In research as recent as 2022, it was shown that customer acquisition cost (CAC) for eCommerce businesses have been steadily on the rise.
In 2013, if merchants lost $9 for every new customer acquired, in 2022 that number had leapt to $29.
Quick math says that’s a 222% increase in just a window of 9 years.
In this atmosphere, the only way ahead is to put tested measures to ensure low customer acquisition cost.
Having worked with over 500 businesses across the world, we’ve put together a list that has come in handy for our clients:
Here we go!
1. Double down on customers from top locations
Customers across these locations are already on your side and ready to buy—so you only have to find the right ways to sell them more.
This can immediately reduce your eCommerce customer acquisition cost.
These locations will reveal what cultural, social and financial demographics and trends are working for your sales and promotions.
Once you’ve rounded up these locations, you can:
Study your target audience more closely
Research the competition you have there
What their messaging is, what kind of discounts & offers work, what kind of ads seem to work etc.
Scope out the trends the audience seem to be responding to/ are interested in
Notice what kind of holidays get them excited, what kind of product launches improve conversions etc.—monthly audits will reveal patterns
2. Find your top categories/products
Phase out products and categories that aren’t doing well over a period of time—this will help keep production & storage costs low.
Alongside, create offers to bring sales movement into slow moving categories & products.
For example, you could announce a clearance sale—position it as a sitewide sale where you offer a deep discount.
Here’s an example from Casper.
Here are a few other ways to promote best selling products to bring down eCommerce customer acquisition cost:
Design your product pages for conversions
Ensure elements such as product images, descriptions, recommendations and social proof come together to nudge the shopper to buy.
Focus on creating paid ads only with these products
Dedicate landing pages to specific ranges or back-in-stock product options.
Highlight social proof for these products at key junctures
Include not just product pages, but the homepage, quick view box of the category page as well as the mini cart/ cart page)
3. Track your top traffic sources
Once you figure out which sources are bringing you the most interest in terms of visits (and interest), you can figure out how to engage with the traffic there.
Here are easily implementable ways to engage traffic and maintain a low customer acquisition cost :
Social media handles
Showcase results, before-after instances, display UGC videos, create targeted ads for shoppers dropping off/ only checking out competitor brands.
Assess which offers & promotions are working, build personal connection through great content marketing, offer early access & discounts to drive exclusivity.
Create long-form content that ties to your product pages, offer a quiz for deeper personalization, offer competitive discounts & make navigation easy at all points, offer effective filtering & sorting, use video to drive the brand
4. Ensure you’re selling to the RIGHT audience
Given that 65% of a brand’s sales come from repeat customers, selling to the right audience can’t be highlighted enough.
Here’s a quick checklist of to-dos:
Track the campaigns you run closely
Tracking can help you see how your target market is evolving in terms of preferences & behaviors.
Create a target persona document
It needs to carry region, demographic, occupation, goals, motivations, lifestyle preferences, challenges etc.
Find the right channels to connect with your target audience
Use analytics to understand where they hang out most often & also interact with your brand.
Analyze which channels are driving the maximum conversions
Take note of what’s working, who are buying and why they’re likely buying from you etc.
Talk the language of the audience you’re catering to
For example, if your skincare products are meant for women over 35, marketing language meant for 25 year olds won’t work.
Ensure your product content answers relevant questions
This is one way to ensure customer support without having customers to access your live chat or helpline—in the past, 77% B2C marketers have indicated that the right kind of content marketing has helped them increase ROI by 24%.
Personalize your emails to the last detail
And this isn’t just about subject lines—from products you recommend to the offers you send to how you acknowledge important events in the shopper’s life.
5. Build a solid cart abandonment strategy
It’s not news that the amount a business has to spend on acquiring new customers is 6 to 7 times more than retaining the ones that exist.
This makes a cart abandonment strategy a need of the hour.
The cart abandonment rate across industries in eCommerce is almost 70%.
