I’m an investor in a company that just reported (9/21/15) on their efforts to get their Customer Acquisition Cost (CAC) down to under $10.

For obvious reasons, they prefer to remain anonymous, but I can tell you that this is a consumable consumer product with a $50 initial purchase price, followed by $15 consume-ables that need to be purchased every two months.  Theirs is a “razor / razor blade” type business where the original item lasts a long time and the consumables are where the real money is.    (Note: their product is NOT a razor.  It’s an item you use in the kitchen.)

Obviously, they use a “subscription model” (which we are seriously investigating) as their business model, with the replacement “razor blades” coming every 2 months

I have access to the CEO / founder here, and will be getting advice from him as we meet with our agency and new marketing team.  Nothing like having primary access to someone doing a similar thing!

Here are the key take-away’s:

• In May, they achieved sub-$10 CAC (media only) on 1000 new customers per day by giving away the initial product, free shipping, first renewal free and a discount on the subscription pricing.
• It took 8 months to recover all their costs — the $10 media cost, the cost of the products and the shipping.
• They now still give the product away but charge $15 S&H and start the subscription payments in 30 days.  The media cost to get a new subscriber is still under $10. They break even in 30 days now.
• Their customer lifetime value now exceeds 32 months, so the ratio of acquisition cost and LTV is very favorable.
• With volume comes economies of scale with manufacturing … a drop of 45% on COGS, $1.00/shipment on fulfilment and terms from manufacturing partners.  Their capital efficiency is very high, and positive cashflow from sales within 30 days of purchase will allow organic growth with retained earnings.