Thriving in a Time of High Acquisition Cost to Retain Repeat Purchases

One of the main reasons why ecommerce brands fail is because their customer acquisition costs (CAC) are too high.

In order to run a successful business, the acquisition cost needs to be drastically lower than the overall lifetime value (LTV) of its customers.

According to one study, online brands are losing out on $29 for each new customer being acquired.

In this article, we’ll address the issue of rising acquisition costs, and ways you can offset these costs by investing in customer retention strategies that will extend your customer’s lifetime value and generate higher revenue and increase average order values (AOV).

What is customer acquisition cost?

Customer acquisition cost (CAC) is the total amount of money a company spends to acquire each new customer.

Traditionally, most of the acquisition costs are a combination of all the money spent on marketing and advertising to reach new customers.

Currently, customer acquisition costs have exponentially increased over the last five years, now costing 60% more to acquire new customers than before.

Reasons why customer acquisition costs keep increasing

The primary reason customer acquisition costs have multiplied over the following years is because of rising digital advertising costs and new privacy settings.

Since the new iOS14 update for iPhone, many digital marketers are having more difficulty delivering ads, due to the increased privacy settings such as opting out of app tracking, which makes ads less effective and more expensive.

Also, increased market saturation and more supply in the online advertising space have driven up keyword prices, making it more expensive than ever to deliver Google and Facebook Ads.

How to determine your customer acquisition cost for your Shopify store

Your customer acquisition cost is determined by taking the total amount spent on advertising and marketing, and dividing it by the number of new customers acquired over a certain period of time.

For instance, a Google Ads campaign that spends $800 a month and brings in 10 new customers would have a customer acquisition cost of $80, which is too high. Because increased privacy settings have made it harder to deliver relevant ads to the right audience, you might experience ads that are underperforming, which drastically increases CAC.

According to Shopify data, the average customer acquisition cost for a small Shopify store with under four employees is $58, which is roughly around the average CAC for other online retailers.

8 ways to reduce acquisition costs

The best way you can offset rising customer acquisition costs is by retaining your existing customers, and finding new ways for them to become repeat buyers.

Try the following customer retention strategies to find new sales opportunities and boost each customer’s lifetime value significantly.

1. Encourage customers to sign up for customer accounts with a discount

When users sign up to become members of your Shopify store, you can ask them to opt-in to receive promotional emails from you in the future.

Customer accounts also let your new customers log into their accounts to view orders, and profile information such as billing info and address.

However, you may find that requiring customers to sign up for an account may result in high cart abandonment rates. 

So instead, give customers the option to checkout under a “guest” account, but encourage them to sign up for an account by offering a special discount, such as 15% off their first order when they sign up for an account.

Once they’ve signed up for an account, you’ll be able to send them optimized transactional emails and branded emails using UpOrder, a Shopify email template builder. 

2. Build a referral program

Referral programs encourage your existing customers to share a customer code or link with their friends and family.

Each time a new customer uses that tracking link, the referring member will receive a reward that can later be redeemed, usually as a discount on their next order.

Using UpOrder’s built-in referral program is a breeze to set up new referral programs that will immediately start reducing your customer acquisition costs!

3. Start a loyalty program

Loyalty programs incentivize your customers to continue shopping at your store, giving them special rewards and points they can later redeem, just like referral program points.

Currently, at least 71% of consumers aged 55-64 are part of at least one loyalty program, and around 43% of consumers 18-24 are loyalty program members. 

Loyalty programs can also increase your average order value (AOV) because your customers will be encouraged to spend more to earn more rewards points.

4. Sell more subscriptions for improved customer retention and extended customer lifetime value (LTV)

You may have noticed a subscription craze going on in the past few years among online brands.

Companies that offer subscription-based services have seen their revenues grow 5X faster than typical retail businesses. 

One of the best ways to present your customers with a subscription is through the post-purchase upsell offers at the end of checkout.

Using the Shopify app CartHook, store merchants can offer post-purchase subscription upsells inside of the native Shopify checkout page.

With just “one click” your customers can quickly accept the subscription upsell to turn first-time buyers into consistent, repeat buyers.

By using CartHook, you’ll see an immediate boost in your average order values (AOV) and customer lifetime value (LTV)!

5. Optimize your transactional emails to include post-purchase offers 

Most Shopify owners don’t realize the selling power of optimizing their transactional emails.

Transactional emails, or post-purchase emails, include automated messages sent from your store to customers, such as order confirmation emails and shipping confirmation emails.

Did you know you can embed personalized product recommendations in each of these emails to encourage repeat purchases?

Use UpOrder’s Shopify email template builder to craft personalized post-purchase offers for each of your customers based on their shopping history, and you’ll see a 10% increase in sales revenue easily! 

6. Create custom discounts using your customer’s first name

Instead of sending your new customers a generic discount code, such as “SUMMER20” why not personalize it by using their first name instead?

You’ll see a big difference in an uptick in discount code usage by using your customer’s first name, such as “ROBIN20.”

Using UpOrder makes it simple to automatically generate limited-use discount codes that use your customer’s first name as the promo code!

7. Use post-purchase upsell offers on the checkout page

Looking for more ways to cross-sell and upsell more items to your customers without the risk of cart abandonment?

Use a post-purchase upsell app such as CartHook to recommend up to two product suggestions at the end of the checkout page.

Your customers can quickly accept or decline the offers with just one click, creating a frictionless way to increase their cart size and average order value (AOV).

8. Send re-engagement emails to bring customers back to your store

Lapsed customers are customers who haven’t visited your store in a certain period of time, often more than a few months.

Instead of spending money on advertising to new customers, send re-engagement emails to existing customers who haven’t visited your store in a while.

Try sending emails with the subject title “We’ve missed you! Here’s a 20% discount off your next purchase!”

Using UpOrder makes it easy to generate new limited-use discount codes for a variety of re-engagement email types.

Download UpOrder and CartHook for improved customer retention and post-purchase offers

CartHook and UpOrder Shopify apps that raise AOV, upsell more products as post-purchase offers, and boost customer retention rates.

UpOrder is an email template builder that drives repeat purchases through personalized product suggestions embedded into transactional post-purchase emails, with no coding required!

CartHook is a post-purchase upsell app that places recommended product suggestions at the end of the native Shopify checkout page with a 15% acceptance rate to boost sales by 10%!

Download your free trials of CartHook and UpOrder today and watch your AOV and customer retention increase.

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