Here are a few considerations you’ll have to think of while coming up with a cart abandonment strategy:
Assess what additional costs are necessary
Offer a cost split-up in the cart itself and if you can’t offer free shipping across the board, look at an attractive free shipping threshold.
Clarify shipping charges & other details
Feature a shipping charge calculator by the delivery partner so that customers can key in their location and find the exact shipping charges.
In case of different expedited and standard shipping rates, mention them)
Here’s an example of how clearly Nordstrom declares shipping details in their cart page:
Send personalized cart abandonment emails
Look at data, figure behavioral triggers and craft your emails—sending them out in a way that builds interest (the first one reminding of the products in the cart, the second carrying a discount etc.), helps conversions.
6. Optimize every step in your conversion funnel
Not knowing where a customer is in the conversion funnel, could potentially lead you to overlook where they are dropping off from and why.
For example, primary navigation on your homepage could be a reason behind drop-offs.
On the product page, you may not display reviews in an instantly accessible way—and that could become a reason for drop-offs from the product page.
Here are a few tested measures we’ve applied to deal with drop-offs:
Go through the click & navigation data
Look for issues like poor search that does not show up alternatives or related categories
Use a dedicated tool to find & fix broken links
ScreamingFrog works really well.
Use heatmaps to identify which fold(s) of a page has most engagement
Heatmaps can also help identify form fields that cause friction.
Check for excessive scrolling
Use dropdowns, a horizontal content format, bullet points and "load more" features.
Provide sufficient product information
Make the product name, price/discount and short one line descriptor non-negotiable.
Assess your pop-ups and exit intent communication
Find out what’s not working—is it the CTA, the langage, the offer or when it’s being shown?
Pay attention to UX based on customer interest
For example, show product comparison to a seasoned buyer but more product information to someone new.
For more insights, read: 5 Stages of an eCommerce Conversion Funnel (+Ways to Improve Each Step)
7. Design a loyalty program for long-term conversions
90% customers are likely to buy from brands that clearly show they know personal engagement preferences & buying behavior.
Here are a few considerations that can enhance your eCommerce loyalty program:
Start incentivizing non-transactional engagement
Offer discounts to those who finish surveys and quizzes as well as to those who make social shares widely.
Convey the benefits of joining the loyalty program clearly
Anything that’s difficult to understand or relate to can potentially create cognitive load for your customers.
Offer tiered benefits
For example, the more they buy, the deeper the discounts & the more they refer, the greater the exclusive access.
- Personalize the rewards based on data (for example, one member might want early access to product launches but another might expect to be told about a flash deal early)
One brand that’s known to clearly communicate the advantages of joining their loyalty program is Ikea.
8. Start a “sticky” referral program
Going by statistics, 92% of shoppers can trustingly rely on a brand people they know have referred.
Here’s how you can create a referral program that helps you spread the word and creates a great experience for referrers:
Offer clear instructions & real-time updates
These can be effective at getting more customers interested in the incentives.
Gather social proof from shoppers who’ve participated in the program
Create a quick three-question survey that asks them about the ease, the experience and the incentives—you can highlight snippets of these to market the program.
Create combined experiences for the referrer and the referred
The best way to do this is through email as a medium marking them both declaring discounts, offering recommendations etc.
Rreduce the window between when the referred makes purchases and when the referrer gets their incentives—ensure to update them on the points, discounts or cash back they’ve earned.
9. Get smarter with pricing
Here’s a fact you may not know:
Only 21% of shoppers start their research right before they buy.
From a pricing point of view, this means that potential customers have been checking your prices alongside other brands and products.
So, to draw them and then to retain them, you’ll have to develop a robust pricing strategy:
Draw attention to higher priced products through decoy pricing
Apply the central fixation bias to sell products that aren’t cheap or too expensive hence unattractive.
Introduce tiered discounts based on the cart value
Offer choices like buying more of the same product and adding relevant upsells to increase the cart value.
Create premium pricing around limited availability product releases
Bring out product differentiation including ingredients, make and technology to make the price seem convincing.
