As the eCommerce industry continues to grow, competition among brands has intensified. With more businesses vying for the attention of consumers on social media, eCommerce customer acquisition costs (CAC) have significantly increased over the past few years.
In fact, according to a recent study, the average CAC has increased by 50% in the last five years. This trend has put a strain on the marketing budgets of many eCommerce businesses, especially small and medium-sized enterprises.
Here’s a quick look at the average CAC by industry -
Another important metric here is the average ROAS for eCommerce. Determining the average return on ad spend (ROAS) for eCommerce can be challenging as it can vary significantly based on factors such as product type, target audience, and competition.
On average, the ROAS for eCommerce comes in at 2.87, which translates to a 287% return on investment or a ratio of 2.87:1. However, this average may vary slightly across different industries.
For instance, the average ROAS for baby products is around 3.71, while health and beauty products average at 2.82. A higher average ROAS indicates that a business generates more revenue from its ads than it spends on them, while a lower average ROAS suggests that the business needs to improve its ad spending
In this blog, we will explore some effective strategies to reduce their CAC and reduce ROAS for eCommerce stores by using social media.
13 tips on how brands can reduce eCommerce customer acquisition costs on social media
In today's digital age, social media has become an essential tool for brands to reach their target audience and drive sales. However, acquiring customers on social media can be an expensive process, especially for eCommerce businesses. To help reduce customer acquisition costs, here are 13 tips that brands can implement to optimize their eCommerce ads strategy and achieve better results.
1. Optimize Ad Targeting
One of the most effective ways to reduce eCommerce customer acquisition costs on social media is to define your target audience. By understanding who your ideal customer is, you can create more targeted and relevant content that resonates with them. This, in turn, can help you attract more qualified leads and reduce your customer acquisition costs.
To define your target audience, start by looking at your existing customer base. Analyze their demographics, interests, and behavior patterns to identify commonalities. You can also use social media analytics tools to gain insights into your audience's behavior on social media.
Once you have a clear understanding of your target audience, you can create content that speaks directly to them. This can help you build a more engaged and loyal following and reduce your customer acquisition costs in the long run.
2. Run Experiments with Different Campaign Objectives
By testing different campaign objectives, you can identify which ones are most effective at driving conversions and reducing costs.
For example, you can experiment with objectives such as website clicks, lead generation, or conversions to see which one performs best with your target audience. Once you have identified the best eCommerce ads strategy, you can focus your advertising efforts on that objective and optimize your campaigns for better results.
3. Use Retargeting Ads
Retargeting ads are ads that target users who have already interacted with your brand in some way, such as by visiting your website or engaging with your social media posts.
Retargeting ads are effective because they target users who are already familiar with your brand and are more likely to convert. By focusing your advertising efforts on these users, you can reduce your customer acquisition costs and improve your average ROAS for eCommerce.
To use retargeting ads, start by creating a list of users who have interacted with your brand in some way. You can do this by installing Facebook Pixel on your website or using a social media analytics tool to track user behavior on social media.
Once you have a list of users, you can create retargeting ads that are tailored to their specific interests and behavior patterns. This can help you increase the effectiveness of your advertising efforts and reduce your customer acquisition costs.
4. Use Lots of Images and Videos
Visual content is more engaging and memorable than text-based content, making it more likely to drive conversions. To use images and videos effectively, start by creating high-quality, eye-catching content that is tailored to your target audience's interests and behavior patterns.
You can also use A/B testing to test different variations of your ads and identify which ones perform best with your audience.
5. Set up edge storefronts
A number of brands are too focused on either promoting their brand on social media and offering the entire commerce experience on the platform itself, or using it as a means to drive traffic to their online store.
But as per our research on social commerce, we have found that more than 56% of consumers don’t want to make a purchase on social media. Owing to online threats, they prefer making the purchase from the brand website instead. This causes a break in their natural browsing of the platform, also leading to broken experiences delivered by the brand on the two platforms - think about the lifestyle images you see on social media vs the product images displayed on an online store product page.
If we run the numbers, the broken experiences often cause dead ends in shopping journeys. The traditional landing pages used by brands are also not able to serve multiple buyer intents and interests, leading to lower conversion rates - 1-4% on average. And that’s exactly why eCommerce customer acquisition costs have been increasing!
Edge storefronts can help tackle this by creating softer landings for buyers coming from social media. Using artificial intelligence, these storefronts are able to identify the different interests a consumer may have on viewing social media content, offering them a personalized experience to explore the products - on a branded site. Call it killing two birds with one stone!
Recommended read: SimplicityDX reinvents social commerce with edge storefronts
6. Avoid Overlapping Audiences
Overlapping audiences can lead to wasted ad spend and reduced ROI.
According to Craig Smith, the founder of Trinity Insight, it is essential to minimize audience overlap when building Facebook Ads campaigns.
