Lumen Learning: Paid Growth Is Getting Expensive
Product Management
hard45 min0 submissionsMcKinsey
Scenario
Lumen Learning's edtech product has grown almost entirely through paid acquisition. That is becoming unsustainable.
Unit economics (monthly):
- Blended CAC: $1,126
- ARPU: $300
- Gross margin: 78%
- Monthly churn: 7%
Existing referral behaviour:
- 24% of active users invite at least one other person
- 11% of those invitations convert to a signup
CAC has risen 28% over 18 months as auction competition increased. The CEO wants a growth model that does not depend on buying every user.
Supporting data
trend
- cac increase 18m pct
- 28
referral
- implied k factor
- 0.026
- users inviting pct
- 24
- invite conversion pct
- 11
unit economics
- blended cac
- 1126
- arpu monthly
- 300
- estimated ltv
- 3343
- ltv cac ratio
- 2.97
- gross margin pct
- 78
- monthly churn pct
- 7
Your task
Design the growth strategy. Provide:
- Analysis — current unit economics, payback period, and the strength of the existing loop.
- Risks — of the loop you propose and of continuing as-is.
- Recommendation — the specific loop to build and how you would prove it works.
Ready to move forward? Up next: Market Sizing Sprint: India ConsumerNext question
How you'll be graded
100 points, 60% to pass.
- loop design25
- growth model25
- recommendation25
- quantitative reasoning25
Hint
Reveal suggested structure
- LTV = ARPU × gross margin ÷ churn.
- LTV:CAC and payback period = CAC ÷ (ARPU × margin).
- K-factor = invite rate × conversion rate. K ≥ 1 is self-sustaining; below that the loop amplifies but does not replace paid.
- Identify the loop type — viral, content, or paid-recycled.
- Find the weakest step and fix that, rather than adding a new channel.