Ecommerce customer acquisition isn’t only about conversion rates. Attract the proper clientele for long-term success. Understanding which acquisition methods work for your e-commerce firm requires continual evaluation and testing. This article explains how to evaluate client acquisition strategies. Find and plug gaps in your existing acquisition strategy to develop quicker than the competition.
Ecommerce Customer acquisition supports growth. But why?
Customer acquisition involves discovering and convincing the best-fit clients to buy from your e-commerce firm.
It has three stages:
- Prospecting (attracting leads toward your business)
- Developing sales leads (engaging those leads through your content)
- Become customers (convincing them to buy)
But there is a fourth stage where no one bothered to look at it. Post-purchase buyer satisfaction. By satisfying post-purchase demands, you’ll retain customers. You’ll optimize ROI and decrease customer acquisition costs (CAC). More ideal clients will lead to successful connections since they’ll buy from you several times.
It’s the start of more significant consumer experience.
This experience should proceed from start to finish:
- Leads/subscribers. Your ideal consumer becomes interested then.
- Customers. Your leads finally buy from you.
- Referrals. They’ve bought your stuff before and will tell others.
- Advocates. They’re lifelong customers who promote your company (e.g., by making posts about it on various social media platforms.).
Buy why customer acquisition vs. marketing?
Customer acquisition encourages conversions and sales to produce money in the same way that marketing increases brand recognition. Customer acquisition refers to the steps to encourage customers to make a purchase, such as sending them a coupon through an email or displaying relevant advertisements (e.g., Google ads). Whereas marketing, it’s all about brand awareness.
The goal is always to turn visitors into clients, whether these activities occur immediately or months from now.
Correct examples of successful and unsuccessful Ecommerce customer acquisition
Data-driven strategies that prioritize ROI over revenue win the game of customer acquisition. Here are a few examples –
Scenario 1: A direct-to-consumer haircare brand
A brand of direct-to-consumer haircare runs an email marketing campaign with a 10% discount coupon for new customers. The email generates brand awareness and results in 800 new customers with a 20% open rate.
After one month, sales have increased by $38,500, and the business owner considers the campaign a success. The proprietor of the company forked over $1,500 to a consultant for the email list, $225 for the email template, and $200 for the copy. Two dollars were returned for every dollar spent.
Why such a low yield?
The email list recipients were not the business’s target audience; as a result, many had a negative purchasing experience; and fifty percent wrote negative reviews or warned their friends to avoid the brand. No new customers made a second purchase, and the company’s reputation deteriorated after three months of below-average sales.
Scenario 2: An online fashion brand
In contrast, a high-end fashion ecommerce store uses Facebook advertisements. It repurposes existing copy and creative, retargeting website visitors and social followers. After one month, these ads generated 175 clicks and 20 sales at a cost-per-click of $0.70. $122.50 was spent on marketing for the campaign.
Even though the campaign only generated 20 new customers, they spent an average of $150 on products, generating $3,000.
These ideal customer profiles, or your best customers, had positive experiences. They appreciated the personalized emails they received after a purchase that suggested additional products similar to the one they had just purchased. Fifteen customers provided positive feedback, and eight made a second purchase within three months.
What distinguishes these examples of business?
The online fashion retailer attracted fewer customers and generated a smaller revenue. However, it was more effective at acquiring customers for three reasons –
- Marketing productivity: The retailer’s investment in a data-driven campaign resulted in lower advertising costs and a greater return on investment.
- Data-driven targeting: It used demographic and website information to target customers who were likely to spend more money and be satisfied with their purchases.
- Post-purchase experience: After-purchase encounters followed up after the conversion to ensure buyer satisfaction, enhancing the overall customer experience to generate repeat business and brand advocacy.
Ineffective customer acquisition strategies can cause a company to fall behind more efficient rivals. If you continue to spend $1 to earn $2, a competitor that earns $4 on the same investment will outgrow you. Misaligned targeting is costly and often results in poor user experiences and low conversion rates.
