If you’re here, you already know what customer acquisition costs (CAC) are and why you should optimize yours to flourish your e-commerce business.
So, we’ll jump right into 10 specific strategies to lower your e-commerce customer acquisition cost.
This guide shows you:
- Actionable strategies
- Insider stories from our company
- Excellent examples from real e-commerce websites
Keep reading below.
1. Use the Market Pull Technique
If you want your business to thrive, your goal isn’t just to get visitors to your e-commerce website.
You want to attract the right ones who see undeniable value in your products. That’s how you can achieve sustainable and cost-effective growth.
Enter the market-pull technique.
Essentially, the market demand is so strong that it ‘pulls’ products, so you won’t have to push them to your potential customers.
In this case, consumers experience a strong “Aha!” moment, realizing your products are exactly what they need.
Insider tip: Such moments don’t happen accidentally; they result from meticulous research, understanding, and delivery.
Insider story: One of our clients, beauty brand Prose, also wanted to reduce their customer acquisition cost.
We researched their existing strategies, competitors’ marketing efforts, and audience’s needs.
That’s how we discovered the insight: their target audience craved hacks and inspiration from relatable figures.
We then used the existing data to recruit relevant micro-influencers that generated high-performing assets weekly. Prose got 50 unique content assets monthly to target a wider pool of customers at a lower cost.
How can you leverage data for profound insights?
Focus on gathering:
- Demographic data: Age, location, gender, and other such parameters give a broad view of who your potential customers are. Use customer segmentation data from your analytics software (e.g., Google Analytics) or your sales team.
- Behavioral data: Customer behavior data includes your target customers’ browsing patterns, purchase histories, product views, cart abandonment rates, etc. It provides a clear picture of how customers interact with your platform and where there might be potential friction points.
Pro tip: Don’t neglect feedback and reviews. Direct insights from customers can highlight gaps in product offerings, user experience issues, or even potential new product ideas.
Why start with market insights before diving into marketing?
It’s tempting to allocate a hefty budget towards ads, social media marketing, and SEO right from the get-go. However, without proper market insights:
- Your messaging could be off: Regardless of your marketing spend, the conversion rate will be low if your messaging doesn’t resonate with your audience.
- You’re wasting valuable resources: Money spent on targeting the wrong audience or promoting misaligned products is essentially wasted.
- You get lower ROI: The return on investment for marketing campaigns that aren’t backed by robust market insights is considerably lower.
Basically, gathering relevant market insights ensures higher conversion rates with less money. Ultimately, this translates into reduced cost of acquisition.
2. Use Nano and Micro-Influencer Marketing
Partnering with influencers can enhance visibility and credibility, thus reducing your e-commerce customer acquisition costs.
Nano (typically 1,000–10,000 followers) and micro-influencers (generally 10,000–100,000 followers):
- Often have a tight-knit, engaged community: Their followers are likelier to see them as peers. This level of authenticity often results in higher engagement rates, genuine interactions, and trust. And that means nano- and micro-influencers can directly persuade your target audience to purchase more products.
- Are cost-effective: Relative to macro-influencers or celebrities, nano and micro-influencers charge less. Therefore, you can collaborate with multiple influencers, ensuring diverse audience reach and better ROI.
- Cater to specific niches: Whether vegan skincare, handcrafted jewelry, or sustainable fashion, you can precisely target your desired audience with nano and micro-influencers. This precise targeting increases your conversion rate and optimizes your expenses.
Insider story: We successfully used micro-influencer marketing to decrease marketing costs and increase the average customer lifespan value for numerous brands.
Soylent is one of our success stories.
The brand wanted to broaden its visibility across different markets while keeping costs low.
Hint: At inBeat, we work with the top 2% of nano- and micro-influencers.
So, we helped Soylent find relevant content creators in different niches (outdoors, hiking, gaming, etc.).
3. Leverage UGC
User-generated content (UGC) refers to any content created by users rather than brands. Basically, it’s the new-and-improved version of word-of-mouth marketing. Leveraging UGC helps you cut customer costs because:
- It builds trust and authenticity: UGC instills a sense of organic trust, leading to higher organic rates without significant ad spend.
- You have reusable free content: You have access to a continuous influx of fresh, affordable content that you can repurpose in different campaigns.
Here’s how you can use UGC for your ecommerce brand:
- Q&As: This content enhances SEO by generating natural keyword variations and increasing content freshness, helping ecommerce websites rank higher without investing heavily in paid search campaigns.