Apply charm pricing as a psychological tactic
Research says charm pricing can bring in 24% more revenue versus other pricing counterparts)
10. Apply smart bundling tactics
When you ‘smart bundle’ fast selling products and slow selling products to give it away at an attractive (discounted price), it’s a win-win.
Here are a few tips that can help you move towards lowering your eCommerce customer acquisition cost:
One or more products are of a higher price
This can instantly make the shopper perceive the "bundle" as superior to independent purchases.
Make sure the products fit together
For example, bundling a tongue cleaner with a toothpaste and toothbrush is way more relevant than bundling a torch.
Introduce labels that are relevant & attractive
When you place a smart bundle under the “bestsellers” section and also give it this label, potential customers experience greater trust & confidence.
Feature price anchoring
This makes shoppers more sensitive to the price difference—and hence, the savings too.
One eCommerce brand that’s known for their super-valuable bundles is Vanity Planet.
Introduce price advantages for “bundling” more items
This can especially be more effective right before peak holiday season.
Use pure bundling to mobilize slow-moving products
Essentially, there will be a number of products in your bundle, but you won’t be able to buy them independently.
Here’s an example from Kylie Cosmetics—what makes it attractive is that they label this bundle as “limited edition” in their product description.
11. Make your drip emails inspiring
According to a study a while ago, 61% shoppers liked the fact they received promotional emails weekly from brands.
However, what’s not covered in the statistic is that shoppers also anticipate quality in emails and make buying decisions based on that.
Consider the following:
Assess the intent with which you’re setting the campaign
Is it to nudge customers towards a new product launch or reminding them to checkout with products left back in the cart?
Make the introductory email trustworthy
Ensure the copy is welcoming and you’re using supporting factors like social proof, how many people have already bought from a particular product range etc.
Offer incentives if you want the customer to act fast
For example, if you want them to checkout, you may want to declare a limited-time discount.
Offer alternate suggestions to improve brand awareness
If you’re nudging customers to look at certain products, you might as well introduce alternate suggestions saying “try these instead".
Bring a balance between promotional & relationship-building content
According to some crucial customer engagement research 88% say that experience matters as much as quality of products—when you offer drip email content that personalizes and nurtures, customers want to buy from you.
Move the conversation forward
Build on the story—if you’ve been sending bestseller recommendations, take it to the next level with a discount they can act upon.
One brand that’s known to create inspiring drip emails is Patagonia.
Here’s an example of one of their newsletter sign-up welcome emails.
(Pay special attention to the aspects they’ve highlighted through the copy.)
For more insights: 15 amazing drip email campaigns that actually drive sales
12. Make your upsells & cross-sells compelling
While traditionally a lot of focus has been placed on what products you offer for upselling and cross-selling, through our experiments we’ve noticed that the HOW is also equally relevant.
There’s research out there already that effective upselling and cross-selling can increase up to 30% of a business’ revenue.
Here are steps towards the right direction if you’ve been wanting to reduce your eCommerce customer acquisition cost:
Limit the number of upsell choices
The point is to have customers not experience choice paralysis and instead add more products to their bag.
Explore channels with higher CTRs
For example, SMS has shown to be a big grosser in terms of customers engaging with upsell & cross-sell content sent by businesses.
Highlight upsells & cross-sells with maximum reviews
This can have an immediate impact on how confident a customer feels about the suggestions being made to them.
Offer context through a short label or highlight
For example, if you’re promoting a better battery, say something like “lasts 5 times longer than…” – context helps customers convert faster.
13. Create distraction-free landing pages
Landing pages are known to be 123% more effective in comparison to other forms of sign-up.
Businesses that happen to have 10-12 pages end up enjoying 55% more leads.
Put simply, effective landing pages help potential customers to move towards a purchase.
