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How to Strike a Balance with eCommerce Customer Acquisition Costs (CAC)

May 2, 2023By Philip Ciaccio

Topics: Marketing Strategy, eCommerce, Scalable Marketing

How do you balance the market forces on your online business and direct the right customer to your shop? Is advertising worth it? What will my ROI be for all my efforts? These questions, and others, might hinder a solid push and investment into new customers.

Find Balance with the Force

As eCommerce continues to grow, many market forces affect online retail shops. One of the biggest challenges is competition from other businesses that offer similar products and services. Retailers must differentiate themselves through unique offerings, competitive pricing, and excellent customer service.

Another factor is the constantly changing consumer preferences and shopping behaviors. Retailers should keep up-to-date with the latest trends (Forbes 2023 article) and adapt to new technologies to stay relevant. Additionally, cybersecurity threats pose a significant risk for eCommerce retailers. To mitigate this risk, businesses should invest in top-notch security measures and remain vigilant in monitoring their systems for potential threats. eCommerce retailers can thrive in today's competitive landscape by staying on top of market forces and taking steps to mitigate risk.

Make a Solid Plan and Give it time.

When it comes to advertising, planning is everything. A well-planned advertising campaign can make all the difference regarding return on investment (ROI).

Get started on your marketing planning with the Ultimate Marketing Strategy guide published by HubSpot for 2023. This user-friendly template is an excellent resource to download.

By taking the time to research your target audience and craft a message that resonates with them, you can ensure that your advertising dollars are being spent effectively. Additionally, by setting clear goals and measuring the success of each aspect of your campaign, you can make adjustments as needed to continue improving your ROI. So, if you want to get the most out of your advertising budget, prioritize planning!

When running a campaign, it's essential to be patient and avoid giving up too soon. Take the time to carefully craft your campaign, identify your target markets, and ensure your creative assets are on point. Allow the platform's machine learning to work magic and find the right customers ready to purchase. If you've taken a balanced and measured approach, take your time to make significant changes until at least 90 days have passed. Instead, focus on making minor incremental optimizations, such as tweaking colors or headlines and conducting A/B testing to maximize the effectiveness of your ad spend.

You can gain valuable insights by testing multiple channels and tracking multi-touch attribution. It's essential to recognize that a single ad click resulting in a purchase is only the final step and shouldn't be the only metric. Building brand awareness through targeted ads, search engine rankings, social media placements, and email marketing takes time and effort. Consistent engagement with your audience is crucial in driving sales and achieving success.

What's This Going to Cost Me?

The average customer acquisition costs (CAC) vary widely depending on the industry, company size, marketing strategy, and target audience. However, based on available data, here are the average CACs for the top 5 eCommerce industries in the U.S.:

  • Apparel and accessories: The average CAC for this industry is around $18 to $25, according to a study by RJMetrics.
  • Beauty and personal care: According to a survey by BigCommerce, the average CAC for this industry is around $25 to $30.
  • Electronics and technology: According to a report by Shopify, this industry has a higher average CAC of around $40 to $60.
  • Home and garden: The average CAC for this industry is around $25 to $30, according to a survey by BigCommerce.
  • Health and wellness: According to a report by Shopify, the average CAC for this industry is around $20 to $30.

It's important to note that these figures are averages and can vary widely depending on various factors specific to each business. 

One effective method for determining the ideal advertising investment is to predict the total earnings from selling out of the products featured in the campaign. It's also important to consider the lifetime value of customers over a given period, such as two years. For a more detailed analysis of cost, check out my article "7 eCommerce Metrics to Know." Based on your net margins, choose a percentage that is reasonable and worthwhile.

According to a study by Forrester Research, U.S. companies allocate an average of 30-40% of their overall marketing budget to online advertising. And total spend is slated to reach $146B by 2023

Set achievable goals and take calculated risks while tracking and optimizing the campaign as necessary. Finally, when the campaign has landed, calculate the customer acquisition costs (CAC) and set them as a benchmark for future campaigns. The lower your CAC, the higher your margins!

Looking to leverage results-driven digital marketing for your business? Contact us today and let's get started!

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