When a business seeks to increase or gather a customer base, work is put into the how of customer acquisition. That is, the strategy to be integrated to acquire customers.
For every e-commerce store, in and out of season, customer acquisition is always top of the list. Since sales rely solely on how extensive the customer base is and the larger the customer base the better numbers a Shopify store will do in terms of sales and revenue.
It is true that a higher portion of customers a Shopify store has is acquired from social media promotions, search engine ads, and maybe traditional media marketing. All of these require that the store owner invest a certain amount to acquire customers.
And that brings us to the point of this blog post. When customer acquisition is the goal, how much is expected of a Shopify merchant to spend which will not be at the detriment of their capital pocket?
You sure cannot invest all your profits into acquiring new customers when there are a ton of other things on your store to expand. Something like restocking inventory, taxation, salaries when you have employees, and so on.
Customer acquisition usually sucks a chunk of money if you want to see a meaningful result with the number and quality of customers you want to attract. What I mean by the quality of customers is, the customers’ gained being converted to sales and not just giving your store the traffic numbers.
What is customer acquisition?
Customer acquisition is every strategy or process a business engages in to attract new customers. For an e-commerce store to have an outstanding sales book, you need to keep your marketing and sales strategy to aim at capturing the attention of potential customers.
These sales strategies should not stop at making that customer check your product but also convince them to make a purchase. The process of leading potential customers (visitors) to your store and encouraging them to buy is what we call customer acquisition.
Customer Acquisition Cost on its own is a metric that measures the cost a business incurs to acquire a new customer. Remember when a business wants to acquire customers, it engages in marketing and sales strategies. CAC then represents the amount spent on having the marketing strategies in place to attract new customers.
To calculate customer acquisition cost, you need to add all the costs associated with customer acquisition including advertising expenses, marketing campaigns, sales team salaries, software tools, and other directly related costs to acquiring a new customer. This will be divided by the total number of customers acquired during the same period.
Let’s say, SHANIAH is a Shopify store that sells luxury fashion items and has spent $2,500 on marketing to reach new customers for 6 months where 60 customers were acquired. To get the customer acquisition cost per each customer gained, the calculation will be thus;
$2,500/60 = $41.66
That’s approximately $42 per customer acquired.
Ways To Cut Customer Acquisition Cost
Depending on business size and revenue record over time, the amount a business is willing to spend on acquiring a new customer differs across board. The first step before pumping so much into acquiring a new customer is to consider the cost. And when the cost becomes too much, a store owner would need to look for ways to reduce customer acquisition costs.
Let’s see ways you can cut down on the amount spent to acquire a customer for your Shopify store.
1. Define target customer/segmentation
The earlier you know that not all the 4.8 billion people on social media are your potential customer the better. You need to choose a target audience you want to reach with your marketing.
Narrow your target audience down to those who are likely to be potential customers. This will help you reduce the cost spent on marketing to acquire a new customer.
If you’ve ever had active social media ads, you will see an option while creating your ad where the platform requires that you choose the age, gender, location, and other demographic factors you want to reach with your promotion.
One thing you will notice is that, the wider the factors included that you want to reach the higher the marketing fee to be paid. To beat down the cost, choose the demography where your target audience lies.
With segmentation, you can set your promotions to reach customers who have not been reached before. This way you won’t be spending money to target customers who have bought from your store before. Although retargeting helps your store grow, you don’t want to mix it up with customer acquisition.
2. Understand your target audience
The kind of promotion that will work for a Gen-Z might not work for a millennial. So understanding the language of your target customer can help you reduce costs and make the marketing more effective in convincing potential customers.
Understand what your potential customers need and how you can convert that need into a marketing strategy that can attract them to visit your store and make a purchase. What you need to do is to show your audience how that product will solve their current problem.
For some target customers, discounts or free delivery can be the language to attract them to join your customer base. For others, it can be a post-purchase service for the item they buy. Knowing what your customers want can help you hit the nail on the head and acquires customers will little cost.
3. Shopify store optimization
When pushing an idea to people, the exterior is expected to be beautiful to get them the first impression that drives them into the main house. But the work does not end there, you need to put things in place to make them stay in the house.
That is where website and landing page optimization comes in for e-commerce stores. Having every page on your website in the best optimal shape can aid your acquisition cost to retain new customers.
Part of your acquisition game is to drive customers to your store and have marketing strategies that can give customers a lead as they visit your store and then convert them to sales.
To see an expected result from your marketing efforts, have your store’s website speed and navigation customer-centered.
4. Boost customer retention and reduce churn rate.
When a new customer is acquired you need to monitor and make repeat customers out of them. This way you get to regain the amount spent in acquiring that customer.
If a customer acquired today churns after one purchase, that will be a loss for that customer. You barely made enough profit from their purchase to repay the cost spent on acquisition. Plus repeat customers are less stressful to convince compared to outrightly new customers.
So get a return on your investment in acquiring a customer, and put strategies in place to make a repeat customer out of them. To increase customer retention rate, you need to take out all the possibilities of making customers churn.
5. Leverage on existing customer
In marketing, one strategy that works and spreads like wildfire is word-of-mouth marketing where existing customers tell your brand to the world. This marketing requires $0 to work out and usually, the customers acquired from this kind of marketing have a good lifetime value.
User-generated content is another way to reduce customer acquisition costs. When existing customers share their experiences about a product bought in your store, the influence they get on potential customers is stronger than when you reach out as a brand.
Online buyers trust the reviews or words from someone who has bought an item they are interested in compared to what they will get from the seller. User-generated content is quite popular these days among e-commerce stores as it helps cut down on customer acquisition and marketing costs.
Knowing your store’s customer acquisition cost is not enough. You have to juxtapose it alongside other e-commerce metrics like the customer lifetime value that shows how long a customer acquired stays with your store.
This will help you know the ROI from the bucks spent on each customer. A customer acquired today and doesn’t have a good lifetime value might be a loss for your store.
As you are keeping acquisition costs in check, also know how long customers stay with your brand.