Is it better for Meesho to focus on acquiring new users or increasing order frequency from existing customers?

Introduction

The trade-off between acquiring new users and increasing order frequency from existing customers is a critical decision for Meesho's growth strategy. This scenario involves balancing short-term user acquisition with long-term customer value optimization. I'll analyze this trade-off by examining key metrics, designing experiments, and providing a data-driven recommendation.

Step 1

Clarifying Questions (3 minutes)

• Based on Meesho's business model, I'm thinking this might be a crucial decision for our unit economics. Could you share our current customer acquisition cost (CAC) and customer lifetime value (LTV)?

Why it matters: Helps determine if new user acquisition is sustainable or if we should focus on existing customers. Expected answer: CAC is high, LTV is moderate but growing. Impact on approach: High CAC would lean towards focusing on existing customers.

• Considering our user segments, I'm assuming we have different cohorts based on purchase frequency. Can you provide insights into the behavior of our most frequent vs. least frequent customers?

Why it matters: Identifies potential for increasing order frequency in different segments. Expected answer: High variance in order frequency across segments. Impact on approach: Large low-frequency segment would suggest potential in increasing order frequency.

• Looking at our technical capabilities, I'm curious about our personalization algorithms. How advanced is our recommendation system for repeat purchases?

Why it matters: Determines our ability to effectively increase order frequency. Expected answer: Moderate sophistication with room for improvement. Impact on approach: Less advanced system might limit short-term gains from focusing on order frequency.

• Regarding our current resources, I'm wondering about our marketing budget allocation. What's the split between new user acquisition and retention campaigns?

Why it matters: Indicates current strategy and potential for reallocation. Expected answer: 70% new acquisition, 30% retention. Impact on approach: High allocation to acquisition might suggest room for shifting focus to retention.

• Considering market dynamics, I'm thinking about our growth rate compared to the overall e-commerce market. How does our user growth compare to the industry average?

Why it matters: Helps assess the urgency of new user acquisition vs. customer development. Expected answer: Slightly above market average but slowing. Impact on approach: Slowing growth might indicate a need to balance acquisition with retention more carefully.