The Ecommerce
Enterprise Scaling
Guide:
How to Build a +$50M Growth Plan
What got you where you
are won’t get you where
you want to be.
Rationally, we know this.
But the instinctive part of our brains tells us something else:
“JUST KEEP DOING
WHAT YOU’VE BEEN
DOING. IT WORKED
BEFORE. WHY
WOULDN’T IT WORK
AGAIN?”
Facing a hypercompetitive landscape and
ever-more aggressive growth goals, enterprise
retailers find themselves leaning on well-worn
tactics. Particularly those from the days of
Facebook arbitrage and lockdown’s online surge.
It works … until, somewhere around $50 million
in annual sales, ecommerce brands hit a wall.
Having scaled through product-market fit,
one or two dominant channels, and favorable
conditions … the business plateaus.
In the past, the answer was simple: Increase
efficiency. When growth stagnates and efficiency
slips, do whatever it takes to get ROAS up.
Here’s the thing: That won’t work.
The solution to $50M+ growth is so counterintuitive
it simply doesn’t occur to most marketing directors.
You have to embrace crumbling efficiency. Learn to love it. Learn to harness it
wisely and transform it into the fuel that ignites breakthrough growth.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
The Trap, the Truth &
the Solution
The investors, board, and executive team all agree on this year’s goal:
25% revenue growth year over year (YoY) without negatively affecting
EBITDA or enterprise value.
Exactly how that growth is supposed to happen seems like an afterthought.
The only real consideration? Dollars in, dollars out. Make a positive return on
whatever you spend.
You and your team are incentivized to use ROI-boosting tactics like:
• Pushing more and more of your social budget toward remarketing
• Doing likewise on paid search through branded campaigns
• Inundating your email and SMS lists with one-off sales
In other words, you start spending most of your money advertising to your
existing customers. And, because they already like your product, they’re happy
to buy.
Revenue goes up; ROAS looks better. Leadership, happy
with your performance, asks you to employ the same
strategy again next month. And the next month. And the
next.
But those numbers mask a terrible truth. Because you’re
not acquiring new customers, you’ll eventually run out
of existing customers, too.
YOU’LL EVENTUALLY
RUN OUT OF EXISTING
CUSTOMERS
The reason brands at this level succumb to the trap?
Their customer base is large enough that this strategy works for months and
months on end. By the time the finance team notices topline revenue is down,
it’s too late.
Companies that avoid this trap and grow at this critical stage have three
things in common. They …
• Spend 50% or more of paid media spend on new customer acquisition
• Increase customer value over the next 60-180 days to break even
(or better) on every first purchase
• Forecast and set targets to quickly identify when they’re wrong
Nailing this sweet spot can only be done by responsibly evaluating and then
mastering your business’ inputs to better control its outputs.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
Contents
Part 1. Set a Foundation to Measure & Align on What Matters......................................................4
The Hierarchy of Metrics............................................................................................................................................................................5
Never Judge Performance By a Single Metric
Net-Active Customers...............................................................................................................................................................................12
Fill the Sponge Before You Squeeze It
Three Revenue Layers................................................................................................................................................................................17
Grow Predictable Revenue First
Part 2. Model Cohorts to Multiply Customer Lifetime Value......................................................... 23
Baseline Value............................................................................................................................................................................................... 25
First Order vs. Lifetime
Time to Value................................................................................................................................................................................................. 29
Cash Multiplier > ‘Lifetime’
Cohort Value....................................................................................................................................................................................................31
By Time, Product (SKU), Offer & Beyond
Part 3. Forecast Growth to Map Your Future & Stay on Track...................................................... 36
Step 1: Ecommerce Inputs..................................................................................................................................................................... 39
What Are Your Historical Realities?
Step 2: Financial Projections................................................................................................................................................................ 83
What Can You Forecast Based on Them?
Step 3: Growth Inputs to Outputs.....................................................................................................................................................88
What Needs to Change to Get Where You Want to Go?
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
PART 1.
SET A FOUNDATION TO MEASURE &
ALIGN ON WHAT MATTERS
If a myopic focus on channel-specific metrics — particularly
ROAS — is a recipe for failure, what’s the alternative?
