single week. Because I love going deep in businesses and really understanding business models, what the problem of those businesses are, how they can be solved, digging underneath the surface a bit, getting into the numbers, getting into the raw materials that really make a business move forward. And today's show is all about just that. This is actually a client that is a new client of tier 11. And the reason why we can use these is because obviously we keep everything confidential, especially for the guys that are on today's show here today. As much as we possibly can, we do need to keep the financials and the details of the business confidential to you, the listener. However, it's a great way for you to really look at your own business and or put under the microscope your agency or your internal team as to whether or not they're doing this type of due diligence prior to them doing anything with you. Meaning do they understand your numbers? Do they understand the numbers behind what makes your business go and the number that will help you and the metric that will help you achieve your big goal for your business and ultimately achieve your vision as an organization? In today's show, we're going through a very unique business model with some guys who are probably some of the smartest marketers I've ever met. And I do not say that lightly. Kassim used to say everyone was the smartest marketer he's ever met. And it's actually not true in many cases. But these guys are really very brilliant and have a unique business model. So it's got a little bit of something for everyone here. If you have a membership site, if you sell digital products, if you sell community, there's a little something for you in here because that's part of their business model. The other part is an E commerce store and believe it or not, like the way that their model works. It's fascinating because they utilize the community in such a unique way in order to enrich the community through their e commerce purchases. And I think that's one of the things that I love about it. They also have a really strong vision and really cool and Smart guys here. So today's show is about ncac and if you don't know what NCAC is or if you don't know how to calculate it, we'll have a solution for you for that ncac. We're going to leave links in the show notes. We have done a lot of shows on NCAC and that is the new cost to acquire a customer. The cost to acquire a customer that is a new customer for you. What are you willing and able to pay to acquire a new customer? And that is the biggest question that we oftentimes get. It's the one that stumbles a lot of businesses. So we do a lot of due diligence which you're going to see here on today's show. Make sure that you do head over to our YouTube channel and check it out there. A lot of it, like I said, it's going to be blurred out because a lot of this information is confidential. However, it's going to be really instructive for you, the business owner to be able to do the same thing for your business. And bonus, bonus alert the calculator that we use which we have perfected through dozens of calls like this, we are now giving it away to you, the perpetual traffic listener. So as you are listening today, head on over to tier11.com NCAC we'll also put it on perpetualtraffic.com NCAC at some point. But go to tier11.com NCAC because it is a calculator that I think will really help you and you'll see how we actually use it by using figuring out ltv, figuring out cogs, figuring out contribution margin, projected profit margin, all the other things obviously factoring in operating expenses and then what our solution for that is is paid traffic in this particular case and we arrive at that NCAC figure. So we do cut this off short at the end where we get into some very in depth details about like how to churn, how to scratch that on how to solve their biggest issue past NCAC which we won't be getting into in today's episode. But the that conversation is something maybe we'll air at a later date. And I know it's something that is probably a problem for many of you business owners which is how do you keep your customers long term buying from you and then become brand ambassadors for you. And that's what we discussed on the last half of the call which we do not air today. We will figure out a way to air that at a later date. So without further Ado, make sure that you do download the NCAT calculator. It's free. All you need is your name and email [e-mail] NCAC that is NCAC if you don't know how to spell, because I'm not a very good speller myself. But without further ado, we are going to take it over to John Moran, who is our chief strategist, been on Perpetual Traffic plenty of times here, as well as our ninja team of Nick Miller, who is our media buying director, as well as our sales guy, tj, who didn't even realize he was going to be the star of this week's show. But here he is with John and with Nick and our mystery business guest. So take it away, guys. Hope you enjoyed today's episode. We'll talk to you on the other side. You're listening to Perpetual Traffic.

[John Moran]

All right, so Ralph, thanks for jumping on. We figured we can get started here and take us through some things. So I have some slides on kind of ads account review, sort of general hygiene best practices. So I will absolutely send those over. We can take a look today. But I think honestly the real info is going to come from John and Nick. I'll get out of the way and let these guys kind of run the show here. So, John, if that's all right, I'd love to start with you and I can kind of fill in the last couple of minutes with the account review stuff.

