Customer acquisition cost is going up: Here’s what to do about it
Kelli Trapnell
·August 11, 2023
Today’s ecommerce merchants know that it’s not as easy as it used to be in the pre-COVID era to attract new customers to your online store. For instance, the cost of running Facebook ads increased by 89% between 2020 and 2021, with an average CPM (cost per thousand views) of $11.
That makes it more important than ever to both build a refined customer acquisition strategy, and to develop a customer retention plan that helps you build customer loyalty and drive continued value from the customers you’ve acquired both organically and through paid advertising methods.
In this article, we’ll explore:
- Identifying your prospective customers
- How to optimize your customer acquisition cost in advertising
- How to reach new customers through organic methods
- How to improve your customer retention rate
Identifying your prospective customers
The first step is to understand your target audience and identify the channels where they spend their time. Build buyer personas for your prospective customers that create a narrative about who they are, what they value, and what they’re looking for in a product. This will help you with formulating a customer acquisition strategy for reaching each of your target personas.
For example, if your stackable containers are popular products with both parents of young children and with teachers looking for classroom materials, you can develop separate buyer personas for each of these audiences and research where they’re most likely to spend their time online, including which blogs and news sources they read and which social media platforms they engage with.
By crafting key messages that appeal to each of these prospective customer types, and building a plan for where and how to reach them online, you’ll be able to develop a customized customer acquisition strategy that’s effective for each audience group that you target.
How to optimize your customer acquisition cost in advertising
Once you’ve developed a customer acquisition strategy for each type of potential customer, it’s time to focus on optimizing your campaigns to lower your customer acquisition cost.
With the right tools, you can track how much it’s costing to acquire each customer and calculate your return on investment (ROI). This will help you understand which channels are most effective for acquiring customers and ensure that your spending is as efficient as possible.
Build a range of ad creative for each campaign, experimenting with different copy and graphics to see what works best for each audience type.
Use a centralized dashboard to help you analyze your spend across each advertising channel, which might include social media platforms like Facebook as well as Google Ads and publisher ad networks that promote relevant ads across a wide range of sites and apps.
By running a variety of ads across multiple platforms, you’ll be able to gather the data to help you analyze which ads and channels are most effective in meeting your goals. From there, you can optimize your campaigns to spend more money on the most successful campaigns, and continue iterating on them to gain more conversions and lower your customer acquisition cost even more.
How to reach new customers through organic methods
Don’t neglect the power of using organic methods — including social media and other forms of content marketing, including blogging, email marketing, and video content — to help you boost your customer acquisition strategy.
Focusing on organic social media and SEO can help you find more potential customers through inbound marketing, where customers who are searching for products like yours will come across your landing pages or social media streams. This strategy does not involve paid ad spend, so your CAC can be much lower, though don’t discount the time and effort it takes to formulate a great content marketing strategy to help you attract your customers.
Referrals are also a great affordable way for reaching new customers: By encouraging happy customers to share a referral code, they’ll be able to pull in new potential customers via word-of-mouth marketing, which is far more trustworthy than online advertising.
Once you’ve driven your potential customers to your site or social media channels, make sure that you have the opportunity to capture their contact information so that you can market to them in the future. Consider offering a special promotional code in exchange for asking customers to sign up for your email marketing list or subscribe to SMS text messaging. From there, you’ll be able to reach out to them with customized content at any point in time, encouraging long-term customer retention.
How to improve your customer retention rate
While offering your customers access to ongoing promotions is one important strategy for increasing customer retention, you probably haven’t considered another important way: during the returns process.
Many customers send products back for returns not because they don’t like your brand, but simply because the specific product didn’t work for them. And if they return a product for a cash refund, that’s likely to be the end of your relationship with that customer, leading to churn and higher customer acquisition costs.
Instead, look for opportunities to optimize for customer retention in the returns process, by incentivizing product exchanges and store credit over returning items for refunds. By using a platform like Loop, you can help your customers seamlessly exchange one item in your store for another — even if it’s not a variant of the original item. Because they don’t need to complete another shopping cart transaction, even if they’re spending more than the original purchase price, customers are far more likely to complete the exchange process and hopefully find a new item that they’ll love, preserving their relationship with your brand and creating new opportunities for customer loyalty.
Your customer acquisition cost is an important metric that can play a heavy impact on your brand’s profitability and longevity. By building a dedicated customer acquisition strategy that includes a range of both organic and paid tactics for reaching and engaging with your target audience, you’ll be able to build a sustainable and cost-effective marketing strategy. And by optimizing your post-purchase experience to convert returns into exchanges, you’ll have the tools in place to optimize your customer retention rate on the back end.
Want to learn more about boosting your customer lifetime value with a returns strategy? Get a demo of Loop today.
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