A growth-oriented strategy anchored on three
principles …
1. Never Judge Performance By a Single Metric
2. Fill the Sponge Before You Squeeze It
3. Grow Predictable Revenue First
These principles will help you achieve your fundamental goal
as a marketing director:
Taking the highest CAC possible while remaining
profitable.
PRINCIPLE 1: NEVER JUDGE PERFORMANCE BY A SINGLE METRIC
The Hierarchy of Metrics
ROAS WAS NEVER
RELIABLE AS A
SINGLE SOURCE OF
TRUTH, ESPECIALLY
FOR BUSINESSES
AS A WHOLE.
For years, ROAS functioned as a proxy for
ecommerce success. If ROAS was good, the
business was healthy. If it was bad, you were in
trouble.
iOS 14.5 shattered that illusion.
Of course, ROAS was never reliable as a single
source of truth, especially for businesses as a
whole.
And especially because no single metric ever
could be.
What you need is a hierarchy — a method to understand how each part of your
marketing stack affects the whole.
The value of all data hinges on context; its role in a cast
of inputs. Metrics only matter relative to expectations.
The hierarchy we’ll follow breaks down into four tiers …
1. FINANCIAL
METRIC
2. BUSINESS
METRICS
3. CUSTOMER
METRICS
4. CHANNEL
METRICS
Are your active customers
growing or shrinking?
Are platforms spending your
money effectively?
Contribution Margin
Order Revenue, Ad
Spend, MER & AOV
New Customers, nCAC,
aMER & Repeat Rate
ROAS & Costs
(CPM, CPC, CPA)
Are your marketing efforts
winning or losing?
5
Are your core drivers
creating enough value?
The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
1. Financial Metric
Are your marketing efforts winning or losing?
Although there is no “one metric to rule them all,” the closest thing we’ve got is
also the only key financial metric: Contribution Margin (CM).
CM is measured as a number, not a percentage.
Contribution Margin (CM) = Net Sales - Cost of Delivery (COD) - Ad Spend
• Net Sales = Gross Sales - Discounts - Returns
• Cost of Delivery (COD) = Product COGS + Variable Costs
• Ad Spend = Every dollar intended to generate online sales
Screenshots taken
from the Growth Map
you’ll build in Part 3.
Why use Cost of Delivery rather
than Cost of Goods Sold?
Your ability to scale ad spend depends on
the business’ ability to support all the costs
associated with increasing sales volume
(variable costs). Product COGS only includes
costs up until the sale.
COD includes post-purchase costs like
shipping, pick-and-pack, payment
processor fees, and more. Anything that
affects your ability to move more units.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
THE ECOMMERCE
PYRAMID OF SUCCESS
Contribution
Margin
“The Scoreboard”
As marketers, this is our closest proxy
to profit.
Contribution margin is a number, not a
percentage.
As a marketer, CM is your closest proxy for profit. Because marketing efforts
don’t impact an organization’s operational expenses (fixed costs), it’s
unreasonable to hold yourself accountable to something like operating
income.
CM is the scoreboard — the ultimate goal you’re pushing toward. If you’re
hitting your CM target, you’re winning. If you’re not, you’d better figure out what
to do about it quickly.
There may be months where the goal is for this number to be small, zero, or
negative; regardless, it paints the clearest picture of marketing’s contribution
to the business’ value creation.
However, it is not enough to simply track CM month-over-month. Without
further decision-making context, there will be serious consequences for your
ability to produce future profit.
Tracking this number eliminates …
Bulls***
You’re held to a goal that ensures marketing efforts are translating
to real, actual dollars
Product-demand disconnect
CM allows marketing to anticipate inventory issues and operations
to purchase inventory based on demand
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
1 METRIC
THE ECOMMERCE
PYRAMID OF SUCCESS
Contribution
Margin
Order Revenue,
Ad Spend, MER & AOV
“The Business Metrics”
Understand the generative value of my
marketing at a business level.
All metrics only matter relative to expectation
2. Business Metrics
Are your core drivers creating enough value?
The second tier contains four inputs that drive CM and enable healthy growth.
If CM is losing, this is where you look for the problem.
•
•
•
•
$
Order Revenue = Gross Sales - Discounts before Returns $
Ad Spend = Every dollar intended to generate online sales
Marketing Efficiency Ratio (MER) = Order Revenue ÷ Spend
AOV = Gross Product Revenue ÷ Total Transactions *
This ensures that you’re tracking marketing effectiveness, not post-purchase dissatisfaction.