So, when designing landing pages, here are some key factors you’ll need to consider:
Feature ONE bold CTA
Make the message compelling and actionable
Make the message appear above-the-fold
Make the content easily scannable
Use minimum text and compressed images for super quick loading
Bring in grid flexibility & make room for mobile-responsiveness
Introduce checkboxes & drop-downs to enable access across devices
One brand that takes its landing pages very seriously is Marley Spoon (Martha Stewart’s meal kit delivery service).
Notice how they’re all for clean layouts, self-explanatory images and no-nonsense copy.
In the mobile version, they ensure their primary navigation is sticky and only one CTA is featured (in contrast to the desktop version).
14. Improve self help across touchpoints
According to some research by Bain & Co., when customer retention rates increase by just 5%, the profits are likely to rise anywhere between 25% and 95%.
To improve CLV, customer experience needs to improve dramatically.
And not all of it depends on live chat or support numbers—when shoppers experience greater control through information & clarity, they’re more likely to buy from you.
Here are a few ways you could consider:
Ensure quick responses over email & on social media comments
Email automation that covers a wide range of email communication can be helpful.
Introduce a thorough FAQ & clearly categorize topics
After all, they need to know where to look for answers.
Use your website & relevant social handles to initiate discussions
This is the reason some thriving eCommerce brands have closed discussion groups on Facebook.
Introduce product selection tools
This can especially be helpful for those who haven’t shopped with your brand before—ask the right questions if it’s a quiz, bring in criteria like size, color, style if it’s a filtering technique.
15. Make it easy for shoppers to share feedback
One way to increase trust in your customers is to make it easy for them to share feedback about their browsing/ buying experience.
With shoppers already trusting you, you’ll need to spend much less in gaining their confidence in your brand in the first place.
There are a number of ways you can make this possible:
By introducing a separate feedback widget
This way you’re able to collect a lot more information on the reasons behind drop-offs. You could bring in subsections like on-site experience & customer service experience etc.
By featuring a feedback link on your live chat feature
This can create more ease and transparency for customers looking to give feedback right away, without going through a separate long-winded live chat conversation.
By running a 24/7 real-time customer support helpline or chat feature
This can enable you to lose less time reverting to customers’ grievances.
Trigger a helping question based on where they are on their journey
Something like “leaving so soon? Want help in finding what you need?” to a shopper that browsed and didn’t buy could wheel them back.
Fenty Beauty’s live chat feature offers customers to talk to a “beauty advisor”, that is, a real person.
16. Find influencers among your loyal customers
Experts have already predicted that micro influencers will continue to aid the growth of brands that want to grow authentically in the eyes of their customers.
If you run a small to mid-sized brand, what can bring you the best traction is engaged customers.
And micro influencers from your own customer base may have greater power to achieve this.
The reason is simple: they’re likely to be closer to your target audience in their social status and would be more easily related with and believed.
One brand that has leveraged the power of micro influencers to the hilt is ASOS.
Through their Insiders Influencer program, the brand handpicks stylish people from their own customer base – and features their visuals & tips for customers around the world.
17. Collaborate with other brands (with similar audiences)
Amplifying brand presence and awareness is one way to ensure more potential customers get to know about a brand.
To keep eCommerce customer acquisition costs low, it’s ideal for a brand to opt for a strategic brand collaboration instead.
Here are a few ways to make eCommerce brand collabs a reality and success:
Align on values and objectives
The more aligned two brands are in how they’re seen by the world, the better it—this way, the collab won’t look forced.
Assess the customer base that each brand brings
While assessing the outcome of the collaboration, it’s important to understand which parts of the customer base you’ll be precisely targeting.
Find a strategic topic/event to collaborate on
It could be a specific calendar day, a cultural milestone or a seasonal highlight that the collaboration will revolve around.
Use appropriate channels to spread the word
Social media, PR, advertising, shares through micro influencers—be clear about the channels that’ll help you gain the traction you need.
Two brands that have successfully collaborated in the past are Warby Parker and Arby’s, the famous sandwich shop.
