tl;dr
There are three main ways to grow your profit
Optimizing the marketing and offer
Stacking audiences
Changing the economics of your offer
Optimizing the marketing and offer leads to quicker results, followed by stacking audiences
But sooner or later you will need to change economics of the offer to be able to spend more on CAC and tab into new market segments
When that is depends on the size and maturity of your market
Example calculation of market segments in Excel sheet at the bottom
Example calculation of market segment margins in Excel Sheet below 👇
Starting off with what actually drives profitability it's: # of customers * (CLV - CAC).
With this understanding, there are three main ways to meaningfully change your profitability:
1. Improve marketing & offer
This means maximizing the amount of new customers while keeping the CAC constant.
To do that you can improve your offer, improve your ads, improve your messaging, improve your conversion rate.
2. Stacking Audiences
This means maximizing new customers at a given CAC constraint by tapping into new audiences. This can be done by adjusting the messaging, targeting or ventually also your product
3. Changing the unit economics of your offer
This means making smaller improvements across your whole P&L to maximize your CLV. Some micro improvements that can have a great impact on your whole margin structure are reducing returns, negotiating costs and many more.
What to do with a better margin structure? Well, you're able to rise your target CAC and address more "expensive" customers, which can offer you completely new market segments.
More details on this and how these three ways are connected in the video.
Example calculation shown in video: