strategy Archives | Mervyn Chua

Recently, the people and clients I meet have been consistently telling me that their cost of growth is rising year on year. And that is alarming.

The cost of growth is soaring. What happens when the price to win a new customer jumps 50% practically overnight?

Growth marketers in 2026 are finding out. Customer acquisition costs (CAC) have surged by 40–60% since 2023, fueled by fierce competition, privacy changes, and murky attribution. Digital advertising, once a bargain, now eats a lion’s share of budgets. In some cases, 30–40% of a DTC brand’s revenue goes straight to ad spend.

The result? Profit margins shrink, and many companies are seeing red on new customers. It’s gotten so extreme that some brands find it cheaper to mail old-school catalogues than to run Facebook ads. This was a scenario unthinkable just a few years ago.

In this environment, growth at any cost won’t cut it. The game has shifted from “spend and acquire” to “acquire smarter and maximise value.”

How can we survive this shift? It starts by obsessing over the balance between CAC and customer lifetime value (LTV). If you’re paying $100 to acquire a customer who only brings in $80, you’re in trouble.

To stay in the black, LTV needs to beat CAC by a healthy margin. Ideally, this ratio is 3:1 or better. Every dollar spent to get a customer should return at least three dollars in revenue over that customer’s life.

Fast-growing B2C companies can still pull this off amid rising costs. Below, we dive into three strategies for balancing CAC with LTV and achieving smarter growth.

1. The New Reality: CAC Surge Squeezing Profitability

It’s official: acquiring customers is more expensive than ever. We are witnessing a fundamental decoupling of cost and value. Between 2013 and 2021, average acquisition costs skyrocketed so much that brands went from losing $9 on every new customer to losing $29.

That is a 222% increase in the cost drag, driven almost entirely by higher CAC and friction. In just the last two years, CAC has kept climbing by roughly 50%. We are living through a perfect storm. The precision of targeting has eroded due to privacy shifts, while competition has turned digital auctions into a bloodbath. Facebook’s cost per action has jumped so high that spending $230 to acquire a single customer is no longer an outlier; it is the new baseline.

These rising costs are crushing margins. If you used to pay $50 to get a customer and now pay $80, that extra spend is a direct tax on your survival. Many brands are literally losing money on initial sales. The traditional growth playbook, where flooding the zone with venture-backed ad spend, has hit a wall. To thrive, we must shift from “spend and acquire” to “acquire smarter.”

2. Smarter Acquisition: Cut Costs and Boost Efficiency

When CAC is rising, you cannot afford sloppy spending. You must channel your inner efficiency expert. The first lever of our balancing act is bringing CAC down by squeezing more conversions out of every single dollar.

Prioritise Lower-CAC Channels: Not all channels are created equal. Referral programs and word-of-mouth incentives often deliver customers at a fraction of the cost of paid ads. Content marketing and SEO require upfront effort, but they build an “equity” that makes future customers effectively free.
Optimise Ruthlessly: If you must spend on ads, make them work harder. Use first-party data to tighten targeting and rotate creative to prevent ad fatigue.
Master Conversion Rate Optimisation (CRO): Why pay for 100 clicks to get 5 customers if you can tweak your funnel to get 10? Recent data shows that advertisers focusing on conversion improvements rather than bidding wars are the ones maintaining a healthy CAC.

You cannot control the market price of an impression, but you can control how well you convert that traffic.

3. Maximising Lifetime Value: Keep Customers Coming Back

If rising CAC is the headwind, a higher Customer Lifetime Value (LTV) is the tailwind that offsets it. As Seth Godin might say, stop chasing strangers and start nurturing the ones you’ve already won.

Acquiring a new customer can cost **5–25X more** than retaining an existing one. A happy repeat customer comes “pre-acquired.” You don’t have to pay the “Zuckerberg Tax” twice. In fact, increasing customer retention by just 5% can lift profits by 25%–95%.

To truly maximise LTV, we focus on five battle-tested strategies:

Invest in Experience: Seamless support and fast shipping turn transactions into relationships.
Loyalty & Perks: Programs like Starbucks Rewards cultivate habit-forming loyalty.
Retention Campaigns: Use personalised SMS and email to win back business before a customer churns.
Thoughtful Upselling: Use data to suggest what they actually need, increasing the average order value.
Subscription Models: The “holy grail” of LTV is recurring revenue that locks in repeat value.

