4 Ways to Reduce eCommerce Customer Acquisition Costs

Many eCommerce businesses focus on lowering their overall spending to reduce the cost of acquiring new customers. It is, however, not the only step you must take to reduce your overall CAC. Check out these four tips for lowering CAC in an e-commerce store.

4 Ways to Reduce Ecommerce Customer Acquisition Costs

Reducing customer acquisition cost is often a primary goal among ecommerce companies.

After all, to grow a business, you need to invest in it, constantly updating marketing, service, and sales strategies to connect with new clients. If the cost to acquire a customer in your company outweighs the value you can get in return from new consumers, your business won’t survive.

Measuring your average customer acquisition cost regularly ensures the money you’re putting into your marketing efforts, sales strategies, and other fees for running your online business, is paying dividends. In general, the overall “Customer Lifetime Value” of each client you earn should be higher than the cost incurred to attract a new client.

 

So, how do you calculate customer acquisition cost, and what exactly can you do to minimize the expenses associated with your customer acquisition strategy?

What is Customer Acquisition Cost (CAC)?

The term “customer acquisition cost” refers to the total approximate cost required to attract new customers to your business. There are numerous sales and marketing costs involved with bringing new attention and potential customers to your eCommerce company.

Your overall customer acquisition cost will usually include various different figures, including:

  • The cost required to run your online store
  • The shipping costs and other expenses associated with selling products
  • Your ad spend, or the amount you pay for marketing campaigns
  • The costs of running your sales team
  •  Costs associated with researching and understanding your target audience
cac

Source: https://kpi-max.com/

Calculating your customer acquisition cost means adding up the cost of everything you use to attract paying customers, from email marketing to ecommerce store ads, and dividing it by the number of customers you acquire. This figure should show you how much you spend on each new prospect.

Generally, customer acquisition cost is often compared with “CLV”, or “Customer Lifetime value” to determine whether a business is successful. Your customer lifetime value is how much the average customer spends with your ecommerce company over the course of their relationship with you.

Typically, your CLV should be 2-3 times higher than your CAC.

Source: https://www.tidio.com/blog/customer-lifetime-value/

How to Reduce Customer Acquisition Costs

If calculating your customer acquisition cost shows you’re spending about the same on acquiring customers as you get from them in return, this is a sign something is going wrong with your e-commerce business.

 

You can’t make a profit if you spend all your money on increasing your customer base.

So, how do you reduce ecommerce customer acquisition costs? There are a number of strategies you can use, but the most common revolve around improving customer retention. Focusing on developing your customer’s relationship with your brand means you can spend less on finding new customers.

According to studies, acquiring a new customer can cost five times more than retaining an existing client. Plus, increasing your customer retention rate by only 5% can increase your profits by up to 95%. Loyal customers are more cost-effective, often purchase higher amounts form your brand, and can even help you to increase traffic through referrals.

 

Here are some of the ways you can reduce customer acquisition costs, by increasing retention.

1.    Deliver Consistent Value

The first step in retaining customers is making them feel as though they get significant value from their relationship with your brand. This doesn’t just mean you should sell physical products and services which appeal to your audience. It also means you need to think about how you can support your target audience in other ways.

Think about the customer journey a client usually takes when interacting with your e-commerce company. How can you make it more efficient, engaging, and streamlined? For instance, many consumers use the web to search for valuable information, rather than just making purchases.

Instead of using your content marketing efforts solely for advertising, consider offering educational content too. Turning a marketing channel like a blog into a resource where users can find useful information to simplify and enrich their lives helps to build stronger relationships.

For instance, if your ecommerce brand sells shoes and clothing, you could post content about how to find the right outfit for different occasions, or guide existing customers on how they can pair certain shoes with other garments for a new look.

Leveraging your content marketing channels in this way doesn’t just boost your value in the eyes of your customers, it can also help you to attract new clients too. You can use your blog for search engine optimization to appear higher in the search results, and reduce your pay-per-click ad spend as a result.

