3 Tips to Optimize Your Ecommerce Customer Acquisition Cost (CAC)
There’s nothing more frustrating than doing the same thing over and over again and seeing no results. Whether you’ve been riding your Peloton every day for weeks and can’t seem to improve your power output or you’ve been playing a new video game for hours and can’t seem to pass a certain level, a plateau can be demotivating. While conventional wisdom tells us that “practice makes perfect”, when it comes to improving your ecommerce customer acquisition cost (CAC) it’s time to throw that old saying out the window!
That’s right, it’s time to stop doing the same thing over and over again and expecting different results! That’s why we put together three unique tips that can help shed new light on how to reduce your CAC. While we can’t speak to your Peloton or video game habits—our three CAC optimization tips will whip your ecommerce marketing program into shape!
Closely track your CAC-CLTV ratio
When optimizing your CAC it’s important to think about this metric’s relationship to your Customer Lifetime Value (CLTV). If you spend $2,000 on a new campaign that brought in 20 new customers, your CAC would be $100 per new customer. While you and your team may be satisfied with this number, it’s important to consider how much customers typically spend over the lifetime of their relationship with your brand. If your CAC is $100 but your CLTV is $150 you may have some trouble scaling profits quickly and effectively. To avoid this fate Chargebee recommends aiming for at least a 3:1 ratio of CLTV:CAC.
While it’s tempting to look at CAC as an isolated indicator of success, true and meaningful change to your CAC will only happen when you understand this KPI in tandem with other key metrics.
Bring down your bounce rate by optimizing your overall user experience
If you’re spending a ton of money on digital ads, but are seeing a high bounce rate from those that click the ads it’s time for a customer experience upgrade! If people are choosing to leave your site as soon as they get there, you need to invest in personalization software that will allow you to implement curated messaging that speaks to each person that clicks on your ads.
AI-powered software like Intellimize can help you run tons of tests on your site to create a 1:1 personalized experience for customers. Using personalization to reduce your bounce rate will increase the efficacy of your ads overall, thus decreasing the costs associated with bringing in new customers.
Double down on reducing your shopping cart abandonment rate
Once customers are on your site, do a large amount of them drop off during the checkout process? The bad news is that a high shopping cart abandonment rate can drive your CAC way up. The good news however, is that you have a large number of customers that are just about to pass the finish line when it comes to making a purchase aka a vetted audience that can help drive down your CAC.
Focus on engaging these customers with personalized shopping cart abandonment emails and a matching personalized experience on your site, should they decide to revisit their virtual cart. With a little creativity and help from personalization software, you can move customers that are very aware of your brand but on the fence about hitting the “check out” button through the purchasing process. Ka-ching!
We hope these three ecommerce optimization tips help take your CAC from so-so to superb! If you’re looking for more tactical tips on how to optimize every single foundational ecommerce KPI check out our new guide: The Marketer's Ultimate Guide to Ecommerce Metrics.