To mark April Fool’s Day in 2018, they launched the WArby Collection – and this enabled customers to buy Arby themed goodies like T-shirts and sunglasses from Warby Parker,
Meanwhile, Arby’s featured the Warby logo across their food packaging – with some boxes carrying the label “onion ring monocle”.
18. Create a niche
More niche companies are seeing slower CAC growth as compared to only five years ago.
Creating a niche segment gives you a number of advantages over competitors:
- Better differentiation
- Improved customer targeting
- Increased defense against mass market products
Since most small and mid-sized eCommerce establishments can’t sway the competition of international mammoths like Amazon, it makes sense to find niches in your current business.
Here are a few key considerations you may want to look at:
Use the Google Keyword Planner to focus on decently searched keywords
Very high volumes would mean higher competition.
Round up niches that are aligned with your current business
Look within your industry as well as outside—sometimes HOW other businesses are branching out will give you ideas.
Find out problems you’d like to solve
Given that you already have a business, you’re already solving some problems—see what else aligns with your current offerings.
Perform a competitive analysis
Assess what both primary & secondary competitors are doing—and what you’d need to widen into a new niche.
Figure out pricing and margins
Considering niches that will give you less than 20% margins can become burdensome on your bottom line in the long run.
19. Monitor your retargeting campaigns closely
Most advertisers update their retargeting campaign only once: when setting it up.
You have to continually optimize the campaign and remove customers who have already converted.
Why? Because they’re no longer interested. They’ve made the sale and completed the action.
Here are a few things you could do to keep your retargeting campaigns effective:
Remove the customers who've been buying repeatedly
Do an audit every 7-14 days, and it’ll go a long way in helping you make the most of your marketing dollars.
Add converted customers to another retargeting campaign
One that encourages upselling, cross-selling, or even downselling.
Leverage event-based retargeting
For example, a product that was out of stock becomes available—retarget those who recently purchased products just like this one.
Analyze customer objections as you retarget
For example, some customers might be abandoning the journey after getting confused between two similar products—see if you can retarget with clarifying information.
20. Bring in a “nurturing” content strategy
When an eCommerce business offers valuable gated content, it’s a win-win scenario:
The business potentially gets access to many more new leads and potential customers.
The customers find more reasons in continuing to engage with the brand.
Here are a few key considerations if you do decide to feature gated content:
Make content suggestions based on customer journey
Llook at buying behavior and browsing history to look at trends in what kind of content shoppers would find most valuable.
Center your content on “problem solving”
This can then be a non-pushy way for you to talk about your brand and also recommend products where necessary.
Assess conversion rates to take next steps
For example, if you find customers not creating as many micro conversions towards a larger conversion, you may want to gate some of your content.
Consider what content can be repurposed
If you’ve already noticed shoppers expressing interest in certain kinds of content, you may want to repurpose parts of it by deepening research, introducing more insights etc.
21. Avoid common A/B testing mistakes
A/B tests aren't one and done efforts. It requires constant revisits.
During the acquisition phase of any sales journey, the first couple of touchpoints are crucial in getting the visitor interested hooked to your brand.
This in turn will make the later sales stages much easier and require less investment.
Here are a few split test mistakes you may want to avoid:
Running too many split tests at the same time
Too many assets being tested at the same time can create results that are difficult to interpret and conclude about.
Running a test for a short time and then giving up
There’s a reason why they talk about achieving the 95% confidence rate in A/B testing—how long you will need to run a test will depend largely on the results you expect to see.
Changing parameters in the middle of the test
Parameters include the amount of traffic that is being observed, other variants to the original list on which the test is being performed, split testing goals being altered from the original plan etc.
22. Use CRO to improve UX
Unique visitors aren’t worth much if your funnel isn’t converting traffic into profit, and there’s no point in spending all those dollars acquiring customers if it doesn’t translate into revenue.
That’s exactly why CRO is crucial.