[Nick Miller]

Sure, that sounds good. So typically what we would like to do in terms of starting our financial review is to make sure that where and when and how the ads dollars are spent is spent profitably before we find out two, three, six months later that, oh man, this whole thing, we lost $10,000. Like that's fairly paid. Media is the most effective way at growing a company, but it's also the most expensive. And it's something that has to have a really good deal of thought and preparation put into it before a proper strategy can be developed and then even more properly measured. So I'm going through the Customer LTV Lifespan COGS worksheet, also the customer acquisition worksheet. I have a couple questions and I know that T.J. you and I were discussing how updated this is. I was going to share screen for a moment. Is this part here the one A? Is this completed?

[John Moran]

Nick, this is the one that you had provided for. So if you want to.

[T.J.]

Okay, yeah, let's clarify this one here. This is from the Shopify store. This is for purely Shopify data for E Commerce and Then, you know, the first tab there, we have a LTV from Samcart for subscriptions of $124. That's the first tab there. But can probably, you know, on the first tab ignore the cogs and any.

[Nick Miller]

Of the other numbers there.

[John Moran]

So that when you and I spoke last via email about getting cogs for the E Comm side, something that your team is still working on. So we've got some sort of early, I think, version of these numbers, but to my knowledge, there's some of that we're still waiting on from your side. Is that right?

[Joe]

Yeah, that's right. Be a big help there. And he had a baby about four days ago, so things are a little slower.

[Lauren E. Petrulo]

Oh yeah, yeah.

[Nick Miller]

He hasn't slept in four days too. That's awesome.

[John Moran]

So the last kind of takeaway that we had, you know, provided, again, it's early.

[Nick Miller]

Right.

[John Moran]

But we said that we're looking at basically ways to grow the E Comm side of the business profitably for a pure revenue stream based basically as a separate kind of initiative from club memberships, like we talked about. So, John, as we kind of go through these things. Right. Keeping these in mind, obviously there's a lot of overlap here and ultimately it's the same P and L, but we do separately, you know, kind of separate lines of business here that each have their own numbers to work through and so on.

[Nick Miller]

Yeah.

[Joe]

Just for us, like, the flow is always membership first. The E commerce business doesn't work without the digital membership. We always look at the LTV of a member over like a new customer on shops.

[Nick Miller]

Okay, got it, got it, got it. I think that's this part here that we didn't have yet. Was that right? That was a subscription portion, correct?

[T.J.]

Yeah. So we have to be able. Yeah, we have the average LTV for a subscriber that we have. And this is, you know, going back from data for all years for the day that we have in Samcart is we have $124 average LTV.

[Nick Miller]

Okay.

[John Moran]

Costs for those digital products, however, cost for the membership is one thing we were a little unclear on. Is that right?

[T.J.]

Yeah, well, the cogs, obviously with a digital product, the cogs, there's not going to be cogs that move in the same way as the cogs for E commerce. But watching the previous calls, there are production costs involved with delivering the digital content, the subscriptions. So that's where on the previous call you mentioned a number of $50. As you said, that's about what the acquisition cost should be for a new member. And you know, combined with that there is usually the new members will the NAOV for new members will be around 170 when they, you know, they buy the VIP package, some of them will buy the 12 month membership, some will buy the monthly membership. But on average that's going to be $170 when you include the E Commerce products they buy. But that's where suggesting an NCAC target for new members. That's where you know, we want to just give a little more clarity there and be confident if we're going to set a number that we're going to use as our target. We want to make sure that's going to be profitable because there's always going to be upward pressure on CAC as we scale. So we want to make sure we, you know, we know that ceiling.

[Joe]

I understand. So that 124, that was the E Commerce LTV of members strictly on the Shopify side. So then kind of what you're saying when you take in the aot.

[T.J.]

What I'm looking at, I'm looking at samcart right now and it's saying the average LTV and this is saying that this is just revenue from samcart which I'm assuming is only for the digital products. That that LTV is 124.

[John Moran]

You want to share that Nick?

[T.J.]

Yeah, I'm just, just sharing the screen right now just looking at samcart. And this did not change when I, you know, when I even when I went to all time. This lifetime value is still going to show up here as 100, you know, 124.

[Unknown]

So that's for the membership site. Plus anything they buy in e Commerce is 124LTV.

[John Moran]

No, I think it's just.

[Joe]

Yeah, there's no.

[Unknown]

Just membership. Just membership. Okay, got it.