* Provides a window into per-SKU revenue generation. This is especially important for setting per-SKU CAC targets.
Taken together, these metrics give you a snapshot of marketing’s combined
performance, from paid social to email to organic.
Again, this is not enough context to understand the effect of that performance in
the long run. For that, you’ll have to drill down a step further …
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
1 METRIC
THE ECOMMERCE
PYRAMID OF SUCCESS
“The Customer Metrics”
Protect future outcomes.
Contribution
Margin
Order Revenue,
Ad Spend, MER & AOV
New Customers, nCAC,
aMER & Repeat Rate
Stop squeezing the value out of your existing
customer base to meet an efficiency goal.
3. Customer Metrics
Are your active customers growing or shrinking?
These inputs help determine whether or not your short-term goals are
compromising desired future outcomes:
• New Customers = Total Number of First-Time Orders
• New Customer Acquisition Cost (nCAC) = First-Time Orders ÷ NewCustomer Ad Spend*
• Acquisition Marketing Efficiency Ratio (aMER): New-Customer Revenue ÷
Total Ad Spend
• Repeat Purchase Rate = Total Transactions ÷ Returning Customers
$
New-Customer Ad Spend excludes remarketing to existing customers as well as branded search campaigns.
The purpose of the third tier? Counteracting
the “Shrinking Sponge,” which we’ll explore in
the next section.
As blended numbers, they reveal the composition of your revenue in any given
month as well as protect future outcomes.
If you miss on customer metrics, but win in the tiers above, there will be
consequences in the following months.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
1 METRIC
THE ECOMMERCE
PYRAMID OF SUCCESS
“The Channel Metrics”
Align my measurement with the platform’s
optimization.
Historical ROAS ≠ Future ROAS
Contribution
Margin
1 METRIC
Order Revenue,
Ad Spend, MER & AOV
New Customers, nCAC,
aMER & Repeat Rate
Return on Ad Spend (ROAS) &
Costs (CPM, CPC, CPA)
4. Channel-Specific Metrics
Are Facebook, Google, etc. spending your money effectively?
In-platform performance comprises the fourth and final
tier. These metrics — namely, ROAS along with costs like
CPM, CPC, and CPA (cost per acquisition) — are, at best,
proxy metrics.
They represent poorly what the metrics we’ve just
reviewed represent clearly.
Ironically, most marketing teams treat them as their
North Star.
THOSE NUMBERS
ARE NOT ACCURATE
PERFORMANCE
INDICATORS
Post-iOS14.5, Facebook’s reported ROAS provides an even more
out-of-focus picture. Why should you track it in-platform?
It’s not because those numbers are accurate performance indicators.
It’s because they’re how the platform makes decisions
about how to spend your money.
As such, restrict your measurement to click-only, in-platform ROAS.
• Click-only because other attribution settings are even more unreliable.
• In-platform because Facebook and Google can’t optimize against thirdparty attribution
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
The reliability of in-platform data is almost inconsequential.
Facebook and Google have to spend your money based on the data available
to them; and you, in turn, have to make account decisions based on the way
the platforms actually spend your money.
WHY NOT? WHAT
DANGERS DO THE
HIERARCHY OF
METRICS HELP YOU
AVOID?
What Does It All Mean?
The Hierarchy of Metrics gives you a sense of
what you should be measuring.
But if Principle 1 is “Never Judge Performance by
a Single Metric,” the question remains:
Why not? What dangers do the Hierarchy of
Metrics help you avoid?
Simply put, the Hierarchy aligns your entire marketing team around profit …
forcing every other metric to ladder up into it.
Still, there’s an even more complex and revealing answer …
Coming up ...
The Growth Map you’ll eventually build in
Part 3 will roll up into a 12-month forecast
centered squarely on this exact Hierarchy
of Metrics.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
PRINCIPLE 2: FILL THE SPONGE BEFORE YOU SQUEEZE IT
Net-Active Customers:
The ‘Shrinking Sponge’
Imagine your customer base as a sponge filled with water.
Without a defined strategy for reaching new customers, brands fall back on
selling more to existing customers. The more aggressive the targets, the more
often and aggressively they squeeze.