Crucially, you must measure your LTV:CAC ratio. Aim for the magic **3:1 ratio** — spend $1 to get $3 back. If your ratio is slipping toward 1:1, it is a red flag that your retention machine is broken. The healthiest growth comes from acquiring the right customers, not just any customers. It is far better to have 1,000 loyal fans than 2,000 one-and-done bargain shoppers.

The Takeaway: Every additional month or purchase you earn from a customer cushions the blow of that initial CAC hit. In 2026, the winners won’t be those with the biggest budgets, but those with the deepest relationships.

Final Thoughts: Growth That Sticks, Not Slick Tricks

Rising acquisition costs are the new gravity. A constant, downward pull on your margins. But gravity doesn’t ground the pilot who understands aerodynamics. The winners in this era won’t be those who simply spend the most on ads; they will be the ones who spend smartly and retain fiercely.

By reining in CAC through efficient, high-signal channels and elevating LTV through customer-centric strategies, you achieve the golden balance. This isn’t just a spreadsheet exercise; it is the only sustainable path to growth.

In practice, this requires a holistic shift. Marketing isn’t about pumping leads into a leaky funnel; it’s about building a base of profitable, loyal fans. Keep your LTV:CAC ratio as your north-star metric. Treat 3:1 as the thin line between a scalable business and an expensive hobby. When that ratio dips, don’t just ask for more budget — cut the CAC waste or amp up your retention efforts.

The cost of maintaining a customer is always less than the cost of winning a new one. The most successful brands understand that acquisition and retention are two sides of the same coin. They acquire smartly, then do everything possible to keep those customers happy for years. That is growth that compounds value rather than eroding it.

The deck is stacked with higher costs, but you can stack the odds back in your favour by maximising what each customer is worth. Those who master this balance will not only survive these turbulent times; they will thrive with unit economics that make profitability and growth two sides of the same success story.

Your Actionable Takeaway: Audit your LTV and CAC today. Where is your ratio? If it’s below 3:1, pick one acquisition expense to cut and one retention play to double down on this quarter. Small tweaks like a refined Google Ads target here, a new loyalty drip there, will move the needle. In a world of rising costs, let smart strategy be your competitive advantage.

Spend wisely, nurture relentlessly, and growth will follow.

Is your LTV:CAC ratio healthy enough for 2026? Reach out and let’s discuss how to rebalance your growth here.

🫶🏻 Thanks for reading till the end.

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As someone who used to be in the OTT streaming industry, this one felt personal. When the news broke that Netflix would be purchasing Warner Bros. Discovery for $82.7 billion, it did not feel like just another M&A headline. It felt like a cultural plot twist. One that few would have believed a decade ago, and yet now feels strangely inevitable.

Warner Bros once owned the cultural high ground. HBO was not just TV, it was taste. Subscribing to HBO signalled discernment. It meant The Sopranos, The Wire, Game of Thrones. Prestige you paid for, waited for, and talked about on Monday morning. Which raises the uncomfortable question: how did the studio that defined “premium” end up licensing its crown jewels to Netflix, a company that once mailed DVDs in red envelopes?

This was not a disruption. It was self-inflicted decay, driven by identity confusion, debt-led decision making, and product thinking anchored to a legacy world that no longer existed. This teardown is not about gossip, personalities, or nostalgia. It is about product, incentives, and strategy. A clear-eyed look at how great companies lose the plot quietly, one rational decision at a time. The strategies and alternate paths explored here are a thought experiment, shaped by my own perspective. Not hindsight heroics, but lessons worth stealing before your own final season airs.

1. The Golden Age Moat and Game of Thrones

HBO was a product, not just a channel

For four decades, HBO built one of the strongest moats in modern media. Scarcity. Curation. Cultural moments. From The Sopranos to The Wire to Game of Thrones, HBO trained audiences to associate Sunday night with status. This was appointment viewing in an on-demand world.

