Customer Acquisition Costs.
A term that haunts just about every marketer’s life.
Moreover, it’s become an increasingly pressing concern for Shopify Plus businesses.
Even enterprise retail brands, regardless of their social media following or size, have been grappling with rising CAC. In fact, a recent study by Overview shows that the average CAC payback time for enterprise customers is 14 months.
This never ending problem of an increasing CAC poses a critical dilemma for e-commerce enterprise businesses.
In this post, we'll explore strategies to help Shopify Plus brands effectively reduce their customer acquisition costs associated with social media marketing.
How do you calculate your social media customer acquisition cost?
Here is a quick formula that CAC calculators use:
Customer Acquisition Cost = Cost of Sales and Marketing divided by the Number of New Customers Acquired.
In this case, it would mean totaling the cost of advertising on social media - across platforms, and the customers acquired via each. Social media CAC is also calculated per channel or platform to give visibility into which ones are the most profitable.
Strategies to reduce social media customer acquisition costs
Let’s look at some of the ways in which you can reduce the CAC of social media ad campaigns for your Shopify Plus store:
1. Utilize Shopify Audiences
Shopify Audiences is a potent tool that allows businesses to create segmented lists of customers based on various criteria, ranging from demographics to purchase history. These audiences can then be harnessed for highly targeted marketing campaigns.
For instance, Happy Hippo, a popular Shopify Plus brand, effectively employs Shopify Audiences to segment their customer base and target them with ads. This enables them to send personalized recommendations and exclusive offers to specific groups of customers, thereby increasing the likelihood of conversion and making their social media marketing efforts more efficient and cost-effective.
Happy Hippo drove a 4.7X return on ad spends and gained 86% new customers with Shopify Audiences.
Some of the benefits of using Shopify Audiences include:
- Improve the performance of your existing ad campaigns - The Shopify Audiences algorithms draw insights from shoppers representing every stage of the buyer’s journey—from initial browse to checkout or cart abandonment—to curate meaningful data about buyers who are ready to enter your funnel. These insights are combined with what Audiences knows about your store and its products to make hyper-relevant target lists, which plug automatically into your existing ad campaigns to fine-tune them with turbocharged precision.
- Precise targeting that is always improving - Leverage the collective power of Shopify merchants to improve the performance of your own campaigns. As more merchants participate, the algorithm receives more customer intent data, which helps to improve performance continually. The Shopify Audiences of a year ago differs from Audiences 2.1, and it will be different a year from now as more customer intent signals are pulled in.
- Grow with performance benchmarks - Audiences offers benchmark data to see how your ad performance stacks up next to merchants with similar shops in the same industry over the past 30 days.
- Benchmarks dashboard - This will help you to pinpoint where you can make improvements across key metrics, including click-through rate, conversion rate, cost per 1,000 impressions, cost per click, and cost per conversion. Benchmarks data is currently available for ad performance only on Meta, but watch this space—we are continually adding features based on Shopify’s capabilities and ecosystem insights that make the experience even more powerful.
2. Implement AI Social Storefronts
AI-powered social storefronts provide customers with a personalized and immersive shopping experience. These storefronts leverage artificial intelligence to recommend products based on user preferences and behaviors, increasing the chances of conversion.
By offering a seamless and tailored shopping experience, Shopify Plus businesses can reduce customer acquisition costs by maximizing the Return On Investment (ROI) from social media traffic.
ModCloth reduced its customer acquisition costs by 50% with SimplicityDX’s AI Social Storefronts. With multi-campaign storefronts, the brand was able to turn every social post - images and videos into shoppable content, leading to shorter purchase cycles for their buyers.
SimplicityDX offers social storefronts to help brands turn the rich, aspirational experience of social media into a full shopping experience. AI-driven and self-learning, our storefronts meet multiple intents and drive customers from product discovery to purchase. Book a demo now.