[Nick Miller]

That's awesome to know. Yeah, there's no really cogs on membership. Right. That's what Nick was kind of explaining is basically just. Okay now then my question for that would be here this Customer LTV and Lifespan Shopify. I have accounts that I work with that have the subscriptions show up in Shopify just differently and some that do not. Do we know if this spreadsheet here of the Sell Strong Customer LTV Lifespan and COGS worksheet if this is including digital and tangible SKUs.

[Joe]

So there was a period where we were getting subscriptions on Shopify through recharge. I know there is some recurring subscription revenue there but for the most part the majority should be just physical products.

[John Moran]

Is that something we could filter by time. Right. That stopped in 2022 or something like that. And we can go and export based on that.

[Joe]

Yeah, I could get you those dates.

[John Moran]

Okay.

[Nick Miller]

Okay. Yeah, I was looking at the, the kind of total amount spent per order. Just looking at average AOV, it's about $52.21 from this worksheet. What is nice though is the total amount spent on average of that $52 total amount in AOV. If we look at the total amount spent going all the way from infinite lifespan days to recently, it's 265 days. So what's nice about that is the average LTV in terms of just the dollar amount going all the way back to 2022 is 265. So my curiosity was looking through here and saying if it was 265I didn't know if it would show up in here. They didn't quite jive together. And so I'm trying to identify the differences so I can perform the proper technical analysis on the financials. Nick, this right here of the average customer lifespan in 12 months, is this just as a benchmark or is it like.

[T.J.]

Yeah, now this is, this is purely taken from. So using the customer cohorts.

[Nick Miller]

Yeah. Okay.

[T.J.]

And then. Yeah, and just one other thing that 5% other costs, the OPEX agency fees. That was me just buffing it.

[Nick Miller]

Yeah, yeah, perfect. Okay. So if we have an average of COGS of 50 and a max level percentage of N rep for paid media 45, essentially what we're looking at is first a NCAC target and then comparative to LTV and then we simply just overlay our percentile of gross and net profit. It's a very, very actually simple equation. So what we'll be tracking in perpetuity, in scale, obviously there's going to be a few things we'll be tracking. Everything we'll be tracking but we'll be focusing on is targets. Our cost per acquired first time customer, the returning customers, the subscribers. Those are things that we don't want to continuously pay for or overspend on. We do want to focus on a scalable volume but at a ceiling or below NCAC target. So what we're looking at from an example here, not example, but we have the metrics so far. We'll just want to iron them out after we agree that these are the metrics is if we have a max allowable NCAC of you know, they're 26, 44, 50, 56. This is our profit payback model. It's essentially a CAC payback. And what a CAC payback basically means is if I spend $25 and I get a customer, maybe that sale was $50 and we technically lost six bucks on the first sale. But they're on subscription and there will be LTV and there will be growth. So in the first month if we basically say hey, we have $26 and we, we made $26 and that's our gross profit, like it's a break even, it's a free customer. That is typically how we like to look at things at scale because it turns into what they call just a media efficiency ratio compounding success. Which means as we always gain new customers, we will always be able to benefit from the returning sales that they make with us, but without having to pay for it in perpetuity. So this is an example of an account that I've done this with for a few years. I'm going to use what I would consider an inferior third party metrics tool, but it was one from like four years ago and they just haven't got it off on the data suite yet. But this is something that I would like to just share as a quick example so you can kind of see visually how this looks when it's executed. We had an NCAC target of this client of about $10 all inclusive. That's like Amazon. Everything is a cost require, first time customer, $10 or less. So it's going from like February to February last year. We can see that we've kept our NNCAC at within 7.9% of our goal right within that 10 range. That's when we get a free customer. Now we scaled up a bunch like 60% scale to 66 million which real obviously yes, like wow, it's amazing scale. This is not like everybody gets this when they come here. We spend $100 million a year. This is just a very large company, well established, but the growth and the tracking is what allows us to make very educated decisions on where to place ad spend. So as an example, when we're looking at our NCAT target, as long as our top line is here, I don't mind If Facebook says 50 and Google says 27 and whatever it is, we focus on that top line metric, that is your bank account essentially. And when we go into the report here, which we'll have inside of data suite, but we're looking at just a profitability report, it's only going one month, that's perfect. This may take like a half a second to load, but it Is important for me to share with you the compounding success year over year. When we're looking at our NCAC target, it can be as profitable or maybe in the negative as we allow. It depends on how much time we're willing to wait at scale for that money to come back in month one, if we get 100 free customers, month two, 25 of those return. That is where now that is going to kind of grow in perpetuity. So that NCAC target is extremely important because if we do get that wrong and we scale, we're losing money at a faster rate. So this is where we look at our profit per new customer. You can see it's like a couple dollars here and there, but over time. Now our repeat customer sales every day is 80 to 90,000. This is taking about four years to get there. But we wake up and there's 100 grand before we even start a turn on a campaign. So that's how we kind of have to think about the growth of this. So we're looking at this here. This would be a fairly aggressive NNCAC target, like $26 for a new customer. All in everything that will be profitable month one. My thought process is we'd probably want to live in a comfortable area somewhere in between. Here is my suggestion. I'm going to pause here and see if there's any questions. I go too fast a lot, so I want to just pause and see what questions you have so far.