They may spend money but are unlikely to become brand advocates or return customers. Restarting the acquisition process will be necessary to replace one-time customers with multiple new ones.
What are metrics to measure customer acquisition?
Basic metrics such as closed deals and generated revenue are insufficient for measuring customer acquisition success. For a clearer picture, combine CAC and LTV (lifetime value), which measure acquisition efficiency and value beyond sales. There is also something called the north star metric as well.
How do you determine an online store’s customer acquisition cost (CAC)?
CAC is essential for preventing wasteful spending. Utilize the following formula to compute it:
CAC = Total spends / Total customers acquired
Allow me to define these terms.
Total customers acquired: Use the total number of first-time buyers for the most straightforward “Number of customers acquired” calculation, or include returning customers for a complete picture.
Are they returning? But how long later? That is up to you, but maintain consistency for all future calculations. For instance, a consumer who waits three years before making a second purchase from an online guitar string store is almost certainly considered a new customer by the retailer. Repeat business is shown when the same purchase frequency is made, which benefits an organization selling pricey things like vehicles.
Consider the purchase frequency of each segment of loyal customers. Draw a line above the highest average time between orders as a threshold. For subscription businesses, the threshold is more straightforward: a returning customer restarts a subscription (generating new monthly recurring revenue, or MRR) after churning.
Be sure to consider product prices and customer lifetimes when evaluating your data.
Total spends: “Total spend on acquiring customers” is ambiguous, but you can typically include the following:
- Compensation of sales and marketing staff;
- Advertising expenditures for acquiring new customers;
- Hardware and software expenses related to sales and marketing;
- Agency, public relations, and other outsourced sales (and)
- Digital marketing expenditures.
How to calculate the lifetime value of customers (LTV or CLTV)?
A customer who pays $100 for a single product is less valuable than one who pays $100 per week for an entire year. Nevertheless, CAC treats them equally if they both convert due to the same marketing effort.
Customer Lifetime Value (LTV) is the total revenue you anticipate a customer to generate throughout their relationship with your company. There are numerous methods for calculating it, but here is a simple formula:
LTV = avg. order value x no. of transactions x avg. retention time
Dividing LTV by CAC for a ratio that more accurately measures the effectiveness of customer acquisition. Without LTV and with just CAC, its customer acquisition strategy became less effective.
Below are some benchmarks for the LTV/CAC ratio:
- Less than 1 – You are losing money on every single customer.
- 1 to 2 – Your strategy for customer acquisition is ineffective. You will fall behind in the competition.
- 3 to 5 – is optimal for a growing business.
- More than 5 – Customer acquisition is proceeding effectively. Reinvest in marketing and sales.
MRR, churn rates, and other variables impact LTV/CAC ratios. The majority of ecommerce businesses increase LTV by increasing average order value, average order frequency, and customer retention rates.
Subscription businesses, such as SaaS providers and specific ecommerce platforms, should prioritize reducing churn and increasing MRR (the entire amount of recurring money generated by an organization’s subscription accounts, expressed as a monthly amount, normalized).
The following three steps assist all ecommerce businesses in optimizing LTV:
- Using highly-targeted marketing campaigns to sell to ICPs so that buyers receive the expected experience;
- Enhancing the overall experience of the consumer to win their trust;
- Based on the customer’s requirements, upselling and cross-selling at the right time.
Fixing funnel leads and how to do it?
By continuously measuring the effectiveness of customer acquisition, you can repeat successful actions to increase ROI. A mental picture of the process will help detect and repair leaks (points at which prospects regularly disengage). Numerous customer acquisition funnels (or “marketing funnels”) end at the conversion point. You must also consider customer retention to assess your business’s performance accurately.
Voice of the customer (VoC) research and website analytics data reveal where and why customers leave your acquisition funnel. Google Analytics allows you to pinpoint where leaks are occurring.
