What customer acquisition is and what’s its cost?

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Customers don’t just magically appear on your e-commerce site. There are always different things at play. They might see your social media marketing campaigns or find you through Google Ads. You need to provide them with the incentive to come and shop on your site. The process is known as customer acquisition. Your business needs to understand how to do it without breaking the bank.

What is customer acquisition?

Customer acquisition is the process of attracting new customers to your business. When a new person or a business buys your product or service, you acquire a customer. With customer acquisition, you’re trying to create strategies to get potential customers to make the sale.

In some respects, customer acquisition is like marketing. The difference is that while marketing builds awareness of your business, customer acquisition aims to drive action. Customer acquisition is about getting people to take action – to purchase your product or service. Your marketing campaign will get the people on your site. But your customer acquisition strategy also needs to ensure they make that purchase.

Your business needs to focus on customer acquisition because it helps your business to make money. You get direct revenue from acquiring a customer. But it can also help attract new investment, as you can show your business is good at turning potential customers into paying customers.

Customer acquisition can involve various strategies to be effective. An e-commerce business might need to use the following steps for customer acquisition:

  • Set up a website that’s easy to navigate
  • Promote the product or service online
  • Provide customer support and service
  • Ensure the product or service is delivered

All the different steps are part of turning potential customers into paying ones. The strategies also cost money, which is why customer acquisition cost is another essential piece of the puzzle you must solve.

What is the cost of customer acquisition?

Your business has to understand the cost of customer acquisition. The reason for it is simple. The strategies you use to acquire customers require investment. If your customer buys a $50 item from you, but you spent $100 to get them to buy, you’re losing money.

Customer acquisition cost (CAC) tells you how much you spent to get a new customer. Knowing the cost of customer acquisition will help you:

  • Streamline your strategies
  • Stop wasting money on costly and ineffective strategies
  • Better invest and allocate your resources

It’s essential for business success that your customer acquisition isn’t losing you money. If you know the cost, you can adjust your acquisition framework accordingly.

How to calculate customer acquisition cost

Knowing customer acquisition costs is important. So how do you calculate it? What is your average customer acquisition cost in e-commerce?

The formula to calculate customer acquisition cost is simple. You need to know your total marketing and sales expenses and then divide this by the number of new clients.

Customer Acquisition Cost = (Marketing Costs + Sales Costs) / New Clients

If you spent $1000 last month on marketing and sales acquiring 500 new clients, your customer acquisition costs would be $2.

Once you know the figure, you can compare it to the average customer spending, too. Let’s say your customers spend $100 on average on your website. If your acquisition cost is only $2 per new client, you’re getting a good value for your acquisition spending.

What is the average customer acquisition cost in e-commerce?

Research shows the average customer acquisition cost in e-commerce to be around $58.64 for small businesses. The bigger your business gets, the higher the acquisition costs tend to go. Furthermore, different industries can have different average costs. In general, marketing costs for electronics are higher than for health and beauty. Paying attention to the averages can help, but it’s more important to understand and look at the costs in relation to your specific business.

How to improve your e-commerce customer acquisition cost

The average customer acquisition cost in the industry can guide you in the right direction. But it’s always important to focus on looking at your current figures. Are you spending too much? If so, you can do a few simply things to improve your e-commerce customer acquisition cost.

1. Prioritize your target audience

Your e-commerce must know its target audience. You must create customer profiles to prioritize marketing to the right audience. You can better allocate resources when you understand how to reach your customers. Today’s customers are looking for personalized experiences. By prioritizing your target audience in your marketing, you can provide them with the right experiences.

2. Improve lead conversion rate

Use analytical tools to understand your potential customers. You should be aware of how often customers abandon their shopping? Are your webpages loading fast enough? Does your content engage website visitors? Improving lead conversion rates with things like responsive websites and fast search engines can be useful. You want the checkout process to be as smooth as possible.

3. Enhance your value proposition

Consider also improving your value proposition. Businesses should always be on the lookout to improve the value they offer. The obvious way to do so is by improving your existing product or service. You can enhance user value differently. You can develop additional services. These can range from informational videos to blog posts. If you’re unsure what your customers want, ask them! Creating surveys is easy, and the answers can help you improve your business.

4. Use a CRM system

Customer relationship management (CRM) systems are great for customer acquisition. The platform tracks your customer engagement through the sales funnel. You’ll learn valuable information on how much and when your customers are buying, and how effective your loyalty programs are. You can even use these systems to set up promotions, email advertising and other such campaigns.

Take control of your customer acquisition costs

Your e-commerce shop needs to know its customer acquisition cost. While the average customer acquisition cost in e-commerce varies across sectors, knowledge of it is power. You can ensure your acquisition strategy is working well. This can all help keep your expenses under control. You can make sure you provide your customers with the best possible service!


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