[Joe]

No, all good and makes sense. So this chart here, I just want to make sure when we say customer like this is also including a digital membership.

[Nick Miller]

Yeah. And that's why I just want to make sure. Nick, this is including digital membership.

[T.J.]

Well, this here was actually purely Shopify data. So.

[Nick Miller]

Okay.

[T.J.]

Yeah.

[Nick Miller]

And there could be some, could be not, but we'll add to it. Let's just say this number changes by five bucks. As an example, after we add membership, that would be okay. Our LTV will be higher, our lifespan will be longer. This could be higher for sure. But that's kind of what we'll want to get to is hopefully what we can do from this meeting is say here's how everything works. This number may change plus or minus 25% after we get the subscription data in and then we can quickly review and say, okay, I understand what this says here. If that number is that, am I happy with that? Can I sustain that? That's kind of the decision that we kind of have to make from a financial standpoint.

[John Moran]

And John, is it worth. And maybe you've got an opinion on this too. Is it worth having a version of this that includes when members purchase through the E commerce store versus if there are non members purchasing purchasing and what an NCAC target would be for somebody who all we need them to do is buy, you know for example that's all we're asking them to do here by way of NCAC as opposed to the members who are much more common if I understand they're the ones mostly purchasing through the store now. So the NCAC Target includes acquiring them as a member and then it's like getting your Costco membership right? They're the ones shopping in the store. But if we were to expand that as already said a few times, we've got it in the notes here as well that that is the primary goal is memberships. However if there is this sort of secondary of just getting E Com customers sounds to me like they would have a separate set of calculations for things like ncac, ncac, Target, ltv. So do you separate those out and have one with and one without here or how those things sort of fit together here?

[Nick Miller]

My opinion and just let me know if you guys would agree. It is common to get a person that has an E commerce sale that then comes back and signs up for membership that has nothing to do with paid ads. The paid ads brought the E Commerce sale but very little to actually bring it across the finish line for a subscription. If we optimize the structure a bit more, for example some simple CRO ad copy, featured benefits, Ben Franklin close and ad copy et cetera. If we start to push membership and we start to see our membership increasing and that will have an effect of a higher ltv. So we can kind of see because those things may move in and out quickly. Person would get a membership, they cancel membership but then they buy from SKUs or they come in for SKUs and they switch to membership it will may be a little bit difficult to say hey this is one path, that's another path. I would imagine those two paths cross very often. Would that be, would that be true?

[Joe]

Yeah, absolutely. We do not have much revenue from non members. It's all essentially through members and we have you know an opportunity where we have I guess 30% or 40% of our current members who are not yet customers from this. So that's kind of focus as of late. So it definitely starts with memberships and then them flowing into customers. Now we would love to know because we can get customers pretty cheap like non member customers, you know through free plus shipping 50% off deals. Like, we've done that pretty well. We haven't been able to do it necessarily profitably, like immediately. But what we'd like to see is we've always looked at it from a profitability standpoint and not like what is the LTV of that customer 60 days, you know, now they becoming members. Should we look at them as more of a customer acquisition versus trying to make profit out of that? So, and that's a big question for us.

[Nick Miller]

A question. What's the e commerce site built with the Shopify? It is Shopify. Okay. One thing that we could do, I think I have this. So I own a company called Bully Stick Central. We sell dog shoes. It's a. Yeah. Kind of small pet project. But I want to share something with you that I think could be helpful. There's a tool called Buy the numbers. It's like $12 and we don't pay for it anymore. We needed it for like three months and then we got rid of it. But we still have the free version. One thing that is nice is if we look at like last 30 days, that kind of stuff. What we can actually do in this is go into the preset segments. Do you use Klaviyo?