For instance, if a Facebook ad drives 1,000 visitors to your website, but Google Analytics reveals that the product landing page has a 66% exit rate, visitors are not receiving what they need during the consideration stage.
Considering that 85 percent of shoppers told Google that product information and images influence their purchasing decisions, you can plug this consideration-stage leak by:
- Including photographs of the product that are of a high grade;
- Re-aligning the benefit copy with the requirements and problems faced by ICP;
- Developing spec sheets to facilitate product comparison among prospects.
Coming to the voice of customer research, speak with prospects and clients for additional “why” context. What apprehensions or hesitations before deciding to purchase from us or work with us?
Addressing sources of friction in your writing is crucial. You can tell your customers how you will address their concerns by reflecting on them.
Asking this question to your current customers will help you identify any flaws in your acquisition process. For instance, the customer you speak with may have persevered through a challenging checkout process, whereas the same issue may have prevented dozens of other customers from purchasing.
Visitors to a website who do not purchase possess equally valuable insight. You must fix a funnel leak if multiple people give the exact reason for leaving. Collect feedback easily with automated exit forms and chatbots, or send post-event surveys via email.
Be straightforward with your questions and motives. Multiple-choice questions produce quantitative data but limited insight, as respondents may be compelled to select an answer that does not reflect their emotions. Open feedback boxes, sometimes known as qualitative surveys, enable respondents to provide more thorough and subjective replies. Because they are not directly comparable, they are ineffective for measuring change quickly. Utilize both question formats for accuracy.
Here are the top 5 Ecommerce customer acquisition strategies to boost sales and customer loyalty
A wide variety of content is required to construct a reliable customer acquisition funnel. Here are five acquisition strategies that have been tried and tested to bolster your strategy.
1. Raise awareness by using sponsored posts on social media.
The amount of money spent on digital advertisements increased by 57% between 2020 and 2022, and Insider Intelligence forecasts that this number will increase by another 30% by 2025. Facebook, Instagram, and TikTok are generally more robust for business-to-consumer interactions, whereas LinkedIn is better suited to business-to-business interactions. Utilize the channels your target audience spends the majority of its time.
90% of Instagram’s users follow at least one business account, and 50% of those users become more interested in a brand when they see advertisements for that brand in their feeds. Because of this, the platform is fantastic for increasing brand awareness.
For instance, the direct-to-consumer haircare brand Prose used a combination of organic and sponsored Reels on Instagram to achieve a 52% higher unique audience reach while simultaneously reducing its CAC by 23%. Utilizing up-to-date buyer personas to set appropriate targeting parameters in Ads Manager is an excellent way to maximize both reach and engagement (for Facebook and Instagram).
Adults from all over the United States were exposed to Prose’s advertisements. This method excluded current members and recent buyers to achieve a higher number of unique audience members and grow brand awareness.
It has been demonstrated that short videos that are compatible with mobile devices receive more engagement than other content formats. According to a survey conducted by HubSpot, 62% of internet users watch online videos in their entirety, whereas they are more likely to scan photos, audio, and written content.
The following are the three types of content that perform the best on social media:
- Funny content. TikTok is a fun and creative environment, but Instagram can also be used. Make your audience laugh with entertaining short videos using them.
- Content that can be interacted with Followers can become members of your community by participating in contests, polls, and quizzes.
- Genuine content (also known as “behind the scenes”). Open and honest messages bridge the gap between your business and your customers, making your brand more approachable.
2. Develop high-value relationships with your customers using organic social content that is helpful.
In places where advertisements compete for attention, organic social content keeps followers interested. When trying to build rapport with someone, it’s helpful to use a variety of content formats and topics. The more your followers think about and trust your brand, the more likely they will purchase and advocate for the products your brand offers.
Create content for social media to elicit an emotional response from your audience by focusing on the following:
- Putting up content that is relatable to the audience;
- Aiding them in conquering the challenges they face;
- providing information that is helpful regarding your company and the products it sells.
