Find out how to lower the Customer Acquisition Cost (CAC) in your eCommerce. Effective strategies to keep CAC under control and ensure the growth of your brand.
What is CAC?
Customer Acquisition Cost (CAC) is the total marketing expense divided by the number of customers acquired. In other words, CAC represents the average cost of obtaining a new customer. This indicator is crucial because it directly affects the profitability and sustainability of your company.
- CAC High: It reduces profit margins, hindering the sustainable growth of the brand.
- CAC Low: Indicates the brand's ability to acquire customers at a lower cost, increasing profit margins and allowing reinvestment in further marketing activities.
Why is the CAC Important?
Tracking and understanding your CAC is vital to the financial and operational health of your eCommerce business.
- Profitability: Too high a CAC can erode profit margins. It is crucial that the cost of acquiring a customer is less than the value the customer will bring to your brand (Customer Lifetime Value, CLTV).
- Sustainability: A sustainable CAC allows the brand to grow without quickly running out of resources. A high cost of acquiring customers can lead to long-term difficulties.
- Marketing Efficiency: Tracking CAC helps evaluate the effectiveness of marketing campaigns. An increase in CAC may indicate the need to review strategies.
The CAC Life Cycle
The CAC life cycle can be divided into three main phases:
- Initial Phase: Growth of the CAC
- At the beginning of advertising campaigns, CAC tends to be high due to lack of optimizations on advertising accounts. The algorithm needs time to optimize itself.
- Optimization Phase: Reduction of CAC
- Over time, advertising campaigns optimize themselves. Data analysis, targeting refinement, experimentation with different creatives and copy, and advanced analytics tools make campaigns more efficient, reducing CAC.
- Saturation Phase: Unsustainable Increase in CAC
- In the long run, advertising activity alone can no longer create sufficient demand. The audience becomes less responsive to advertising, and the CAC tends to increase again, becoming unsustainable for the brand.
The Importance of Diversification in Marketing
To avoid an unsustainable CAC, it is essential to diversify your marketing activities. Relying solely on paid advertising can lead to increased CAC in the long term.
- Risk Reduction: Diversifying your marketing efforts reduces your reliance on a single source of customer acquisition.
- Increased Visibility: Using different marketing channels allows you to reach a wider and more varied audience.
- Improved Brand Awareness: Organic activities like content marketing and SEO help build a strong, long-term online presence.
- Long-Term Sustainability: Organic marketing strategies provide long-term sustainability, alongside advertising activities.
Diversification Strategies to Reduce CAC
Organic Social Media Activities
Organic social media activities are essential to building a loyal community and reducing reliance on advertising campaigns. Creating engaging and authentic content allows you to connect with the audience in a personal way, improving brand perception and encouraging word of mouth.
DEM activities and Marketing Automation
Direct Email Marketing (DEM) and marketing automation activities are powerful tools for retaining current customers and acquiring new ones at lower costs than paid advertising.
Offline activities and PR
Don't underestimate the power of offline activities and public relations (PR). Events, collaborations with physical stores and magazine articles can increase brand visibility and attract new customers.
Content Creators and Influencer Marketing
Collaborating with content creators and influencers can be an effective way to reach new market segments and increase brand credibility.
Campaign Optimization and Objective Change
Optimizing your advertising campaigns and varying your objectives can make a big difference in your CAC.
Co-Branding and Collaborations
Co-branding activities and collaborations with other brands can broaden reach and reduce CAC.
SEO and Content Marketing
Search engine optimization (SEO) and content marketing are long-term strategies that can reduce CAC by creating a steady flow of organic traffic to your eCommerce store.
Change in the Product Catalogue
Expanding or varying your product catalog can attract new market segments and retain existing customers.
Shooting and Investments in Product Visuals
Investing in professional photography and the visual presentation of your products can significantly improve the attractiveness of your eCommerce.
In an increasingly competitive market, Customer Acquisition Cost (CAC) is a crucial metric for the success of any business, especially in eCommerce. Understanding and carefully monitoring CAC is not just a matter of measurement, but a fundamental strategy for ensuring the long-term profitability and sustainability of your business. Integrate the activities listed together with advertising activities to achieve constant sustainability over time.
FAQs
What does CAC mean? Customer Acquisition Cost (CAC) represents the average cost of obtaining a new customer, calculated by dividing marketing expenses by the number of customers acquired.
Why is it important to monitor CAC? Monitoring CAC is important to ensure that the costs of acquiring new customers are lower than the revenues generated by these customers, ensuring the profitability and sustainability of the business.
How can content marketing help reduce CAC? Content marketing attracts organic traffic to your eCommerce site, reducing your reliance on paid advertising campaigns and thus lowering your CAC.
What is the role of organic social media activities in reducing CAC? Organic social media activities build a loyal community and improve brand perception, reducing the need for expensive advertising campaigns.
How can diversification of marketing strategies impact CAC? Diversifying marketing strategies reduces the risk of dependence on a single source of customer acquisition, keeping the flow of new customers stable and controlling CAC.
What are the advantages of collaborations with influencers? Collaborations with influencers allow you to reach new market segments and increase the credibility of the brand, helping to reduce the CAC.
