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CAC:LT V

1:1 Reduce marketing costs, focus on customer conversion and tenure

1:3 Balanced marketing spend

1:5 Spend more on marketing to accelerate growth CAC = Customer Acquisition Cost LTV = Lifetime Value

much acquiring new customers and need to reduce your costs or increase your lifetime value. However, if you’re at 1:5 you’re not spending enough on growing your business. Although it sounds impressive to have a higher CAC to LTV ratio, it probably means you’re missing out on accelerating your speed of growth and can afford to invest more in marketing.

Offsetting member losses There are several schools of thought around offsetting the loss of member volume that some clubs are experiencing as we come out of lockdown, with various solutions being proposed. These include: 1. Finding cheaper ways to acquire customers For example, tap into a new social media platform you haven’t used before, work to get more positive customer reviews online or source a new marketing partner. 2. Increasing your prices This will enable you to operate a similar size business

with fewer members, but you need to be confident that this increase is competitive and will land well with your existing members and not deter new ones. 3. Reducing prices This will enable you to attract more customers and increase member volume. Which route you take should depend on local market conditions and competition. The ‘price increase’ strategy needs to be supported by exceptional facilities and services. The ‘price decrease’ strategy means you will have to significantly increase the volume of sales to bring in more revenue and that can be challenging. You’ll need a solid plan to source new customers and unless you’re already in the low cost sector, it could also bring you into competition with budget gyms, which have the economies of scale to run their businesses more cheaply. Added to that, when companies discount, they often lose tenure, as the type of person that joins on ©Cybertrek 2021 Issue 5 2021

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