How to Reduce Customer Acquisition Costs: 9 Proven Strategies

Customer acquisition costs (CAC) determine the profitability of your business. If your online store spends more money attracting customers than it generates in revenue from those customers (customer lifetime value), then your business is operating at a loss. 

According to Invesp, the customer acquisition costs rose by between 60 and 75% between 2014 and 2019. In the eCommerce industry, CAC rose by 60% in the five years leading up to 2024.

So, how exactly can you lower customer acquisition costs when research shows that CAC is skyrocketing across all industries?

This article shares nine creative strategies you can use to stop the rising customer acquisition costs from eating into your margins.

What is a good customer acquisition rate?

A good customer acquisition rate is lower than your customer lifetime value. The lower the figure, the bigger your profit margins.

That said, customer acquisition costs vary significantly depending on your specific niche, region, business type, and other factors.

For example, one report shows that the jewelry niche has the highest CAC at $91. Meanwhile, the food and beverages niche had the lowest customer acquisition costs at $53. 

Here is a breakdown of the average customer acquisition costs across different eCommerce niches, according to that report. 

As you can imagine, it’s difficult to pin down a good customer acquisition cost to a specific figure. This is why most eCommerce businesses do not look at CAC in isolation. You must compare this metric to customer lifetime value to determine your business performance and the overall effectiveness of your sales and marketing efforts.

That is usually done by looking at the customer lifetime value to customer acquisition cost ratio, i.e., LTV:CAC ratio. The general best practice is to aim for a 3:1 ratio. This means that you spend $1 to generate $3 in revenue from a single customer.

The 3:1 ratio is a good guiding principle to ensure you have sufficient cushion to build a profitable eCommerce business. However, some industries have to make do with a 2:1 ratio or lower, while others can even generate up to 5 times the amount they spend on customer acquisition, so 5:1.

For example, cheap low-frequency commodities like cheap electronics see fewer repeat purchases and lower average order values. This keeps the LTV low, thereby reducing the LTV-to-CAC ratio.

On the other hand, you have high-margin high-frequency items like consumables. Think about pet foods, baby diapers, vitamins, and supplements. Customers have to reorder these items frequently. Some of the consumable brands even provide subscription services. This drives the LTV high and increases the LTV-to-CAC ratio. 

Therefore, if you sell low-margin, low-frequency products, your best strategy is to boost the average order value and customer retention to increase your LTV-to-CAC ratio. Increasing the average order value of the first purchase is especially important if you want to shorten the payback period. The payback period is how long it takes to recover your CAC from the customer’s purchases.

A short payback period enhances your cash flow, allowing you to reinvest and scale business growth.

On the other hand, brands selling high-margin consumables can leverage subscription services to lock in customers and optimize the LTV-to-CAC ratio beyond the standard 3:1. 

Let’s break down all these CAC optimization strategies below.

9 ways to lower customer acquisition costs (CAC)

Here is what top eCommerce businesses do to reduce customer acquisition costs:

1. Prioritize conversion rate optimization

One of the most effective ways to lower customer acquisition costs is by optimizing the percentage of people who convert after landing on your eCommerce website. This process is known as conversion rate optimization (CRO).

Conversion rate optimization reduces your customer acquisition costs by helping you convert more customers from the same traffic. 

Here is what I mean. 

Let’s say you spent a total of $800 in one paid ad campaign. This campaign drives 200 people to your website. In one scenario, 20 of the 200 people convert. That brings your CAC for that campaign to $40, i.e., $800 ÷ 20 = $40. 

Now, let’s assume you had invested in a powerful CRO strategy that increased the number of customers acquired from 20 to 30. Your CAC for the same campaign will be $800 ÷ 30 = $26.67. That’s a 33.33% decrease in CAC!

The next natural question is how exactly can you optimize your conversion rate? 

Well, there are different ways to go about it. You can start with quick experiments and fixes like making sure your eCommerce website is responsive, mobile-friendly, and loads quickly. For some context, 53% of website visitors bounce from a website if it takes longer than 3 seconds to load. You don’t want to lose customers because of a sluggish website.

