Reducing CaC Amid Data Challenges
Frazier Healthcare Partners, a Seattle-based private equity and venture capital firm, specializes in leveraged buyouts, growth equity, and venture capital financing across the U.S., Canada, and Europe. Their strategic approach combines thematic investing with the expertise of “Executives in Residence,” seasoned C-level leaders in healthcare.
For over three years, TMI has collaborated with Frazier in a pre-acquisition advisory role, providing customer acquisition cost modeling and digital marketing insights critical to evaluating potential buyouts. Post-acquisition, TMI has also managed paid media campaigns for the acquired companies.
Challenge
In June 2024, Frazier Partners engaged TMI to provide digital marketing strategy during the due diligence process for acquiring GIVF Fertility, a leading reproductive clinic with extensive services and two of the largest egg and sperm banks in the U.S.
TMI was tasked with assessing donor-specific Customer Acquisition Costs (CaC) and identifying inefficiencies in marketing budget deployment, while recommending strategies to reduce CaC.
Threefold Challenge:
- Limited Data Access: Restricted access to platforms like Meta, Google Ads, and YouTube, relying on incomplete internal reports from GIVF.
- Tight Deadlines: A narrow four-day window to deliver a comprehensive report despite limited data access.
- Complex Lead-to-Donor Conversion: Significant drop-offs from online applications to final donor selection, with challenges in estimating accurate CaC due to the complexity of the approval process.
Discovery
1. Inefficiencies in the Marketing Acquisition Program
Based on the data provided to TMI and our analysis, we identified significant inefficiencies in GIVF’s marketing acquisition program across core media platforms. From 2018 to 2023, Google advertising spend increased by 640%, with the average Cost-per-Online-Lead (CPL) rising by 350%, largely due to increased spending on YouTube. During the same period, Meta’s ad spend grew by 350%, with a 270% rise in CPL. Despite the rise in online lead volumes, the conversion to viable donors was insufficient, leading to unsustainable full funnel donor acquisition costs.
2. Optimize Online Acquisition and Increase Donor Numbers
To address these issues, TMI proposed several strategies to reduce online acquisition costs, including shifting focus from branding and awareness campaigns to bottom-of-the-funnel direct response efforts. Additionally, we recommended re-engaging pre-existing or lapsed customers through CRM initiatives such as content marketing, newsletters, and outbound calling, with the aim of increasing annual donor numbers by 10%.
Results
Partly as a result of TMI’s assistance in the due diligence process, Frazier Healthcare Partners decided against the acquisition of GIVF Fertility. As such and via the application of our domain expertise in online paid media, we assisted this prominent private equity and venture capital outfit in its assessment of the viability of the potential acquisition. A decision not to acquire can be just as consequential as an acquisition decision in that avoiding a bad investment is a contribution to profitability for Frazier Healthcare Partners in the context of a leveraged buyout as well as the preservation of capital for any potential third-party investors.