Recommended read: How to Increase Conversions and Sales From Social Storefronts
3. Multichannel and Omnichannel Marketing with Personalization
Multichannel marketing involves using various marketing channels, such as social media, email, SMS, and more, to engage with customers on different platforms. The key to its success lies in the breadth of coverage, allowing businesses to cast a wide net and reach potential customers across diverse channels.
On the other hand, omnichannel marketing takes the concept of personalization a step further. It seamlessly integrates these marketing channels, ensuring customers receive a consistent and highly personalized experience across all touchpoints. This not only enhances customer engagement but also leads to improved conversion rates.
To further reduce CAC, personalization is essential. Personalized messages and offers for different customer segments ensure you connect with the right people at the right time with the right content, increasing conversion rates and lowering the overall acquisition cost.
4. Use the Power of CRO
CRO, or Conversion Rate Optimization, plays a crucial and underrated role in reducing CAC. Unique visitors aren't worth much if your funnel isn't converting traffic into profit, and there's no point in spending all those dollars acquiring customers if it doesn't translate into revenue. That's exactly why Conversion Rate Optimization (CRO) is crucial.
How can CRO help a business? Let’s have a look:
- Enhanced Conversion Rates: CRO optimizes various elements of your website and digital touchpoints, increasing conversion rates. This means more visitors taking the desired action, reducing the cost per acquisition.
- Improved User Experience: By making your website more user-friendly and accessible, CRO ensures a seamless user experience. Satisfied users are more likely to convert, and their acquisition cost decreases.
- Targeted Personalization: CRO often involves personalization strategies that tailor content and offers to individual users. This targeted approach minimizes wasted marketing efforts and decreases CAC.
- Reduced Bounce Rates: With CRO, you can address issues that lead to high bounce rates, such as slow page loading times or confusing navigation. Lower bounce rates mean more engaged visitors and, ultimately, lower acquisition costs.
- Iterative Improvement: CRO is an ongoing process that uses data and insights to continually refine your website and digital strategies. This iterative approach ensures that you consistently lower CAC as you adapt to changing user behavior and preferences.
5. Leverage Referral Marketing and UGC
Referral marketing is a cost-effective strategy that many top US brands use to grow their customer base. And they’re not just restricting the tactic to roping in influencers to promote their products - they’re also actively promoting content created by their customers.
By encouraging existing customers to refer friends and family, businesses can tap into a network of potential new customers without the high costs associated with traditional marketing channels.
Additionally, you can also:
- Push organic social media followings/posts
- Improve customer retention and referrals
- Utilize targeted and cost-effective marketing channels
- Optimize the sales funnel and conversion rates
A prime example of using referral marketing to its optimal degree is GymShark. They are a brand that brings in referrals from both customers and influencers, by using user-generated content in their ad campaigns.
PS. If you’re making use of SimplicityDX Social Storefronts, you can turn this user generated content shoppable too. Be it an image, a carousel or a video, we can generate a campaign storefront in real-time, giving inspired shoppers an easier way to find the products that are being presented.
Why does social media CAC matter?
Customer Acquisition Cost (CAC) is a key metric that significantly impacts the bottom line of your business.
It's essential to keep CAC in check because when it becomes too high, it can erode your profitability and hinder your growth.
High CAC also means you need a longer time to recoup the costs associated with acquiring each customer. Therefore, understanding and managing CAC is vital for sustainable business growth.
Reducing CAC is not just about cutting costs; it's about optimizing your marketing efforts to attract and retain valuable customers efficiently.
By incorporating the strategies mentioned above and focusing on personalization and referrals, Shopify Plus businesses can enhance their social media marketing efforts while simultaneously lowering customer acquisition costs. In today's competitive e-commerce landscape, this approach is crucial for long-term success.
SimplicityDX comes in to bridge the gap between social media and eCommerce websites by making your social content shoppable. With our AI-powered Social Storefronts, you can create multi-campaign storefronts in no time - these storefronts have the ability to blend social content with the commerce experience of your online store, creating a continual shopping journey for your audience.
Brands like Modcloth have been able to reduce their customer acquisition costs by 50% using SimplicityDX AI Social Storefronts. Learn more about their strategy here.