Next, make it easier for customers to make a buying decision and complete the checkout process as smoothly as possible. Include social proof on the product pages to convert customers who might still be undecided about their purchase. 

You must also mention your return and exchange policies on the product pages to give your customers peace of mind. Similar to what Chewy does, right next to their autoship CTA.

Lastly, enhance the checkout process by providing options like a guest checkout, so customers don’t have to create an account to complete their orders. 

Reduce the number of form fields in the checkout process and provide an option to select “shipping address same as billing address.” These small details can lower cart abandonment and result in more checkouts.

Implementing an exit-intent lead capture strategy with pop-ups is another clever way to reduce your CAC. This strategy allows you to capture email addresses of website visitors just before they abandon your site. You can then retarget these users through a personalized email marketing strategy. 

Though the technique requires additional marketing spend on retargeting users through another channel like email, it’s much cheaper than letting prospective customers leave and having to bring them back to your site afresh through expensive paid campaigns.

In the long term, experiment with different pricing points, product bundling, and subscription options. Small changes in how your products are priced and bundled can affect conversions by a lot. 

2. Leverage marketing automation

Marketing automation is another incredibly effective method for reducing customer acquisition costs. For starters, automation lowers CAC by reducing the number of staff you need to run your marketing campaigns. 

Marketing automation platforms like GetResponse help you set up automated workflows that work just like your marketing and sales representatives. These flows will track and respond to customer behavior, upsell and cross-sell products on your behalf, and nurture customer relationships to boost retention.  

Marketing automation also lowers customer acquisition costs through several strategic campaigns. For example, lead nurturing campaigns, such as welcome email series, help you nurture leads who land on your website but are not yet ready to buy. These workflows will educate your potential customers and present your products as a solution when the time is right. 

The workflow looks like this.

Post-purchase automation workflows are also really good at boosting customer retention. 

Post-purchase campaigns like replenishment reminders and subscription upgrades help bring first-time customers back to your site. These campaigns encourage repeat purchases, which drives your customer lifetime value up. As LTV goes up, your CAC drops. 

Besides boosting LTV, automation can also enhance your average order value through strategic upsells and cross-sells. For example, you can configure your platform to upsell or cross-sell products in the order confirmation page. The same can be done in post-purchase email campaigns, like order and shipping confirmation emails.

Crate & Barrel does this through a “You’ll Also Love” section in their order confirmation emails.

Automation also boosts AOV by supporting personalized customer interactions at scale. Automation solutions can track customer behavior on your site. For example, they can see the products a customer views. These platforms can use that data to send relevant product recommendations.

I’ll talk more about product recommendations below. 

Another advantage of using marketing automation is that it helps you scale campaigns on your owned channels. Automation platforms help you automate email, SMS, and push notifications. 

Those channels are considered owned media because you have full control over the message, timing, and audience. It’s much cheaper and more sustainable to connect with your potential customers through these channels as opposed to third-party platforms where pay-to-play is the name of the game. 

3. Optimize your conversion funnels

A sales funnel shows every step a customer takes from when they discover your brand to when they place their first order and beyond. Having complete visibility into this customer journey can show you where your funnel is not working as it should. 

For example, it may show that most potential customers drop off at the checkout point. This highlights a potential problem with the checkout process. 

Therefore, understanding and optimizing your conversion funnel is crucial. It plugs leaks that cause potential customers to leave your funnel before they make a purchase. 

Use solutions like Google Analytics and heatmaps tools like Hotjar to understand how users navigate your website. Look into the steps customers take until they either complete a purchase or abandon your site. As mentioned above, if you notice that too many people abandon the site at a particular point, e.g., at the checkout page or even the product page, look into what might be missing. 

The heatmaps tools can also tell you the elements users interact with on your product page and website in general. This can highlight potential distractions within your product pages or in the checkout process that pull users away from the primary objective, i.e., completing a purchase. 

Complement your insights from these tools with qualitative data from customer surveys. Run a post-purchase email customer survey asking customers questions like:

• What nearly stopped you from completing your purchase?
• What critical information did you not find on our website when making your purchase?
• What would have made your buying experience better?

Answers to these questions can help you understand how to optimize your product page copy for more conversions, for example. It can also give you interesting A/B testing ideas to explore.