But, when companies squeeze the sponge without adding more water — new
customers — each squeeze risks being the last before wringing the sponge dry.
Hence, “The Shrinking Sponge.”
In this metaphor, the “sponge” is active customers —
the key to long-term revenue growth.
NET ACTIVE
CUSTOMERS
January
February
March
April
Reactivated Customers
Active Customers
Lapsed Customers
Net Active
Customer Rate
“The Shrinking Sponge”
In this metaphor, the “sponge” is active
customers — the key to long-term revenue
growth.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
Net Active Customers
New Customers
Time
While it’s tempting to look at your customer
file as a homogeneous group, that’s a
dangerous illusion. In fact, you’ll need to
break your customers into four segments:
•
•
•
•
Active customers
Lapsed customers
Reactivated customers
New customers
LOOKING AT YOUR
CUSTOMER FILE AS A
HOMOGENEOUS GROUP IS
A DANGEROUS ILLUSION
As we define each, we’ll also build an example of how the sponge grows or shrinks.
1. Active Customers
Net Active Customers
Active Customers
Reactivated Customers
Lapsed Customers
New Customers
1. Active
Customers
200 active
customers in Jan.
The first is the most important segment: customers still
within your average repurchase window. They’re your
most-valuable, most-predictable source of revenue.
200 active customers in Jan.​​
200
Time
January
2. Lapsed
Customers
500 customers
lapsed in Jan. from
previously active
200
500
3. Reactivated
Customers
100 lapsed
customers
reactivated in Jan.
300
200
200 new customers
were acquired in
Jan.
These are the customers who have moved beyond the
repurchase window. For example, if the average time
between purchases is 90 days, a lapsed customer is
anybody 25% beyond that period — 120 days.
500 customers lapsed in Jan. from previously active
Time
January
Time
3. Reactivated Customers
This group is composed of previously lapsed
customers that have moved back into “active
customer” status. Typically, through intentional
remarketing via paid or owned channels — email,
SMS, etc.
100 lapsed customers reactivated in Jan.
500
4. New
Customers
2. Lapsed Customers
January
500
300
200
Time
4. New Customers
New customers are exactly that — first-time
purchasers of your product. They’re by far the most
expensive to acquire. But, as we’ll see, not acquiring
them is even more expensive.
200 new customers were acquired in Jan.
500
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
January
Once you’ve sorted your customer file into these categories, you’re set to
determine Net Active Customers. This metric helps you determine whether or
not your sponge — the number of active customers — is growing or shrinking:
Net Active Customers = Active + New + Reactivated - Lapsed
• >0 = Growth
• <0 = Shrinkage
If this number is greater than zero, you have sponge growth.
Less than zero; shrinkage.
The Short-Term Squeeze
SPONGE
SHRINKAGE ISN’T
INHERENTLY BAD.
Sponge shrinkage isn’t inherently bad. But it causes
major problems if you’re not keeping an eye on it.
After some digging, the finance team realizes that
Jan.’s CAC was high, affecting the company’s P&L. As
a result, you’re directed to maximize profitability in Feb.
To improve marketing efficiency, you pull back on new
customer acquisition and push toward maximizing
revenue from your existing customer base.
The problem is not necessarily that your sponge
shrunk. It’s that nobody noticed because ROAS and
MER looked fantastic.
January
February
Active Customers
Lapsed Customers
450
400
Reactivated Customers
New Customers
Net Active
Customer Rate
200
Time
-50 Net Active
Customers
Calculating Your Net Active Customer Growth
Using the numbers above:
200 (Active) + 200 (New) + 100 (Reactivated) - 500 (Lapsed) = 0
Active + New + Reactivated - Lapsed = Net Active Customers
You broke even on Net Active Customer growth in January.
At the end of Feb., another 500 customers lapse. Despite the fact
that you successfully reactivated some customers, your Net Active
Customer base went down 50.
200 (Active) + 50 (New) + 200 (Reactivated) - 500 (Lapsed) = -50
500
14
Active + New + Reactivated - Lapsed = Net Active Customers
CAC
MER
The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
YOU’LL HAVE
TO CONVINCE
EVERYONE TO
TANK EFFICIENCY!
As for your P&L? It looked even better. Worse, it will continue to
look amazing … while your Net Active Customer pool continues
to dwindle.