- User reviews, testimonials, or user-posted product page images: This strategy strengthens social proof. Social proof can increase the likelihood of visitors converting into customers, thus lowering the cost of customer acquisition through organic channels.
- Sharing UGC on social media: This tactic can improve engagement metrics like shares, likes, and comments. Higher engagement often translates to increased organic reach, reducing the need (and cost) for paid promotions.
- Use UGC-powered ads: These ads resonate better with audiences, leading to higher click-through and conversion rates. As a result, you can achieve better results with the same ad spend, effectively reducing your campaign CAC.
- Engage with UGC actively: Like, comment on, and share user-generated content. Active engagement encourages more users to share content, fostering a vibrant community around your brand.
- Optimize UGC for SEO: Encourage users to mention specific product names and benefits or use keyword-rich descriptions when submitting reviews or content. Optimized UGC can boost organic search rankings, driving cost-effective, organic traffic to your ecommerce site.
Insider story: Organic salmon retailer Bluehouse Salmon is one of our numerous UGC success examples.
And organic salmon is not a sexy, multi-faceted product. So, ad fatigue can set in pretty fast.
Bluehouse Salmon found the key to success by simply powering its social media calendar with UGC:
Basically, users create a myriad of recipes using organic salmon from Bluehouse Salmon, posting these images online.
Results: The brand gets visibility, stays top-of-mind, and isn’t boring or pushy. And it gains multiple reusable content assets each month.
4. Increase the Average Order Value (AOV)
Another way to decrease customer acquisition costs is to focus on existing customers.
The reason is that gaining new customers is 5 times more expensive than keeping existing ones.
Now, imagine you’re not just keeping those loyal customers but enticing them to make higher purchases.
Here’s how increasing the average order value (AOV) can reduce your e-commerce customer acquisition cost:
- Your average revenue increases organically without finding, nurturing, and persuading new prospects.
- You can defray fixed costs and other operational and marketing expenses, amplifying your business profits.
- You don’t depend on expensive customer acquisition strategies, shifting to a revenue generation approach.
- You increase customer lifetime value, thus generating sustainable, long-term revenue streams beyond just one sales cycle.
- You can obtain a more efficient inventory turnover, saving on storage through reduced wastage.
- You can negotiate more favorable terms with suppliers.
- You obtain more comprehensive transaction data, which helps you improve product development and marketing strategies.
- You can position your business as premium and customer-centric, enhancing brand perception.
Strategies to increase average order value for ecommerce businesses include:
- Upselling: Showcase a premium version or a higher-end product than the one the customer is considering. Use product comparisons on your website to highlight why the premium product may be better.
- Cross-selling: Recommend complementary products that go well with the item the customer intends to purchase. You can use the “people who bought [Product X] also bought [Product Y]” technique.
- Volume discounts: Provide discounts when customers buy products in bulk when their total purchase exceeds a certain amount, or when they’re getting a subscription service.
- Loyalty programs: These programs reward existing customers so they stay incentivized to purchase. This decreases your advertising costs significantly.
- Bundling products: Offer sets of complementary products at a discounted price when purchased together.
- Free shipping thresholds: Offer free shipping for orders above a certain amount, encouraging customers to add more items to their cart.
- Gift wrapping or personalization: Offer special services for products at a slight premium, such as personalized engraving on jewelry items or gift wrapping services for a small fee.
Insider story: We helped Nordstrom partner with fast-growing DTC brand Wildfang to add a non-binary clothing line to their e-commerce store.
Our campaign used famous influencers (we told you we’re good at that):
5. Don’t Neglect Email Marketing
Email marketing can consistently lower CAC because:
- You can get more loyal customers (who cost you less): Emails allow you to communicate directly with potential and existing customers. This creates a personal connection without intermediary platforms or algorithms.
- You maximize your budget: Advanced email marketing tools allow you to segment your audience, tailoring your marketing messages to specific groups. This level of personalization can drastically increase conversion rates. Plus, email marketing is one of the most cost-effective marketing channels.
- You increase customer retention: Email marketing is a powerful retention tool because it helps you nurture relationships with your clients.
Here’s how to use email marketing effectively to decrease CAC:
- Build a quality subscriber list: Place email subscription forms prominently on your website, especially on the landing page, product pages, and checkout pages. Offer incentives, like discounts or exclusive content, to entice visitors to subscribe.
- Segment your audience: Categorize your subscribers based on their behaviors, purchase history, and preferences. Use the options in your customer relationship management tool to tailor content to specific segments and thus optimize conversion rates.