For example, the educational App, Blinkist, is aware that its followers are interested in their personal development. Instead of trying to sell customers’ products, the company provides guidance that assists followers in overcoming obstacles.
This post about a book recommendation received almost 14,000 likes. There are three main reasons why Blinkist’s post was so successful in comparison to the company’s other posts:
- It has multiple slides, encouraging followers to learn more rather than scrolling past them;
- It appeals to the audience’s interest in self-development;
- It uses an eye-catching title text color with bright colors and simple text.
3. Utilizing influencer marketing can help you achieve quick results by leveraging trust.
Influencer marketing has the potential to provide something that other channels of acquisition cannot: instant trust.
A recent study by Oracle found that consumers place more faith in social media influencers than in brands. And getting results does not require a user to have a following of millions of people. According to the report “State of Influencer Marketing 2021” by HypeAuditor, nano-influencers (those with 1–5k followers) receive over three times as much engagement as mega-influencers (1M+ followers). These nano-influencers have more opportunities to engage with and learn about their followers than traditional influencers. They are aware of the things their audiences value and can incorporate them into the marketing content to increase engagement.
Instagram and TikTok are currently the most popular platforms for influencer marketing, dominating the market as a result (the latter is snowballing, particularly among users aged 16–25).
Keep an eye out on these platforms for nano-influencers who have solid relationships with the customers you want to attract. These fictitious collaborators can lend a human dimension to the message you want to convey.
4. Email marketing allows you to personalize the experience of the buyer.
According to a survey conducted by HubSpot, personalization is the most effective method for email marketing.
Every email address collected naturally is a direct channel to a prospect who has consented to be contacted. You can nurture recipients to conversion and beyond via email by providing them with pertinent information and buying incentives.
Regarding conversion, emails are one of the most successful marketing tools. According to Google’s findings, 49% of consumers believe that their shopping experience would have improved if merchants offered discounts or promotions tailored to their previous purchases. By providing relevant offers, you can convert previously hesitant prospects, boost the number of repeat transactions, or cross-sell.
5. Use search engine optimization (SEO) to boost your content’s visibility.
People believe that Google will put the most pertinent information at the front of the search results. You will attract high-quality leads if you position yourself at the top search results for relevant terms. According to research by HubSpot, search engine optimization (SEO) is the second most successful marketing channel for obtaining new consumers (social media is the most effective), and organic search is responsible for 17% of the web traffic experienced by survey respondents.
The search engine results pages are still dominated by unique, helpful content.
When ranking search results, search engines give users the most incredible experience possible by prioritizing the information that is both the most helpful and the most original. Increase the likelihood of reaching page one of search results and remaining, thereby aligning the topics and formats of your content with the challenges and interests of your audience.
Be practical. You will never rank higher than dictionary.com or worldwide megabrands for generic keywords like “clothing;” therefore, you should focus on being as detailed as possible.
For the keyword “buying jeans online,” a brand called Ajio, which has only 25k Twitter followers, rates higher than the multi-billion dollar shop Amazon.
Google informs us the following under the header that says “Your search & this result:”
- This page contains search-relevant photographs;
- other websites dealing with this subject connect to this page;
- the searcher’s language is used in the result.
- The page has all three of the search terms that were entered (jeans, online”)
These are all fundamental (and basic) content SEO practices; however, by doing these well, in addition to a multitude of other significant SEO factors that Google does not mention in detail, Ajio outranks a major competitor and is likely to get more clicks from high-value customers as a result of this.
Value and effectiveness are the defining characteristics of successful client acquisition. By improving their LTV and CAC, the most successful organizations in the ecommerce industry can surpass their rivals. However, there is no silver bullet for acquiring new customers. Reaching high-quality prospects, converting those leads, and building customer loyalty all require a well-balanced combination of data-driven strategies.