[Joe]

No, we had Klaviyo for a bit.

[Nick Miller]

And now we're moving to HubSpot. Oh, I think this integrates a HubSpot. I'll look into it. But one thing that this machine does very well, and this is kind of like a bonus and it's like 12 bucks, is it gives you these preset segments that help with your targeting and your segmentations for those type of communications. So for example, this is just the standard ones that give us where it's like dormant customers at risk. So people who purchased, you know, that kind of stuff. I'm not saying the memberships would be here, but these would be all the people that like purchase once and never purchase again. Those would be your SKU customers and we customers that purchased 12 months ago and will likely churn. So they purchased once, never came back. And there's 4,000 people in there. And then we basically can just link this up to Klaviyo and it was going to automatically sync, you know, basically every week so that it just dumps in all those people and you put them on a, on a drip campaign of like the features, benefits of a membership and how they can actually get cheaper. Now, I don't know, we're just spitballing here, but for 12 bucks and you get, I mean there's, I think 40 of them in here, retail customers that include a tag. So it will go back and back, date everything since inception for you and then organize it and then you click one button, it will synchronize it right to your email marketing campaigns by the numbers. I don't even know who made it, but I just found it one day and I thought it was pretty cool, so I wanted to share that with you. So I think right now we probably want to have a very, very tight focus on subscribers that I think is pretty much our only thing that we should focus on and measure. The SKU customers I think are going to be too expensive to go after a paid media, I call them SKU customers with product. But the customers I think from a holistic standpoint about going after a large portion of those people, in my opinion is not necessarily where our focus should be at. That's kind of uncontrollable for MRR and even ARR for growth. So thinking that if we were looking at an NCAC target for simply subscribers or new customers that have a subscription, have not a subscription, one thing I did want to share with you, this is a Data Suite feature, but I do want it to be something at least I at least share with you. So are you familiar with Data Suite? I know this first time meeting John John so strong.

[T.J.]

They're actually already on Wicked, so.

[Nick Miller]

Oh, perfect. Okay, cool. So this Data Suite then essentially add on bolt, benefit, et cetera, I think is extremely important just because you're familiar with Capi. So capi is an offline import into a paid channel. So what that means I'll use my again, it's another company I'm involved with. I always share data kind of from companies that I'm working with that I have an equity stake. So I can. There's no issues there, but the company here, what we really needed to focus on was a new customer. This is two ways that we do this with Data Suite, both on the Google side and on the Meta side. And those are primarily our first areas that we would attack is when we're training those algorithms or training those pixels with the conversion action. We're trying to have it focus on a particular audience. And so the new customer or new subscriber is something that can be imported into both Meta and Google in order to train its models to focus on those people. So that as we look at all of our purchases, we see that we have 4,600 purchases, but 4,200 of them are new. This is going to be extremely important, especially with Your audience that does flip flop and people that are on subscribers are buying and that gets very messy when we clump those two together inside the paid media platforms. That's where most companies actually fail at scale is because they're dumping in a lot of money paying for just simply the activity of their member base. And it's just showing up as roas. And it looks fantastic because they're your customers, they're warm people. So this is just a quick side note that I think that this is something that is already integrated into the wicked functionality. It's just a feature of Data Suite so that's something that we really need. So we're looking at NCAG targets. I know that our cost per acquired first time customer is 190. This is also on a subscription model. We actually started this in December 1st. So we stuck a new customer acquisition goal on here and then started to scale it. But when we're focusing on those subscriptions, this one is in recharge. Before we focus on we could not make any sort of headway. We had an ad spend and things are just kind of ebb and flow. Once we install Data suite to count for those new customers, the new subscribers, that's all we're paying for now is or all we're really tracking is the cost of those new customers. They're expensive for us, they're like 195 bucks. But we're selling like hip and joint medications for dogs. So it's a little difficult. The analytics though show that after doing this, so we started this December 1st, I'm just going to go back like the last 12 months as an example and then let's turn off the comparison, see the whole line there. But this is going back all the way from like February 26th. We can pretty much go back to even like last year if we wanted to. But this is one of the things I think is extremely pivotal in these types of markets is because we can have this kind of slow growth right here and then we kind of stagnate and then once we start optimizing for new customers, that's our active subscribers just continually going up. And this is just from December. The reason why we're able to do that is we were able to increase this by about 732 grand since December 1st. We were able to pump a whole bunch of money into this thing go from 25 to 800 and that seeing the cost for a first time purchaser go down. So that's kind of how this operates is we focus on NCAC Targets of the subscribers at a profitable level. We know our NCAC targets and NCAC payback models. You're a agreeing with it, happy with it. We're measuring it to make sure it's there. You're already on Wicked so it's fantastic. And then that kind of scale and that push is something that we analyze each week. How many new customers, how much did they come in? Is it profitable? Is it verified? Is our data matching your data etc like Wicked and backend metrics? But I think that we're probably at a good safe stopping point right now just until we get that subscribers. I think that is going to be pretty much everything that we're going to focus on. The SKU customers will be a benefit.

