Starting and running a business means continually acquiring new customers and increasing sales.

But how do you achieve this without it costing you an arm and a leg?

Strengthening your customer acquisition strategy will help attract new customers to your e-commerce store, and when done correctly, will result in satisfied customers who return time and time again.

Understanding Customer Acquisition and The Cost

Customer acquisition is the process of bringing in new customers or persuading them to purchase your products or services.

For each prospective customer that moves through your sales funnel, there will be a cost for acquiring them, known as the customer acquisition cost.

Your customer acquisition cost (CAC) calculates the total amount of money you had to spend to acquire one new customer.

To calculate this, you must know how much money is spent on sales and marketing. These costs include:

• Employee salaries
• Advertising costs
• Creative costs
• Technical costs
• Publishing costs
• Production costs
• Inventory upkeep

All these aspects of running your eCommerce store will ultimately play a role in how much you’re spending to acquire a new customer, but how do you figure that out?

How to Calculate Customer Acquisition Costs

It’s important to calculate how much you spend to acquire a new customer to determine if your marketing strategy is profitable.

To do this, take your total marketing costs and divide them by the number of new customers you have acquired.

It may look something like this:

Your social media platforms bring in 100 customers per month on average, and you spend $600 creating content. In this scenario, your CAC would be $6.

If you multiply the average order value by the gross margin, you can determine whether your store is profitable. Then, deduct your CAC from this figure to calculate how much your store is profiting.

Using the above example, let’s say, on average, each customer is spending $65 at your store, and your gross margin on each order is 60%.

$65 (average order value) x 60% (gross margin) - $6 (CAC) = $33 (profit)

If you’re not satisfied with the amount of profit your store earns compared to how much you’re spending to acquire new customers, try implementing some of these strategies to make your customer acquisition strategy stronger and cheaper.

Customer Acquisition Strategies for E-Commerce Businesses

   1. Paid advertising

Many eCommerce brands turn to platforms like Facebook or Google to run their ads due to the plethora of tools they provide that allow you to optimize your ads and get the most bang for your buck.

Brands are charged based on how many users see their advertisements, also known as user impressions. This metric is known as CPMs, or cost per 1,000 impressions.

Paid advertising allows your e-commerce store to receive a lot of exposure and traffic relatively quickly. On many platforms, such as Facebook, you can implement targeting abilities to reach a specific demographic based on their interests and behavior online.

   2. Email Marketing

To acquire a new customer, you must first focus on lead generation.

Email marketing is one of the top-producing tools a business can use to bring in revenue because it is very effective at generating leads.

You can capture email addresses by driving traffic to a page on your website with an email capture form. It’s also wise to use this to target new visitors to your site, and in exchange for them giving their email addresses, you can offer them a welcome discount as an incentive.

Once you've built an email list, send them targeted email campaigns to convert them into customers.

   3. SEO

Search engine optimization, or SEO, is vital to any business since most prospects will begin their search for a product or service on Google.

Creating content and optimizing your website for SEO will help your brand rank higher in Google’s search results, gaining more exposure and traffic for your website.

Tips for Reducing Customer Acquisition Costs

Try implementing these tips to reduce your customer acquisition costs:

   1. A/B test your campaigns

You can reduce your CAC by converting more leads into customers, so run split tests to determine which campaigns work best.

You can send one option to half of your list and another version to the other half and then use a tool like Google Analytics to determine which campaign was most effective in converting leads.

You can run A/B tests for landing pages, email campaigns, Google Ads, web copy, and more.

   2. Display social proof

People sometimes need help visualizing how your product or service would work in the real world, and using social proof can help accomplish this.

With your customers’ permission, you can repost their photos using your product or service on your brand’s Instagram page or website.

You can also encourage existing customers to share their experience with your store on review sites like Google or Yelp.

   3. Adopt the decoy strategy

Decoy strategies work by offering two options and one decoy option intended to sway the customer to buy the higher-priced product or service.

Let’s use Starbucks coffee as an example. If they have two sizes, a small coffee for $3 and a large coffee for $6, the small coffee seems a lot cheaper than the large option, so most people would buy the small one since it’s more affordable.

However, when Starbucks offers a third option, a medium coffee for $5.50, the medium is more expensive than the small but cheaper than the large, making the medium coffee the decoy.

Customers no longer compare the small size of coffee to the large size when given a third option. Instead, they compare the medium coffee to the large coffee.

Since the difference between the two is minuscule, customers see the price of the large coffee as more reasonable and will purchase the large coffee.

The purpose of the decoy is not to be purchased but to attract buyers to the more profitable option, so if you decide to implement this strategy, don’t be surprised if you don’t sell large amounts of your decoy product.

Customer Acquisition is a Process

To grow your e-commerce store consistently and profitably, you must see customer acquisition for what it is – a process.

Using these tips, you can increase customer acquisition for your e-commerce store at a lower cost, allowing you to have the most profitable year yet.

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