There has been a steady rise in competition in the eCommerce industry. This competition has made it harder for brands to attract customers.
This, in turn, has resulted in a rise in Customer Acquisition Cost (CAC) across all channels.
A 2022 research by SimplicityDX revealed that merchants lose $29 for every new customer acquired. In 2013 this number was only $9; indicating a 222% CAC rise in the last 8 years!
In this guide, we aim to share a few ways to reduce Customer Acquisition Costs (CAC).
What is the average CAC for eCommerce businesses?
Customer Acquisition Cost (CAC) = Total marketing and sales spend/ Total no. of new customers
Here’s an industry-wise view of what the average CAC for eCommerce businesses is -
How to reduce CAC for eCommerce?
1. Determine the primary geographical regions of most of your customers
One of the easiest ways to reduce Customer Acquisition Costs (CAC) is to figure out where your customers are coming from.
If you have a lot of customers located in one area, you can focus on getting more leads from that location. If you have a lot of customers located in another area, you can focus on getting more leads from that location.
When you know where your most valuable leads are coming from, it's easier to focus your marketing efforts on those areas and get more business in return.
To do this, go to Google Analytics > Audience > Geo > Location.
This will show you where your most active users come from.
2. Identify the most popular categories and products
If you want to reduce your eCommerce CAC, you're going to have to get a little more granular. Your sales team, especially if it's using a CRM tool, is likely tracking all kinds of data, including the most popular categories and products that are purchased through your site.
You can easily pull this data from Google Analytics. Simply go to Google Analytics > Conversions > eCommerce > Product Performance.
Using this information, you can start to look at what makes up your CAC. If you don't see any patterns yet, try identifying a few categories or products with lower CACs and compare them to their higher-cost counterparts. You might notice that they're selling fewer units per month or have a lower conversion rate—both of these factors can drive up costs in other areas like shipping or inventory management.
In the event that you discover several categories and products with poor performance, consider running and promoting a clearance sale. You can then leverage this data and be mindful when you restock your inventory the next time.
3. Determine the top sources of your website traffic
Once you've figured out where your new customers are coming from—whether it's Facebook ads or organic search—take a look at how much each source costs per lead. This will help you determine which channels are working best for your company and what needs improvement.
To find out your top traffic sources, go to Google Analytics > Acquisition > All traffic > Source/Medium.
Once you have this information in front of you, it's time to start optimizing!
For example, if Facebook ads are getting the most impressions but only converting at a rate of 2%, then it wouldn't make sense to increase those ad spends until they can start bringing in more sales. Instead, try targeting your ad campaigns based on demographics (like age and gender) or interests instead of location alone.
4. Bundle slow-selling & fast-selling products together
This is a great way to optimize your customer acquisition costs because you'll get people buying products that they might not have otherwise purchased, and you'll also be able to reduce the amount of inventory you have by bundling items together.
To ensure your ‘smart bundles’ sell really well, you’ll have to ensure:
- The price is right: there should be a strong correlation between the cost of the bundle and the combined value of its contents.
- The items are relevant to the customer: they should contain products that are relevant to what customers want or need at the right time of year.
- The offers are highly visible: they should be prominent in search results and on product pages so that customers can easily find them
5. Analyze reasons behind drop-offs on your website
When you're trying to acquire customers, it's important to know what your drop-offs are. Otherwise, you'll never know how many people are visiting your site and falling off at each page.
So how do you find out? The easiest way is to look at your Google Analytics data.
There are many reasons why people may leave a website and not complete a transaction, including:
- Abandoning the shopping cart because they didn't find the product they were looking for or couldn't find the size/color they wanted
- Leaving because of high shipping costs or long delivery times
- Leaving because of high prices
- Not being able to find a coupon code or discount code for their purchase
Understanding which page on your site has the highest drop-offs can help you understand what parts of your store may need some more strategic reshaping.
Once you've identified the problem areas, go back and fix them! Don't just assume that users will figure things out on their own—take steps to help them if it will save them time or confusion when trying to purchase from your store.
6. Study customer experience gaps on desktop and mobile versions of your Shopify store
Look at your website and mobile site analytics data and see if there are any gaps in customer experience across both platforms. If so, what are they? Are there pages that lose a lot of visitors or have high bounce rates? Are there some aspects of the site that aren't accessible from a mobile device? Do users who come from certain devices have different goals than those who come from others?
There are a few things you should do:
- Analyze data from your website and mobile site to see if there's a difference between how customers interact with them. You can do this by running a heatmap report to see where most of the attention is being directed, or by looking at things like bounce rates, time spent on the site, and the number of pages visited per visit for each platform.
- Ask some users what they think about how easy it is to find what they want on your website or mobile site and how long it takes them to find it. This will help you understand what kind of information they're looking for and whether or not they feel satisfied with their experience overall.
- Look at similar websites (like yours) that offer similar products/services, but have higher conversion rates than yours (or lower ones). This will help you understand what you're doing right (and wrong) so that you can implement those best practices into your own marketing strategy!
7. Improve support & build reliable resource repositories
Customer Lifetime Value (CLV) refers to the total value of a customer over the course of their relationship with your brand. It's based on a number of factors, including average purchase value, repeat sales, and referrals.