- Automate welcome emails: Send welcome emails to new subscribers, introducing them to your brand and offering special deals. This initial touchpoint can set the tone for future interactions and drive early conversions.
- Leverage abandoned cart emails: Set up automated emails targeting customers who added products to their cart but didn’t complete the purchase. Remind them of what they left behind and consider offering a small discount or bonus to encourage completion.
- Send regular newsletters: Keep subscribers informed with regular updates about new products, company news, or content. Consistency keeps your brand top-of-mind, but ensure content is valuable and not overly promotional.
- Optimize for mobile: Ensure that all emails are mobile-responsive since many users access emails on mobile devices.
- Send personalized recommendations: Use data analytics to recommend products based on each subscriber’s browsing or purchase history. This tactic can increase click-through and conversion rates.
- Test and optimize: Regularly A/B test different email components like subject lines, call-to-action buttons, or content layout. Continuous optimization based on data can improve open rates, engagement, and conversions.
Here’s a neat abandoned cart email example from Perch & Parrow:
6. Use Referral Programs
Referral programs work well for e-commerce stores because:
- Trust factor: People trust recommendations from friends and family more than any form of advertising. A referral comes with inherent trust, making conversions more likely.
- Cost-effective: Referral programs use your existing customer base to bring in new customers, often at a fraction of traditional advertising expenses.
- Higher lifetime value: Customers acquired through referrals tend to have a 25% higher customer lifetime value and are more likely to become loyal customers themselves.
- Improved targeting: Referrals generally bring in like-minded customers. If your existing customer base loves your products, likely, their network will too.
- Organic growth: Referral programs can facilitate organic growth, reducing the cost of other marketing channels.
Here’s how you can implement referral programs effectively:
- Offer appealing incentives: Determine what would motivate your current customers to refer others. This could be discounts, free products, or exclusive offers.
- Make referrals easy: Implement a simple, user-friendly process for customers to make referrals. This could involve creating a dedicated referral page or integrating referral options into checkout processes.
- Engage with high-value customers: Identify customers who make frequent purchases or engage actively with your brand and encourage them to participate in the referral program.
- Set clear terms: Define your program’s conditions to avoid potential confusion or misuse. Be transparent about any limits (e.g., the maximum number of referrals) or requirements (e.g., the referred customer must purchase) to maintain trust.
- Personalize the experience: Send personalized thank-you notes or messages to customers who refer others to show appreciation.
- Promote your referral program: Remind your customers about the referral program and its benefits. Use email newsletters, social media, and your website.
- Track and analyze: Monitor your program’s success, tracking business metrics like the number of referrals, the conversion rate of referred customers, and overall ROI. Adjust your strategy based on valuable insights to continually optimize the program.
Pro tip: E-commerce business Zulily has created a neat YouTube tutorial to enroll more purchasing customers into their referral program seamlessly:
7. Improve the Shopping Experience
A seamless shopping experience is deeply connected to conversion rate optimization because it:
- Ensures your website visitors finalize the purchase, reducing cart abandonment.
- Encourages repeat purchases and product recommendations.
- Builds trust, which can lead to increased customer loyalty in the long run.
- Saves advertising dollars because each website visitor has a higher likelihood of converting.
Here’s what to focus on to improve your shopping experience:
- Enhance website speed: Use tools like Google PageSpeed Insights to assess and improve website speed. Also, compress images, use browser caching, and consider a Content Delivery Network (CDN). Fast-loading websites enhance user satisfaction and positively influence conversion rates.
- Simplify the checkout process: Minimize the number of steps in the checkout process and offer guest checkout options. Avoid unnecessary form fields, provide clear instructions, and ensure trust signals (like SSL certificates) are visible. Simplified checkouts reduce cart abandonment rates.
- Provide detailed and relevant product information: Include high-quality images, detailed product descriptions, and customer reviews on product pages. Consider adding videos or 360-degree views of products. The more information customers have, the more confident they’ll be in their purchasing decision, leading to higher conversion rates.
- Optimize for mobile: Keep your e-commerce website mobile-responsive, given the significant number of users shopping on mobile devices. Test the mobile shopping experience regularly and consider implementing mobile-first design principles.
- Implement intuitive navigation: Organize products into clear categories and offer effective search functionality. Include filters and sorting options to help users quickly find what they’re looking for.
- Offer multiple payment options: This tactic caters to different customer preferences, reducing friction in the checkout process.
- Enhance customer support: Offer multiple channels, such as live chat, email, and phone. Quick and helpful customer support can address concerns, build trust, and encourage purchases.
- Use personalization: Use customer data to offer personalized product recommendations and content.