Marketers often make the mistake of creating multiple ads that have only one or two different factors, which leads to bidding against themselves and ultimately results in a higher CPC. To avoid this, it is recommended to apply similar filters for different factors such as geographic focus, age, interests, and pages liked.
For instance, if you want to promote an ad with a geographic focus, you should not create one campaign targeting Coral Gables in Florida and another targeting all of Miami-Dade County.
7. Calculate Your Estimated Action Rate
Calculating your estimated action rate is another important step in reducing eCommerce customer acquisition costs on social media.
Your estimated action rate is the percentage of users who are likely to take an action, such as making a purchase or filling out a lead form, after seeing your ad.
To calculate your estimated action rate, start by analyzing your historical data to identify trends and patterns in user behavior. You can use this data to estimate the percentage of users who are likely to take action after seeing your ad.
8. Include a Strong CTA
Your CTA should be clear, concise, and compelling, encouraging users to take action after seeing your ad.
To create a strong CTA, start by identifying the desired action you want users to take, such as making a purchase or filling out a lead form. You can then create a CTA that is tailored to that action, using language that is clear and compelling.
9. Leverage User-Generated Content (UGC) in Social Media Ads
User-generated content (UGC) refers to any type of content, including audio, digital images, posts, blogs, and videos, that is created by end-users or consumers of a service and is available to other users.
Did you know that 70% of consumers trust UGC more than information provided on a company's website?
In today's marketing world, UGC has become more important than ever, especially for businesses with small advertising budgets. Although obtaining UGC is cost-effective, the process can be time-consuming.
However, most consumers are willing to allow businesses to share their content, and analyzing UGC as an ad can increase your return on ad spend (ROAS) and drive sales. Additionally, using UGC can help establish relationships with passionate and invested brand advocates.
10. Focus on Organic Reach
Another effective way to reduce the cost of customer acquisition on social media is to focus on organic reach. Organic reach refers to the number of users who see your content without the need for paid promotion.
While organic reach has declined in recent years, it is still an important aspect of social media marketing. By creating high-quality, engaging content that resonates with your target audience, you can increase your organic reach and reduce your customer acquisition costs.
To increase your organic reach, start by creating content that is tailored to your target audience's interests and behavior patterns. Use social media analytics tools to gain insights into what types of content perform well with your audience and create more of that content.
You can also encourage your followers to engage with your content by asking questions, running contests, or offering exclusive promotions. This can help you increase your engagement rates and improve your organic reach.
11. Use Influencer Marketing
Influencer marketing involves partnering with social media influencers to promote your brand to their followers.
Influencer marketing is effective because it allows you to tap into the influencer's existing audience and reach users who are already interested in your niche. This can help you reduce your eCommerce customer acquisition costs significantly while also ensuring ROI.
To use influencer marketing, start by identifying influencers who are relevant to your niche and have a large and engaged following. You can use social media analytics tools to identify influencers who are a good fit for your brand.
Once you have identified influencers, reach out to them and offer to partner with them on a campaign. Be sure to provide them with clear guidelines and expectations for the campaign to ensure that it aligns with your brand's values and goals.
12. Focus on Retention
One common mistake made by small eCommerce businesses is focusing too much on acquiring new customers and neglecting their existing ones. However, acquiring a new customer is about five times more expensive than retaining an existing one.
Acquiring a new customer requires various costs, including content creation, scheduling, and promotions per new follower. On the other hand, customer retention involves building a long-lasting connection with your existing customers to enhance brand loyalty and affinity.
Engaging with your social media followers is a cost-effective way to achieve this. For instance, according to HootSuite, over 150 million individuals use Instagram's direct message feature to communicate with businesses. Therefore, providing excellent customer service on social media platforms can help you retain more customers.
By prioritizing customer retention, you can save on social media advertising costs and build a loyal customer base.
13. Test and Optimize Your Campaigns
Finally, one of the most effective ways to reduce your eCommerce customer acquisition costs on social media is to test and optimize your campaigns. By continually testing and optimizing your campaigns, you can identify what works and what doesn't and make adjustments to improve your ROI.
To test and optimize your campaigns, start by setting clear goals and KPIs for each campaign. This can help you measure the effectiveness of your campaigns and identify areas for improvement.
You can also use A/B testing to test different variations of your ads and content. This can help you identify what types of content and ads perform best with your target audience and make adjustments accordingly.
The competition for attention on social media is only going to increase in the coming years, with more and more brands and creators vying for the same target audience. The winners in this race will be those who can tap into the impulses of social media users and convert them from discovery to purchase quickly.
This is where SimplicityDX comes in, offering a solution to shorten the purchase journey for buyers and reduce CAC for eCommerce businesses.
By simplifying the buying process, businesses can increase their chances of converting users into customers and ultimately improve their ROI.
Book a demo with SimplicityDX today to learn more about how it can help reduce your eCommerce customer acquisition costs on social media.