Here’s why this is such an insidious problem: Shrinking the
sponge generates numbers so good that it feels insane to
change course.
But the longer you shrink the sponge, the harder it is to reverse
the damage.
Let’s say you catch the problem in May and identify the core issue. You realize
that the only way to fill the sponge again is to acquire customers via expensive
paid channels.
The more unchecked shrinkage, the more you’ll have to spend to counteract
month-over-month churn.
And that means … you’ll have to convince everyone to tank efficiency!
Good luck.
In all seriousness, though, the point of this guide is to give you the tools to
convince your team to align around efficiency degradation. Because …
Even though short-term profitability might be
adversely affected, future profit is contingent on the
growth of your active customer file.
NET ACTIVE CUSTOMERS
January
February
March
April
New Customers
Active Customers
Lapsed Customers
Net Active
Customer Rate
“The Shrinking Sponge”
Future profit is contingent on the growth of
your active customer file.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
Net Active Customers
Reactivated Customers
Time
The question your organization needs to ask itself is:
“In what window of time do we need to maximize profit?”
The answer may look different depending on the specifics of your goals.
However, the answer is definitely not …
“Always, all the time, no matter what.”
Unfortunately, that’s the mindset most businesses instinctively adopt. Shortterm goals pitted against long-term expectations.
How do you counteract this
knee-jerk mindset?
By building accurate forecasts that
demonstrate how short-term losses lead to
long-term wins.
The Growth Map you’ll build in Part 3 roots
itself in both new and existing customers.
Your ability to aggressively acquire the
former depends on the stability of the latter.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
PRINCIPLE 3: GROW PREDICTABLE REVENUE FIRST
Three Revenue Layers
THE USEFULNESS OF ANY
FORECAST COMES FROM
HOW MUCH IT’S WEIGHTED
IN PREDICTABILITY.
An accurate forecast is not about
guessing what will happen. It’s about
creating a map of what should happen.
Or rather, what is most likely to happen.
The usefulness of any forecast
comes from how much it’s weighted
in predictability. Not all revenue is
equally predictable.
Picture your customer base as a “layer cake” made of three tiers that gradually
increase in size.
🎂• Top Layer
New customers from paid channels comprise your smallest, most volatile tier
🎂• Middle Layer
Owned audiences reachable through “free” channels like email, SMS, SEO,
and organic social media
🎂• Bottom Layer
Existing customers (repeat purchasers) form the base, the foundational tier
upon which the other rest
The further you move up the cake, the less predictable
the revenue becomes.
The strength of your bottom layer allows you to accept more volatility on the
higher layers.
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The Ecommerce Enterprise Scaling Guide:
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Layer Cake as a Metaphor
for Ecommerce Revenue
Top Layer: Most volatile, especially
during peak seasons
Data full of unknowns like CPMs, conversion rates,
and how customers will respond to your offer.
Predict the amount of money you’re going to
spend, and calculate the CAC on that spend.
Paid Acquisition
New Customers
Middle Layer: Where you can reach
non-customers for free
Data driven from your organic strategy, not
subject to the volatility of CPMs or the ad market.
Predictions come from channel-by-channel
based on the number of organic views and
revenue per view.
Owned Audiences
Email, SMS, Organic Search & Social
Bottom Layer: Most predictable
base for forecasting
Data you already have, and it can be
extremely accurate in predicting future
revenue. Use a cohort of your previous
weeks, months, and quarters.
Variability in Revenue
Less Variable
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
More Variable
Existing Customers
Cohort LTV
Top Layer: Paid Acquisition
In the ecommerce world, paid acquisition primarily happens in two places —
Facebook and Google.
It’s the most unpredictable source of revenue because …
• Costs rise and fall due to factors outside your control
• Plus, new customers are a harder sell than existing customers
These are cold, hard facts.
But it gets worse. As your business gets bigger and bigger, reaching further
afield from your original target audience, it becomes harder and harder to sell
into new audiences.
They become more and more expensive.
Translation? Your paid social CAC will always go up as you grow.
You’ll still have to forecast spend and CAC. But that forecast is highly unlikely
to be accurate. If you’re relying on your paid media team to hit their targets to
survive next month, you’re in trouble.
