What It Is And What It Means To You
This post is meant primarily as an exploratory piece to engage and promote an educated discussion. None of the below is a model that OM currently offers… but we’re interested in exploring the concept further.
A vision for demand generation being the pillar
Today, the barriers to start a business are lower than ever. We have endless resources, access to information, and the cost reduction that technology makes it possible to build from your home office, garage, or dorm room. Even complex challenges like software development have become less of a challenge; there are amazing developers worldwide with strong capabilities at varying costs. I say this because in the digital first world, it is no longer enough to simply create a business or build good software. Great ideas and companies die every single day from their inability to create true demand. The result is quickly saturated markets (think Telehealth with hundreds of new entrants as soon as COVID hit), as well as hyper competition at any cost (VC’s pouring money to give some players the ability to drown out the competition).
Creating demand is difficult, can be costly, and requires a sustained high level of strategic execution. These challenges lead me to believe that effective execution of demand generation and customer acquisition are today’s biggest opportunity to gain a competitive advantage.
As a demand generation agency, this opens the doorway for deeper agency and client relationships, as well as the ability to explore models where the demand generation entity becomes the core business and the product is then outsourced (a concept the manufacturing world has been practicing for decades as a private label for big brands).
CAAS – Customer Acquisition As A Service
With these thoughts, I’ve created a concept I call CAAS “Customer Acquisition As A Service”. CAAS is a test concept that allows us to use our expertise in demand generation, build selective partnerships with early stage companies that have a lot of potential, and offer access to advanced demand generation that they may not otherwise be able to afford. A model like this requires a deep understanding of the LTV/CAC ratio, and requires the demand generation partner to be fully accountable and compensated for creating real business growth.
How would it work
This is a complex question that is still to be determined… I believe there are a couple of potential approaches. One that is more standard and one that may stretch what is considered the norm:
- CAAS pay for performance: With a mature acquisition model, it would make sense for the agency or partner to completely fund demand generation, IF they are able to achieve healthy growth economics. For example, if we know LTV is $20k and we can achieve a CAC of $2k, it would be mutually beneficial to “sell” that customer for something in the range of $5-$10k. This allows higher earnings by the demand generation partner for taking the investment and production risk.
- CAAS solution compensation: This unique model flips the script. The solution provider provides a set price for the use of the solution while the demand generation partner controls the acquisition, cost to the customer, and “owns” the customer. This structure set’s the demand generation as the core entity and the provider as the vendor. The model in a way is similar to AIRBNB / UBER where the demand generation (AirBNB) does not own or manage the houses but they do own the customer. I would love to see this done in a b2b SAAS play.
Other models may exist, and I believe both of these have their flaws, but you can begin to imagine a world where risk can be distributed or transferred based on who owns the competitive advantage.
At this point, these are all ideas with elements that have been attempted at some level in many industries. We are simply ideating on how to apply some of those business synergies that benefit other industries and result in value creation.
With technology growth, demand generation is positioned well to be an emerging sub-industry as it becomes relevant (and often vital) to every business in the future.