Thread by @TaylorHoliday

~35% of DTC paid acquisitions will NEVER be profitable on a LTV:CAC basis.

This data point that was shared with me on a call this week by a massive data provider.

How is this possible?

Here’s 5 reasons…

1. The marketing team has no insight into unit economics.

COGS, return rates, transactions fees, shipping costs, fulfillment fees aren’t transparent making setting accurate targets impossible.

2. The single account ROAS target.

Not all orders are worth the same because not all products and not all customers are equal.

When you use a single ROAS target applied across every purchase type many of those purchases are net negative value even when you hit the target.

3. LTVs change.

Switch your merchandising, offer concept, product focus and your LTV can vary meaningfully. The past is not always like the future.

4. Using blended CAC or MER can mask negative paid acquisition with organic demand.

You need to hold ever $ of spend accountable to profit. Negative value paid efforts exist in almost every ad account.

5. Unit cost assumptions are often wrong.

Understanding your fully loaded cost of delivery on every order is challenging. There are many variables and the data is often not readily available.

I’m sure there are a million more ways this occurs but as brands face more and more margin pressure from rising CAC, supply chain constrains and labor costs the demand for clarity of how each dollar is performing is only going to increase

How have you seen this problem manifest?