[John Moran]

So getting there John, costs have to be factored in, right? So we know what the MCAC target will be of a subscriber I know you said is otherwise engaged at the moment but figuring out what those costs look like and obviously at this point because they don't scale the way a cogs would with a tangible product, we're really focused on gross margin and contribution margin here. That's part of the calculus for us is figuring out what those costs look like. But John, are there any other pieces that we absolutely need and some homework that has to be done here before we can make some real recommendations and what else comes next in order to achieve that?

[Nick Miller]

Nick, you were saying that we were still missing a piece and that was new for me. So my apologies, I was a bit out of the loop on what we needed there. Nick, you mentioned we're still waiting on some subscription data.

[T.J.]

Well it was really just if we're going to set a target for the subscribers really just what that target needs to be seeing. We don't have the cogs, the physical cogs that we do for ecom.

[Nick Miller]

Got it.

[T.J.]

What then do we need to factor in if we're setting a target for per subscribers? So just looking at the last three years this was I separated the ad spend going through the Meta and Google Ad accounts from spend going to the subscriber landing pages, the funnels and then breaking that out by E Comm it's going to be very close. There are some campaigns where I was looking at and you know I was going through each campaign looking at the landing pages. So it's going to be close. They might little bit off but generally you can see the spend here over the last three years on the membership compared to Ecom. Much more, much more spent here. This is the historical NCAC over The last three years for new subscribers, taking the Samsung subscribers who had $40 in 2022, $36 in 2023. I think you mentioned something on the last call that 2023 there was big, big, big surge in subscribers. 2023. Then the NCAC last year came up pretty significantly to $51. So it's identifying. Is this too much? Is $51 getting into unprofit subscribers?

[Joe]

Yeah, exactly. Yeah, it seems like. I'm sure we're close because we've got LTV on the E Commerce side. We've got the data here on the subscription side. So yeah, I'd be really excited to know what that combined LTV is and dialing on that number because like I said, some data, some instincts. We think that 50 number is okay and that's what we've been pushing forward at the moment. But we'd really like to dial it in and know what we can scale at.

[John Moran]

So in the process of getting there. Ralph, I might lean on you for this one, right? The number or I guess the types of costs that we, we would recommend factoring in so that we can get to that target NCAC or the allowable NCAC. What should that calculus look like? So that tier 11 has a recommendation back to the salt strong guys here of here's what we think the NCAC target should be and so on. How would you recommend we sort of calculate those things out?

[Unknown]

I think the analysis that Nick did here the last three years is super helpful. I didn't realize that that was done. So that's knowing historical data is very helpful. The question really then becomes back to you guys. Like we try and figure out NCAC from effective ltv, which is LTV for in this case membership minus any chargebacks and then take out cogs.

[Ralph Burns]

The digital product might be a little.

[Unknown]

Challenging to figure that out, but then like what your desired profit margin is on that and because then we look at E Commerce as sort of icing on the cake, that's going to be additional. It is like a Prime membership. It is like a Costco membership because once you get them in, it's really. Then it's about focusing in on maximizing sales to the E Commerce site and obviously minimizing churn as much as possible. But that number of 50 in 2024, are you guys comfortable with that NCAP number to acquire a new customer or are you not? Because that's really, it's more of a judgment call than anything else because when we factor in ncac, we always factor in at least I do. When I do it, I factor in a. A certain amount of profit margin. And if your LTV is 124 and you're acquiring for 50, like, there's additional costs, like you guys need to get paid. There's sgna, there's operating expenses. You know, there's all the other things that go along with it. But it's like, what are you comfortable with for an NCAC figure? Because we can say, all right, at 50 we can scale, but at 60 we need to optimize. At 40 or 30 we need to step on the gas and ramp things up. And that's really back to you guys.

