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How to reduce customer acquisition cost (CAC) for e-commerce businesses

October 8, 2021   |
   Sariga V

No denial on the fact that Facebook is the playground for e-commerce businesses and by the end of 2021, there will be 2.14 billion online shoppers as well. The opportunity is huge but the Customer Acquisition Cost is also huge. 

When we Googled how to reduce the Customer Acquisition Cost, we found some popular opinions in about 100+ blogs that we thought needed to be analyzed. 

#1 – Breaking down the POPULAR OPINION of LTV>CAC

When Googling about CAC, there were other 1832 blogs that said to concentrate more on your LTV rather than CAC. 

But however, does it apply to all businesses?

Let’s take an example of a company which sells washing machines or appliances. Now, please think, who buys washing machines every 3months or 1 year goddammit. Washing machines are like a one-time investment for a period of 5-6 years unless you jump in it for a shower.

Having said that, of course acquiring a new customer is six to seven times more expensive than keeping the current one, provided the product is suitable to the LTV strategy. 

Lookalike works:

We could instead create a lookalike audience of the purchasers and also the users who added to cart but not purchased or wishlist or made any communication with the brand which can be qualified as the high intent audience (for the high purchase value-based businesses). 

#2 – Breaking down the POPULAR OPINION of Retargeting works only (to reduce CAC) between 7-21 days

In the era of privacy and Apple  iOS’14 updates, Facebook or other social media platforms do not have access to target audiences like they used to have before, resulting in poor audience match rates and fewer conversions. 

Also, it is about hitting the right audience with high intent at the right time which means a user may not buy pink shoes when you run the ad today. But they may buy it a month or 3months later.

Similarly, a user may not be craving for a burger meal or a cake when you run an ad today, but the probability of the user craving for fish fingers or chocolate cake after 90 -100 days is possible because they are your audience who engaged with you in the past and it is an everyday commodity that we use. 

When should the Customer Acquisition Cost be calculated?

For the same reason, the customer acquisition cost cannot be calculated with a 7days window or 21days. The longer the period, the better the results. If the budgets are higher, then a 6months or 9months window would be appropriate. 

But, Facebook’s 90 days retention policy 

For you to re-target the users who got cakes from you for the easter/ new year cannot be retargeted as Facebook would be deleting those data after 90 days.

#3 – Breaking down the UNPOPULAR OPINION that Facebook Custom Audience Match Rate Sucks

We have been lately discussing with quite a lot of marketers about the challenges and we could visibly see that Facebook Custom Audience Match Rate is less than 25% of the total sample size. 

Let’s say you have 6000+ website visitors tracked for 60days and you have created a custom audience on Facebook audience manager. But Facebook could only match or find only 25% of the total visitors on Facebook. Check out the experiment that we did with the custom audience match rate and pulled the match rate beyond 80%. 

However, the rescue, the bottom line is that we need to have complete control over the data to strategize our marketing ideas. To have complete control then we need to own the data which is First-Party data. 

Strategies with First-Party data  (anonymous visitors) to reduce the CAC

#Fact 1: Not that CRM data and the form submitted users are your first-party data. Also, the anonymous visitors who may have gone through the product details and left the site are also the first-party data. 

#Fact 2: Generally, there is only a 2% conversion rate from the leads generated. But the remaining 98% is not considered as an audience because of the assumption that the leads who do not show interest within 7 to 21 days are no more the audience. But that’s not how retargeting works. 

Its re-activating and not retargeting

Usually, there is a common assumption that if the user has not engaged with us for 7 to 21 days then, the user is not interested and we need to let go of them. 

On the contrary, we need to understand that reactivating is about rekindling the intent of the user and It is always about approaching the right intent-full audience at the right time. 

Usually, a marketing funnel looks like the top of the funnel (awareness), middle of the funnel( product details page views), and bottom of the funnel(add to cart) then the conversions/purchasers.

Marketing funnel

In this funnel, the focus always goes on the top of the funnel and then the add to cart and the purchasers. But we forget the middle of the funnel audience who are our high-intent audience who can be pushed to add to cart and then conversions. 

Middle of the funnel: The untapped conversions gold mine

The middle of the funnel is an area untapped, untouched by marketers. From getting in front of the shoppers through exploratory campaigns and luring these shoppers into completing the purchase as final conversions. There lies a middle ground, MOFU – an area where consumers are stuck up to make a decision.

By properly utilizing the first-party data, a marketer can run reassurance campaigns with relevant information to reactivate these customers and convert them.

You can check out this full report “messy middle” by Google to understand the power of middle of funnel. 

In these transitioning times, the adoption to proper utilization of the first-party data, and smart funnel strategies are essential and inevitable for defining the success in reducing CAC at 2021.

 
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