2.    Leverage Personalization

One of the best ways to reduce your customer acquisition cost (CAC) and increase the lifetime value of your existing clients at the same time, is to leverage personalization. According to reports, 79% of customers are happy to share personal information about themselves if it means they’ll get more relevant and contextual interactions from brands.

Giving your existing and new customers a personalized experience when they shop with you will help them to form an emotional connection to your ecommerce business. You can also use personalization as a way of keeping your customers coming back for more. Segmenting your buyers into different groups and sending them unique offers or emails based on their tastes improves your chances of repeat sales, and increases average customer lifespan.

Some of the ways you can leverage personalization to improve customer acquisition cost include:

– Personalized recommendations

Increase the average order or average purchase value of each customer by recommending the products they might like to add to their cart when they visit your site. Personalized suggestions can influence customer behavior and increase revenue.

Product Recommedations

– Custom content

Distribute content to specific users based on their interests and expectations. This will help you to appeal to different clients at different points in their customer journey, and show your audience you understand their needs.

– Unique offers

Delight your existing customers and make them feel more willing to shop with you by rewarding their loyalty. Give special discounts and exclusive coupons to the people who spend the most with your business.

You can implement personalization into every aspect of your online store and marketing strategy, to start forming more meaningful relationships with clients.

Segmented banner

3.    Create a Loyalty Program

Another great way to reduce customer acquisition spending, is to give your existing customers a reason to keep supporting your business. Around 75% of customers say they favor companies that give them rewards. With this in mind, think about how you can motivate your clients to stick with your ecommerce business.

There are a few ways to build a loyalty program. One option could be to give your customers access to a tiered “point” system, where they receive points every time they buy something from you, or complete a specific action. The ability to earn worthwhile rewards will encourage your clients to keep coming back to your business, instead of using a competitor, because they won’t want to miss out on the things they’ve “earned”.

Another option is to create a referral program, which turns your loyal customers into advocates. This is a great way to enhance your marketing strategy, and acquire customers without spending anything. Every time a customer refers a new client to your business, reward them with a discount, a gift, or something valuable, like free shipping.

Referral programs are a great way to generate word-of-mouth marketing opportunities, while strengthening customer loyalty.

ecommerce referral

4.    Deliver Amazing Service Experiences

Finally, above anything else, today’s customers are constantly looking for the best possible “experiences” from the businesses they interact with. If you want your ecommerce website to thrive, you need to make sure you’re serving your clients with simple, streamlined experiences.

This starts with making the shopping experience as convenient as possible. Personalized recommendations on the checkout page, multiple payment options, and even guest checkout can all help to enhance the user experience for your clients. Some of the other ways e-commerce companies can boost the quality of their service include:

– Making it easy to get assistance

eCommerce brands should always be easy to reach when a customer has a concern or question. Think about how your clients might want to reach out to you about shipping or return issues. At the very least, you’ll need an active email account, but live chat functionality and phone calls can be useful too.

 

Tolstoy video chat

Video Chat by Tolstoy

Source: https://www.gotolstoy.com/

– Keep up with expectations

Pay attention to the expectations your target audience has when it comes to things like shipping speed, responses to service requests, and refunds. You’ll need to be fast, efficient, and empathetic to maintain your customers.

– Gathering feedback

Collecting feedback, both positive and negative from your target audience, will help you to determine which areas you’re excelling in, and where you’re falling behind. Constantly ask for reviews, and respond to what your customers ask for.

Amazing customer service won’t just increase the lifetime value of your existing clients, it can also help you to attract new customers too. After all, you can use your positive reviews and testimonials as social proof on your website, and product pages.

Reduce Your Customer Acquisition Cost

Customer acquisition cost is an important metric for any ecommerce company, and it’s something all brands should be working hard to improve. The more you focus on customer relationship management and retention, the less you’ll have to spend on attracting new customers to your brand.

Remember, your existing customers can be more valuable to your business than any new client. Don’t underestimate the importance of building loyalty.

 

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