[Joe]

Yeah, it would be awesome to know.

[Unknown]

Yeah, I mean, that's real quick. Maybe that's a joke. Maybe that's a joke question.

[Lauren E. Petrulo]

I'm in here listening. I'm in my truck. But yeah, at 50, if we're talking about the actual tack of what we're spending on paid media, then, dude, all day long I told Barry, I'll give you a million dollars a month if you get new members. At 50, assuming that we also get some referrals and some freebies. And we obviously have about 100,000 people a month organically, just finding us through Google and being in YouTube. So the answer to that one is an Absolute yes, 50 or less. The other thing, just so you guys are all aware, Jason on our team is our head of operations and he is. He's about 60% done. It'll definitely be done in March where we're breaking out the P and L because we essentially have two companies. Part of the problem. We have an E commerce company and we have this membership. And so our accounting group and Jason's heading it up, I mean, it should be spot on. It's not just guesswork. P and L for both companies. And at some point we might even split them up and have two completely separate companies. But at least we'll have a P and L. So you guys can see. All right, here's what this really looks like on the E Comm side on Shopify, and here's what it looks like on the membership side. But if you look at our mission statement and our vision and everything that we do as a company, you don't see the word equipment or Shopify or E Comm anywhere in there. It's never mentioned. So I think you guys are on the right path. Where we are club. We're a community. That's what I get excited about. That's what keeps us up at night, is how do we grow this club in this community and really get more people in and fix the Churn problem is probably a bigger pain point than sound more. And then finally I'll say, Ralph, you're lucky. Just from listening here, John and TJ Nick make you look really good. So you gotta get.

[John Moran]

Thanks for putting me on that list, Joe. I appreciate that.

[Unknown]

Even the sales guy.

[Ralph Burns]

That'S good.

[Unknown]

That's Joe Simon's career. I mean that's really, that's the crux of all this. This is why we do all this pre work. Because we can run paid media for you and if we don't know a number that just makes you go out of business faster. And we don't want that. We want you guys to be with us for, for a long time and have you be as profitable and the relationship make the most sense to you. But we need to know what those ranges are now that range that $50. If $50 is like your midpoint, less than that is great.

[Ralph Burns]

A little bit higher.

[Unknown]

Okay, we need to have a discussion. But then the question really becomes, all right, all day long, get you $50 members. But then how can we decrease Churn?

[Nick Miller]

Churn.

[Unknown]

Churn for us was our biggest issue like three or four years ago.

[Ralph Burns]

We've solved that.

[Unknown]

Because you know what, Joe? Because we do this now, because now we're on the same page with everybody that comes into us. But I know that Churn is like the most expensive thing. So how can we help with that? We have additional services, we have email, we have CRO, we have all these other things layered on top of that. Maybe that's sort of a secondary thing. But if we have a number to start with paid traffic, like that's golden. And if you as the owner say like 50 is it like that's what we shoot for. The question then becomes for the smart guys on the call here, can we get to 50 and at what scale?

[Ralph Burns]

So like I said, we cut that off a little bit short here. We went into a conversation about ltv, how to enhance ltv, how to increase value. Sort of after that call. Like I said, we'll air that at a later date. But I think today's show is really is instructive for you to determine what you can pay to acquire a customer. You have to look at all the different figures that we talked about. John actually uses a lot of different examples in there. So go back and if you're listening, watch it over on our YouTube channel, perpetualtraffic.com YouTube. It should be up there by the time this airs, we had to do a lot of editing, so it might not be there if you're downloading it early in the morning the first day this episode comes out. So apologies there, but go back and check on it a day or two later and make sure that you do download your NCAC calculator completely free from us at tier 11 over at tier11.com NCAC so on behalf of my amazing co host Lauren E. Petrulo, who I believe is in Austin this week at south by Southwest, if I'm not mistaken. Hopefully she's having a blast there. Until next show. See ya. You've been listening to Perpetual Traffic.