It’s no wonder that media buyers are sorely tempted to move budgets toward
remarketing, especially if their job is merely to “get the same (or better) CAC as
last month.”
Since revenue from paid acquisition is both necessary and unreliable, you
have to build a base of reliable revenue to support it.
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
Middle Layer: Owned Audiences
An owned audience is any channel where you can reach non-customers for free:
• Email and SMS
• Organic social
• Organic search
Without the unpredictability of ad costs, forecasting revenue from owned
channels is far easier than paid.
Essentially, divide your sends, shares, and keywords by revenue from email +
SMS, organic social, and organic search.
Take the resulting average revenue per send and multiply it by the number of
planned sends in the month you’re forecasting. Voila! You have a rough sense
of how much revenue to expect from this tier.
As long as your channel groupings are tightly constructed and your UTMs
managed with discipline, send more, share more, rank more … earn more.
By combining Google Analytics and your ecommerce platform, Statlas lets you
easily track channel performance.
Owned audiences underwrite New Customer Acquisition Cost (nCAC) and
provide a more reliable stream of revenue than paid.
By themselves, however, they don’t have the reach of the top layer nor the
revenue stability of the bottom layer …
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The Ecommerce Enterprise Scaling Guide:
How to Build a +$50M Growth Plan
Bottom Layer: Existing Customers
Finally, we have the foundation. This tier corresponds to the sponge we discussed
in Principle 2.
Existing customer revenue is predictable. Not only because active customers
purchase more frequently, but because you have years of data on when, how
many, and how often.
Let’s take a simplistic example that will be unpacked in full during Part 3,
when you construct your Growth Map.
Say you’re forecasting revenue for November.
Start by looking at the amount of new-customer
revenue you acquired in August: $100k. Next, look
at the amount of revenue those same customers
produced in September and October. Usually,
something like this:
Revenue Forecasting:
Aug.
Sept.
$100k
Oct.
$30k
$15k
At this rate of retention, you can predict with a high degree of certainty that this
cohort will return $8k in Nov. We’ll get into the specifics of why a little later.
Assume you also made $100k in new revenue during Sept. and Oct.
That means new customers from Sept. will reliably
provide $15k in Nov., and Oct.’s first-time buyers will
provide $30k. Add it all up, and you can reasonably
forecast at least $53k in Nov. revenue without relying
on any other tier than the bottom.
Knowing the amount of money you’ll make from existing
customers is as close to a sure thing as you’ll get in
ecommerce. The bigger that sure thing is … the more
volatility — and money — you can commit at the top.
Revenue Forecasting:
Aug.
Sept.
$100k
Oct.
$30k
$15k
$8k
$100k
$30k
$15k
$100k
$30k
Avoiding the “Ecommerce Upside-Down Cake”
The revenue layer cake works because building on a solid,
predictable foundation minimizes volatility while you expand
the top layer with new customers.
However, many businesses make their cake upside-down,
pouring themselves into the most volatile portions of revenue
generation without reliable targets supporting them from the
bottom up.
Obviously, your business is exposed to a great deal more risk if
the bulk of your revenue is subject to uncontrollable volatility.
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The Ecommerce Enterprise Scaling Guide:
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Forecast
Paid Acquisition
Owned Audiences
Existing Customers
Part 1 Recap
Ecommerce success relies on three core principles:
Principle 1: Never Judge Performance by a Single Metric
Instead, use a hierarchy of interconnected metrics.
Principle 2: Fill the Sponge Before You Squeeze It
Avoid shrinking your base of active customers in pursuit of short-term
profitability.
Principle 3: Grow Predictable Revenue First
Protect yourself from the volatility of acquisition by building a layer of reliable
revenue.
HOW DO YOU MAP THAT LAYER OF RELIABLE REVENUE?
Now that we’ve got the core philosophy down, we can go deeper on the secret
sauce of ecommerce growth: modeling cohort-specific lifetime value.
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The Ecommerce Enterprise Scaling Guide:
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PART 2.
MODEL COHORTS TO MULTIPLY
CUSTOMER LIFETIME VALUE
Let’s quickly return to your main goal:
Taking the highest CAC possible while remaining
profitable.
To do so, you need to front increasing CAC with predictable
revenue from your existing customers.
And to do that, you must reliably model the timeframe over
which existing customer value is realized.
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