Average customer acquisition cost for eCommerce

We at LumoAds have done some research into eCommerce stores in the US and found a lot of interesting metrics that you can download here. One of those metrics in that report is customer acquisition cost, also known as CAC.

So you must be wonder what the average customer acquisition cost for eCommerce is, right? Read on and find out!

What is customer acquisition cost?

Customer acquisition cost (CAC) is the cost of acquiring a new customer. It includes all the expenses associated with marketing and sales efforts to bring in new customers. CAC can be calculated quite easily with simple math. Choose a time frame, it could be two years, one year or less. Divide the total cost of acquiring new customers by the number of new customers in that period.

For example, if you spent $10 000 on advertising last year and that brought in 200 new customers, that would make your CAC $50. CAC is an important metric because it gives you an idea of how much you need to spend to bring in new customers. If your CAC is too high, it may be difficult to grow your business and maintain profitability.

The average CAC for eCommerce

The average customer acquisition cost for eCommerce is $64.27 across all different eCommerce stores. This data comes from looking at Google Ads spend as well as Facebook ads.

It might seem quite high to you, but remember that the average customer lifetime value might be a lot higher than that, so in actuality that customer you acquired for $64 might spend $168 throughout the year from repeat purchases.

It's important to understand the relationship between CAC and LVT so I've written an article that I think you should read. CAC and CLV - the two most important metrics for any business.

How to calculate customer acquisition cost

To calculate your CAC, you need to add up all the costs associated with acquiring new customers. You can do it in a simple way that only includes actual advertising spend. This is a proper way of calculating CAC:

Add up all these costs (you might not spend money on all of these):

  • Advertising expenses
  • SEO
  • Email marketing
  • Agency fees if you have any marketing agencies doing these things for you

Once you have added up all of these expenses, divide the total cost by the number of new customers acquired during the same period. And WHAM! You will find your own CAC.

It's important to calculate your CAC on a regular basis, such as every quarter or year, to keep track of changes over time. This can help you identify trends and make adjustments to your marketing and sales strategies as needed.

What is a good Ccustomer acquisition cost?

There is no one-size-fits-all answer to what a good CAC is, as it can vary depending on your industry, business model, and other factors. However, as a general rule of thumb, a good CAC is one that allows you to maintain profitability and growth.

One way to determine a good CAC is to calculate your customer lifetime value (CLV). CLV is the amount of revenue a customer is expected to generate over their lifetime with your business. If your CAC is lower than your CLV, it means that you are acquiring customers at a reasonable cost and can expect to make a profit over time.

Tips on how to lower your customer acquisition cost

Lowering your CAC can help you grow your business and increase profitability. Here are some tips on how to reduce your CAC:

1. Focus on referral marketing

Referral marketing is a powerful way to acquire new customers at a low cost. Encourage your existing customers to refer their friends and family to your business. You can offer incentives, such as discounts or free products, to encourage referrals. Referral marketing can help you acquire new customers who are more likely to be loyal and make repeat purchases.

2. Improve your website's conversion rate

Your website's conversion rate is the percentage of visitors who take a desired action, such as making a purchase or signing up for your email list. Improving your website's conversion rate can help you acquire more customers without spending more on marketing and advertising. Focus on improving your website's user experience, such as by making it easier to navigate and reducing load times.

3. Use organic social media

Social media can be an effective way to reach new customers with just organic posts. Remind your followers of any sales you have or any new products that dropped in your store.

4. Optimize your email marketing

Email marketing can be a cost-effective way to acquire new customers and retain existing ones. Focus on building a targeted email list and sending relevant, personalized emails. Use A/B testing to optimize your email subject lines, content, and calls-to-action to improve your conversion rates.

5. Leverage Influencer Marketing

Influencer marketing involves partnering with social media influencers to promote your products or services to their followers. This can be a powerful way to reach new customers who are more likely to be interested in your business. Look for influencers who have a large and engaged following in your industry or niche.

Wrapping up Average CAC for eCommerce

Customer acquisition cost is an important metric for eCommerce businesses to track. Understanding CAC and how to reduce it can help you grow your business and increase profitability. 

By focusing on referral marketing, improving your website's conversion rate, using social media advertising, optimizing your email marketing, and leveraging influencer marketing, you can lower your CAC and acquire new customers at a reasonable cost.

Remember to calculate your CAC regularly and make adjustments to your marketing and sales strategies as needed to maintain profitability and growth.

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