HBO was not background noise. It was a signal. Subscribing said something about you. That you valued quality over quantity. That you had taste. This mattered because the brand equity transcended any single show. It justified premium pricing, slower release cycles, and a sense of trust that few media companies ever earn.

In product terms, HBO did what most platforms fail to do. It stood for something clear, narrow, and emotionally resonant.

Game of Thrones was not the problem

The finale did not kill HBO. Dependency did.

The real failure was not a controversial ending but a lack of succession planning. When Game of Thrones ended in 2019, there was no narrative handoff. No next cultural gravity well. Viewers did not migrate en masse to Westworld or Watchmen. They left.

The data tells a blunt story. Post-2019, HBO saw a sharp audience drop. No replacement show achieved comparable cultural pull. This was not market saturation. It was product fragility. When one feature carries the entire value proposition, the product is weaker than it looks.

The lesson is uncomfortable but universal. If your best feature leaves and your users leave with it, you did not build a platform. You built a hit.

2. While Warner Bros Debated, Netflix Compounded

Infrastructure beats prestige

Netflix did not win because it spent the most on content. It won because it built the best systems.

Its advantage was infrastructure. A compounding flywheel that looked like this: more users led to more data, which led to better recommendations, which drove higher engagement, which informed smarter content bets.

Netflix iterated at product speed. Warner Bros moved at board-cycle speed.

Netflix is becoming a utility rather than a channel. That framing matters. Utilities are hard to displace because they embed themselves into daily behaviour. Prestige brands still need to earn attention every time.

When everything is the product, nothing is

Then came the identity crisis. HBO Max launched. Then it was rebranded to Max. Then, quietly, it became HBO Max again.

Each move was rational in isolation. Together, they were destructive.

Prestige drama sat next to reality TV in the same interface. Discovery content collided with HBO’s carefully cultivated aura. Users no longer knew what the brand stood for.

People buy meaning before features. Warner Bros did not lose features. It erased meaning.

Conflicting business models, one broken experience

Underneath the branding confusion was a deeper structural problem. An impossible triangle.

Theatrical teams wanted exclusive windows. Streaming teams needed immediacy. Finance teams were focused on debt reduction. Project Popcorn, the simultaneous theatrical and streaming release strategy, was not a solution. It was a compromise dressed up as innovation.

The result was predictable. Theater partners were alienated. Creators felt betrayed. Consumers were confused. When everyone is optimised for a different outcome, the product experience suffers quietly and then suddenly.

3. The Alternate Timeline

What Warner Bros could have done

The tragedy is that none of the alternatives were radical.

One path was to become the prestige streaming service. Fewer shows. Higher prices. Clear positioning. Think twelve to fifteen cultural events a year, not a content firehose.
Another was to partner early with a platform player like Apple. Capital on one side, content on the other. HBO is a premium layer, not a mass-market competitor.
A third was to separate from debt faster and reset incentives around customers rather than creditors. Painful in the short term, liberating in the long term.

These were not moonshots. They were uncomfortable choices that required saying no.

The Netflix deal is a symptom, not the ending

Selling content to Netflix signals more than pragmatism. It signals a loss of distribution leverage. In markets where scale wins, late movers do not disappear. They become suppliers.

This is consolidation as inevitability. Fewer platforms. More power. Higher prices. Exactly the oligopoly dynamics Galloway has warned about in the streaming economy.

Warner Bros did not lose because Netflix was brilliant once. Netflix compounded while Warner Bros hesitated. And in product strategy, hesitation is rarely neutral. It is cumulative.

Final Thoughts: Great Companies Rarely Die Loudly

Great companies do not collapse in spectacular fashion. They fade. Quietly. Through a thousand small, reasonable decisions that make sense in the moment and compound into irrelevance over time. Warner Bros did not lose because Netflix made one genius move. They lost because Netflix was consistently clearer about who it was building for, what it stood for, and how fast it needed to move.

This is the uncomfortable product lesson. Speed beats optimisation. Focus beats volume. A brand is not a logo or a legacy. It is a fragile promise renewed every time a customer opens your product and instantly understands why it exists.

Warner Bros did not lose the streaming war. They lost the plot long before the final episode.