- Incorporate social proof: Display testimonials, ratings, and reviews prominently on product pages. Social proof builds trust and can significantly influence purchasing decisions.
For example, Frank & Oak online store organizes its products extremely well, making it easy for people to find the right products:
- Clear descriptions, features, specifications, material care, and shipping and returns
- A “Get the look” section to promote other product
- Related products under a section called “Picked just for you” to create and further enhance desire
8. Use Content Marketing
High-quality content positions your brand as an expert in the field, so more customers will trust and purchase your products.
Pro tip: Optimize your content marketing for search to drive more organic traffic that can actually read your pieces.
Unlike paid ads, which stop delivering results once the budget is exhausted, content can continue attracting visitors and generating sales for years.
To optimize your content marketing strategy and decrease your customer acquisition costs:
- Understand your audience: Conduct market research and create buyer personas. Knowing your audience’s needs, pain points, and interests ensures your content resonates and is relevant.
- Develop a content strategy: Plan the types of content you’ll create, its frequency, and the platforms on which it’ll be shared.
- Optimize for SEO: Research relevant keywords and incorporate them into your content. Ensure site speed and mobile responsiveness.
- Diversify content types: Create a mix of blogs, videos, infographics, podcasts, and other content forms. This strategy caters to a broader audience and maximizes reach.
- Educate, don’t sell: Create content that adds value by educating or entertaining rather than just promoting products. Consumers are more likely to engage with content that offers them tangible value and helps them make informed decisions.
Here’s a neat example from raw natural pet food brand Stella & Chewy:
9. Cut Costs
Cutting costs wisely has a slew of advantages apart from higher profit margins.
- Competitive pricing: Savings from reduced costs can be passed onto customers. And cutting your sales expenses makes your products more competitive.
- Efficient resource allocation: You can reinvest the saved money into improving your customer experience or other aspects of your business.
However, the keyword here was cutting costs “wisely.” To do that:
- Re-evaluate costs of goods: Regularly negotiate with suppliers for better deals or consider bulk purchasing to avail discounts. Investigate alternative suppliers or manufacturing methods that offer similar quality at reduced costs.
- Optimize shipping costs: Negotiate rates with shipping providers, consider offering a minimum purchase threshold for free shipping, or use a hybrid of carriers based on regions. Streamline packaging to reduce weight and volume, and use fulfillment centers to save on cross-country shipping.
- Re-assess marketing channels: Regularly analyze the ROI of different marketing channels to determine which ones are most cost-effective. Focus on a few that yield the best results to optimize your marketing expenses.
- Employ marketing automation: Use tools and software to automate repetitive marketing tasks like email campaigns, social media posts, or ad bidding.
- Refine ad spend: Action: Use creative testing to determine the most effective ads and audiences and adjust your budget accordingly.
- Cut down on return costs: Implement a clear return policy and offer detailed product descriptions and quality images to reduce the chances of returns.
- Reduce inventory costs: Consider a cheaper warehouse to store your products.
10. Optimize Your Customer Acquisition Strategy Constantly
A solid customer acquisition strategy may bring results, but nothing lasts forever.
The ecommerce landscape is continuously changing, with new competitors, technologies, and consumer behaviors emerging. Regular optimization keeps your business ahead of the curve.
That means you can channel your resources to the most productive areas and get better ROI.
To optimize your customer acquisition strategy, consider:
- Data-driven decisions: Invest in analytics tools to gather data on website visitors, campaign performances, and sales conversions.
- Follow key performance indicators: Base decisions on actual data rather than gut feelings. Monitor critical metrics like conversion rates, click-through rates, and bounce rates.
- Implement A/B Testing: Test different elements of your website, ads, or emails to determine what resonates most with your audience. To enhance performance, refine elements like call-to-action buttons, website colors, or ad copies.
- Refine your value proposition: Ensure that your value proposition is clear and compelling and communicates the unique benefits of your product. Refine and adapt it periodically based on customer feedback and market changes.
- Expand marketing channels: Explore and test different marketing and advertising channels to determine those with the best acquisition rates.
The strategies above are specific for e-commerce stores. And they can help you cut customer acquisition costs effectively – if you implement them correctly.
Follow the steps above for each strategy, but mostly, focus on data and your target audience.
Remember that you need to create that “pull” from the market. Use quality software to extract meaningful data about your audience.
That will help you adapt, combine, and optimize all strategies to reduce CAC.
If you need help getting started, let’s schedule a strategy call. We’ll review your current marketing efforts and determine personalized solutions to streamline your costs.