For instance, some customers may point out that seeing the shipping costs at the very last step of the checkout process made them second-guess their purchase. This can give you an idea of testing whether to display shipping charges on product pages or at checkout to see which option works better. 

Another set of customers may complain about too many form fields or a long checkout process. Instead of simply changing this, run an A/B test for a one-page checkout vs a multi-step checkout. See which one works better for your specific target audience and industry.

4. Run personalized retargeting campaigns 

When a potential customer visits your website and leaves without making a purchase, the next best thing you can do is implement a retargeting strategy to bring them back to your store. This can lower your customer acquisition costs because the prospect has already shown interest in your products. That means they have a higher likelihood of converting into a paying customer compared to cold traffic.

You’ll need to install a tracking pixel on your eCommerce website to track site visitors and retarget them through Google Ads and Facebook Ads. This allows you to display dynamic ads featuring the products a customer was viewing on your site. 

One way to boost the effectiveness of your retargeting campaigns is to segment your audience based on the buying intent level. How far a customer has progressed in the buying process can indicate their level of purchasing intent. For example, a customer who left your site after adding products to the cart has a higher buying intent than one who only browsed a product category. 

Target these potential customers with sequential advertising. This involves planning several ads that appear in a specific order to guide your prospects through the buyer journey. 

For example, the first ad can be deployed within the first 24 hours to remind the customer about the product they viewed. If a customer fails to convert, they’ll be targeted with a different ad creative that focuses on social proof, such as customer testimonials and product reviews, in the next 24 to 48 hours. The last ad can use a time-limited discount.

Sequential advertising reduces ad fatigue by exposing potential customers to different ad creatives. It also reduces reliance on discounts to convert customers. A well-orchestrated sequential ad helps address common objections to demonstrate the value of your products. Sometimes, all it takes to convert a potential customer is for them to see how your product has helped other folks, not a price cut. 

But paid advertising is not your only retargeting channel. In fact, it should not be your only channel. You must retarget your prospects through owned marketing channels like email and SMS. This allows you to reach your audience at a fraction of the cost of paid advertising.

Effective retargeting through email marketing requires a marketing solution like GetResponse. GetResponse integrates with eCommerce stores built on Shopify, WooCommerce, Magento, BigCommerce, and other platforms. This allows the software to track customer behavior on your store. It can see the product pages they view, the items they add to cart, and the carts they abandon. 

GetResponse can then retarget these customers with personalized browse and cart abandonment emails. Use this alongside your sequential paid ads to reach your customers across multiple channels. 

Plus, the GetResponse platform helps you create pop-ups to capture email addresses for these remarketing campaigns.  

5. Create a compelling customer loyalty and referral program

An effective loyalty program encourages repeat purchases. This means you generate more revenue from each customer, resulting in a higher LTV. A high LTV optimizes your LTV:CAC ratio, which allows you to generate a higher ROI from your customer acquisition efforts. 

A customer referral program, on the other hand, allows you to acquire new customers at a lower cost. This program helps you leverage word-of-mouth marketing from existing customers. You don’t need to pay for ads or use other expensive channels. 

You simply need to provide exceptional products and customer relationship management. Then, create a simple referral program that incentivizes both the referred and the referee. A double incentive makes sure both parties feel rewarded. 

An effective customer loyalty program uses a points-for-purchase and tiered rewards system. This means customers earn points for every purchase they make. These points can be redeemed for store credits. 

Meanwhile, a tiered rewards system means customers progress through several tiers based on their spending in your store. The tiers may start with a Bronze level, progressing all the way to Gold or Platinum. Bigger rewards, such as access to limited-edition products and early access to new items, are available in higher tiers.

Here is an example of the perks H&M loyalty program members receive, for example. 

This loyalty system offers both instant gratification through points and encourages long-term loyalty through its tiered system. 

Promote these programs extensively. You can include them in key emails like your transactional emails, as shown below. 

You can also mention them in your Thank-you page after a customer completes an order.  

6. Deliver personalized product recommendations

Personalized product recommendations can significantly increase your conversion rates. Not only that, but they can also boost the average order value. Buyers are more likely to accept your cross-sell and upsell efforts when you recommend appropriate items that make sense to them.