It's a key metric that helps you understand how much each new customer is worth, and why it's important to keep them happy.
It also helps you set appropriate goals for your marketing campaigns. If you're targeting customers who are more likely to spend more money with you, then it makes sense for you to spend more on advertising. But if your customers are less likely to spend more money with you, then it would make sense for you to spend less on advertising because the return on investment (ROI) will be lower.
The most effective way of increasing CLV is by improving support & resources across touchpoints, which will help to increase customer satisfaction and reduce churn. The more accessible these resources are, the more likely it is that customers will be able to get help before they have to reach out. This means that they'll be less likely to abandon their shopping carts or leave negative reviews online that could influence your other potential customers.
8. Design conversion-oriented landing pages
When you're selling products online, the ultimate goal is to get people to buy. You do this by creating a landing page that's designed to capture the attention of your target audience and persuade them that your product is exactly what they need.
Did you know that landing pages are known to be 123% more effective in comparison to other forms of sign-up?
The design of a landing page is critical to its success. You want it to convey the right message at first glance so that when visitors arrive on your site they immediately feel like your brand is a good match for them.
But it's also important that you don't just throw up any old design and call it a day—you need to make sure that everything is working together in harmony. Your color palette should complement one another, and each element of the page should support the overall message you're trying to send out there.
And if you're going for something more visual? Make sure it's not just eye-catching but also easy for visitors to read without getting lost in all those pretty pictures!
Here are a few things to definitely consider when building your next landing page -
- Clean and easy-to-navigate so that users aren't distracted by unnecessary elements when they first arrive on your page
- At least one bold CTA
- Compelling and actionable copy
- Ensure the message appears above the fold
- Use images on your page, but don't go overboard
- Consider using video if possible—it's been shown to increase conversions by up to 80%
- Be sure to get the right information from your customers so you can serve them better in the future
- Offer incentives for completing the form, such as a coupon code or free shipping offer
- Keep testing until things start working
9. Create the right target personas
If you're not selling to the right audience, all your marketing efforts will be wasted and you'll find yourself with a lot of unhappy customers—not to mention higher customer acquisition costs.
A good way to do this is by creating personas for your customers. Personas are made-up profiles of potential customers that represent their demographics, goals, and behaviors. They can help you understand what messages are most likely to resonate with each persona and how best to target them.
So how do you create the right target personas? Here are some tips -
- Know who your ideal customer is (or several)
- Figure out who they are by demographics, psychographics, and behavior
- Find out what they value, their pain points, and why they buy from you
- Identify what motivates them to act and what prevents them from acting (this is called "buyer journey mapping")
The key here is to get specific.
For example, if you're selling clothing online, it's not enough just to say "women." You need to say something more specific like "women who are between 18 and 30 years old and live in a city." This will help you get more qualified leads who are more likely to actually buy from you.
10. Incorporate User-Generated Content (UGC) in your marketing campaigns and Shopify storefront
User-generated content (UGC) is one of the most effective ways to reduce your customer acquisition costs by increasing brand awareness and trust.
UGC can be implemented in a variety of different ways, but we recommend using it on social media and in your Shopify storefront.
UGC can be anything from reviews, photos, and videos of customers using your products, to social media posts featuring their own photos of the products they’re buying.
It’s important that you select the right content for your campaign—you want to showcase the best of your brand and products, but not necessarily what everyone else is doing. If you can find a way to use UGC that’s different from what other brands are doing, it will stand out more than something that looks like any other Instagram post or YouTube video.
Here are some ways you can incorporate UGC into your marketing campaigns:
- Use customer reviews on social media posts or email newsletters
- Create a hashtag for customers to use when posting about their experience with your product on social media
- Ask customers who create videos about their experience with your product if you can share it on social media
11. Run and monitor retargeting campaigns
Retargeting is a great way to fill in the gaps in your customer funnel, and it's also a great way to remind customers who have abandoned their shopping carts that you're still here!
When someone visits your website but doesn't complete their purchase, you can use retargeting ads to show them one final offer in order to get them back on track with their purchase. This kind of ad will usually appear in the same spot as where they saw it last time—on Facebook or Google for example—so it's really easy for them to recognize what you're offering.
Retargeting is a powerful way to keep your brand in front of your customers and potential customers. To make sure you're getting the most out of your retargeting campaigns -
- Run them for as long as possible (ideally six months or more)
- Monitor them closely, so you can figure out what's working and what isn't
- Test different ad copy, colors, images, and landing pages
The key to successful retargeting is to create ads that are relevant to the visitors and display them in places where they're likely to be seen by those customers. For example, if you sell wedding dresses, you could target users who've looked at bridal gowns on Pinterest or Facebook and show them ads when they're browsing other sites that are related to weddings.
Reduce your Customer Acquisition Costs (CAC) through ads
More than 57% of online shoppers discover new brands on social media.
Need help setting up your ad campaigns? Our team of Shopify can help you!
Our process begins by understanding the core of your brand, to ensure that our strategies align with your values, visions, and objectives. We use this information to create a comprehensive plan that not only drives results but also accurately represents the brand across all marketing platforms. Our unique approach to eCommerce marketing creates a results-oriented framework that can help your business grow while maintaining a strong return on investment.
Reach out to us today!