3. Rethink How Models Fit With Acquisition Channels
THINK: Build your model to support the right channel.
Business models that cater to high ARPU (Average revenue per user), high CAC (Customer Acquisition Cost) customers work very differently than those that cater to low ARPU, low CAC customers. You're not likely to capture these customers through the same acquisition channels, so you need to be strategic about which models you use with your channels.
For example, low ARPU, low CAC customers are acquired through viral channels and via B2C SEO optimization. The nature of these acquisition channels allows the customers they target to be low CAC, but at the same time it's also more likely that customers through these channels will be low ARPU.
Companies that use acquisition channels like B2B content and inside sales will acquire higher CAC customers that are likelier to have a higher ARPU.
Thinking of models and channels separately could lead you to develop a model that doesn't fit any acquisition channels and leaves you with very few potential customers.
Brian ran into this problem when he was building Sidekick, which at the time was a freemium sales product that was a division of HubSpot. While they already had a free tier and a $10 tier, they decided to create a $25 tier to capture higher-LTV customers.
This tier wasn't successful. They found that they couldn't acquire customers at a $25/month subscription rate through low-CAC channels, but at the same time the subscription rate wasn't enough to cover the cost of high-CAC acquisition channels on the right side of the spectrum. Bad channel-model fit began to stifle Sidekick's growth.
Brian's team solved this problem by getting rid of the $25 tier and creating a $50 tier. This higher-ARPU, higher-CAC model was a better fit with channels like B2B content and inside sales. They needed to create a model that supported a specific channel.
How You Can Create Models that Work With Particular Channels
Different plans in your pricing tier support different channel-model fits. To avoid falling into the kitchen-sink mentality, choose one model where you want to focus growth efforts—for instance, a lower-priced plan that targets low ARPU, low CAC customers.
Then direct your resources to an acquisition channel that supports that model—for instance, create paid advertising campaigns on social media channels that target this section of your market. Once you've found an acquisition strategy that supports growth for that model at that price point, shift your attention to focus on other points along your pricing scale, optimizing for growth in one model at a time.