Here are a few ways CRO can make your digital touchpoints more seamless:
Improve functionality, usability and accessibility of your eCommerce website
Break your customer journeys into acquisition and retention touchpoints
Apply scientific strategies like behavioral targeting into optimizing various touchpoints
However, CRO is a complex world of data and analytics that requires a thorough understanding of user behavior, statistics, and UX — one that’s best to do with external expertise.
If you've been thinking seriously about CRO, you've got to read this.
People also ask:
1. What is eCommerce customer acquisition cost (CAC)?
To put it very simply, it's the cost of acquiring every new customer.
It paints a picture of how effective your marketing efforts are and what kind of traction it can bring.
More importantly, it gives an idea of the probable profitability and investment requirement you would need to grow your business.
So the lower the customer acquisition cost, the better the profit, the longer you last and the more you grow.
2. How do you calculate CAC?
To calculate the CAC for your eCommerce business, follow this formula:
To calculate the total sales & marketing costs, here are some of the items to consider:
- Advertising costs
- Cost of your marketing team
- Cost of your sales team
- Creative costs
- Technical costs
- Publishing costs
- Production costs
- Inventory upkeep
3. What makes a good CAC?
While this wildly varies based on the industry you’re in, in eCommerce it is directly decided by how good your AOV is.
Let’s say you have a low CAC but also a low AOV - in this case, it’ll be tough to label your CAC as good because the ROI might be quite low as well.
This is the main reason why many eCommerce businesses now choose to benchmark their CAC against their CLV.
In this regard, a commonly accepted CAC:CLV ratio of 1:3 is considered good but it’s always relevant to go deeper into researching your industry and category for finding more precise answers.
4. What factors affect costs around customer acquisitions?
There are various factors that have a direct bearing on customer acquisition costs, including:
- CLV: The lifetime value of a customer has a direct impact on the cost in acquiring them.
If the CAC is high but the CLV is higher it indicates a higher chance of profit making.
It’s mostly agreed that if a company’s CLV is 3 times its CAC, then its bottom line will be impacted positively.
- Customer success costs: These typically include COGS and spends on sales & marketing.
Cost of Goods Sold (COGS) implies the cost a company incurs to creating, delivering and innovating on a product.
Spending on sales & marketing ensures potential customers get to know about a brand, its products, its offers, its improvements and also why they should buy from them.
Typically, increased customer success costs indicate a higher CAC.
- Customer churn: When the customer churn rate of a business is high, it shows that within a given period, more customers are stopping purchases and closing down their accounts.
This can also suggest that the CAC has been high, especially if their lifetime value has been low.
This is why it’s significant for a business to onboard more new customers during a given period than lose old ones.
5. What are the ways to increase CLV to make up for CAC?
It’s a given that it won’t always be possible to reduce CAC.
So along with attempting to reduce CAC, it might be worthwhile to increase CLV - or the total amount you earn from a customer over time.
Here are five steps you can take to increase CLV while making your CAC reducing efforts:
- Offer exciting incentives
After all, brand loyalty and product quality won’t always inspire customers to part with that extra buck.
However, well-timed discounts, free products and exclusively personalized offers can create that impetus in them.
- Ensure consistent customer support across channels
In an increasingly omnichannel existence, you’ll need to anticipate customer anxieties before they actually happen.
One easy way to do this is to combine human and AI capabilities to create seamless customer support.
- Focus on creating high quality content
Yes, the idea is to make your customers buy more but also to remember that they especially will if they’re convinced you care.
Make your content brand-aligned, awareness-generating and genuinely oriented to solve very specific problems.
Amazing UX can lower customer acquisition cost
A major reason why eCommerce businesses continue to fight rising acquisition cost:
98% of visitors who visit an eCommerce site—drop off without buying anything.
This in turn is because: user experience issues cause friction for visitors.
And this is the problem Convertcart solves.
We've helped 500+ eCommerce stores (in the US) improve user experience—and 2X their conversions.
How we can help you 👇🏻
Our conversion experts can audit your site—identify UX issues, and suggest changes to improve conversions.