GetResponse’s AI-powered product recommendation software tracks customer behavior and uses AI to match predicted customer needs with your product offerings. This solution tracks individual customer preferences and habits. It then recommends suitable products with the highest chances of converting to deliver a truly personalized shopping experience that boosts sales. 

The solution lets you create personalized multi-sliders product pages, category pages, and even blog articles. You can also deliver these tailored product recommendations through automated email campaigns. 

The result? AI-powered product recommendations can boost click-through rates on a website or email by up to 70%, increase sales by up to 10%, and boost the average order value by 33%. 

For example, the fashion brand Poko Lorente saw a 14.29% conversion rate after customers viewed their product recommendations. The monthly value of product recommendations added to cart stood at $49,000. This was achieved within 28 days. 

Learn more about how Poko Lorente used product recommendations to speed up conversions and boost AOV here.   

7. Recover lost conversions from abandoned carts and browsing

Cart abandonment is inevitable in the eCommerce industry. The Baymard Institute estimates that 70.19% of online shopping carts are abandoned. Even more users abandon your site after just browsing through product categories and pages. 

Recovering even a small fraction of those cart and browse abandoners can make a huge difference in your customer acquisition costs.

Connect your store with the GetResponse automation solution to track customers on your website and reconnect with them. Use the solution to create automated workflows that are deployed when triggers, such as cart abandonment or browse abandonment, are activated. With the help of dynamic content blocks, you should be able to personalize these campaigns to maximize conversions. 

You can also set a series of emails to follow up with customers in case they don’t convert after the first browse or cart abandonment email. 

Check out our comprehensive guide on abandoned cart emails for more details on how to implement a successful cart recovery campaign. 

8. Use affiliates and creators

Another clever way to reduce CAC is to partner with affiliates and creators. Affiliates earn commissions every time they refer a customer who makes a purchase. This is unlike paid campaigns, where you pay for clicks, regardless of whether those clicks result in conversions or not. 

Similarly, creators can work on a performance-based model. Also, the best creators will help you reach a niche audience. Plus, they’ve already built a rapport with this audience, which means their recommendations of your product will result in much higher conversions. 

That said, a purely performance-based compensation model may not work for all creators. You’ll need a hybrid system that combines upfront payment with a commission based on performance to attract top creators. 

Make sure to partner with content creators whose audience matches your target market. Then, use trackable links or unique discount codes for attribution purposes. 

9. Run A/B tests

Finally, you can reduce CAC by A/B testing different aspects of your customer acquisition and retention strategies. As I mentioned above, you’ll need to analyze your conversion funnel to see where most customers drop off. A/B test those touchpoints to see what adjustments could help plug the leak and convert more traffic. 

You must also A/B test your customer acquisition strategies, like your ad creatives, landing page design, offers, pricing, product bundling, and even email campaigns.

The goal is to identify elements that resonate the most with your target audience at each touchpoint to eliminate friction and enhance conversions. 

A/B testing should be done continuously to ensure your strategy remains in line with changing customer preferences. A product bundle that worked last year may no longer be effective today. The only way to know what works is to do regular split tests. 

Another trick with A/B testing is that you don’t want to test too many elements at the same time. This can make it difficult to know which change is responsible for the results you see. If you change the headline, price, and CTA at the same time, it’ll be difficult to know the adjustment that caused an uplift or drop in conversions. 

High-impact elements should always be tested one at a time. The exception is if your store attracts a huge amount of traffic. In such a scenario, you might be able to conduct multiple tests with a statistically significant sample size at the same time. 

In closing

Successful eCommerce brands reduce customer acquisition costs by doubling down on owned channels like email and prioritizing high-value customers. They also focus on customer retention to ensure every dollar spent on customer acquisition results in a high AOV, repeat purchases, and long-term loyalty. 

The nine strategies I’ve covered above will help you with exactly that. They create a sustainable growth engine that makes sure a significant percentage of your website traffic converts, while the rest is retargeted with personalized campaigns. 

Invest in the right tools and use these tactics to turn your first-time customers into loyal brand advocates.