Unlocking Growth By Reducing Customer Acquisition Cost
Let’s dive into a success story that might just change the game for your e-commerce business. Imagine putting an extra $21,856 in your pocket over the last year. Intrigued? Let’s break it down.
In our last post Melissa, the owner of bikepretty.com, spilled the beans on her mission to reduce marketing costs by increasing organic traffic. Now she’s generously breaking down the nitty-gritty details that led to a whopping 44% reduction in customer acquisition costs (and some other big wins too).
The Cost of Acquiring a Customer: Why It Matters
Let’s address the elephant in the room – new customers don’t (usually) fall from the sky, they cost money to acquire. And if you want your business to grow, you need to ensure a healthy balance of new and repeat buyers. If you’re like Melissa, meeting your revenue goals but wondering why the needle isn’t moving, you might be spending too much on acquisition to turn a real profit. If you’re unclear about customer acquisition cost, you can learn all about here.
Building On A Solid Foundation
The following strategies are best implemented by stores that have demonstrated proof of concept, meaning you’ve sold products to people who aren’t friends or family, and you’re doing so consistently–at least one sale per day over a period of months. If you’re not there yet, check out this podcast episode to learn what you should be focusing on at the stage of business you’re in now.
Melissa’s Game-Changing Strategy
Melissa’s journey began with a commitment to reduce both overall marketing costs and the cost of acquiring a customer. She recognized that paid social media ads were an effective way to reach new customers, but she also understood that you can’t control what you don’t track and measure. Here’s how she met her goal of reducing marketing spend to 15% of her revenue:
Sales Attribution: A Holistic View
Melissa took a holistic approach to tracking her return on marketing spend. Instead of looking at each platform (Facebook, Google ads, Etsy, Pinterest, etc.) independently, she combined them with the paid apps she was using like social media schedulers and email service providers, and looked at the overall impact on her business. This allowed her to see the interconnectedness of her marketing efforts–she might be bringing in new site visitors with her Facebook ads, but then Google was re-targeting them, and she was using email to follow up with the hottest leads. If Melissa had isolated any one of these channels, it might have looked as if her money was being wasted. But like a football team, each player was contributing to the sales funnel in its own way.
Customer Acquisition Cost Calculation
The real magic happened when Melissa started calculating her customer acquisition cost (CAC). By dividing her total marketing spend by the number of first-time buyers, she could pinpoint the cost of acquiring each customer. This simple yet powerful metric became her guiding light.
And what she found was that her cost of acquiring a new customer came down over time. Melissa suggests looking at results over a period of months, not weeks, to get a more accurate sense of whether or not your strategy is working.
Amp Up Your Funnel With Organic Traffic
After getting a handle on her numbers and setting a goal, Melissa got serious about lowering her cold traffic ad spend. Using an adapted version of our Build Your Funnel training, she crafted an organic social media strategy that boosted her traffic without taking all of her time. You can learn all about it HERE.
Melissa’s meticulous approach involved color-coding her data in a spreadsheet as she tracked her numbers week to week. This visual representation allowed her to identify trends over time. Red lines indicated periods when the cost to acquire a new customer was high, while soothing blue hues marked lower/more successful times. The patterns that emerged guided her decisions for the future. Melissa noticed that while there were times that she spent more aggressively (red) those efforts inevitably led to weeks of blue/low-cost results. Like a flywheel, money, and energy up front produced results that continued to build over time.
Email Marketing Amplification
Melissa knew the potential of her email list, that it was the source of her most interested customers, and that the relative cost of sending emails is very low. So she intensified her email marketing efforts, sending weekly campaigns to her list of engaged subscribers. Ultimately email contributed a whopping 58% to her overall revenue, so Melissa was really making the most of the money she had already spent to get those subscribers on her list in the first place.
A New Way To Set Goals
Melissa is a coach in the Inner Circle, and so she knows how difficult most online store owners find annual goal-setting. Choosing a number out of thin air doesn’t feel all that actionable, and can even be discouraging. She suggests that instead, we choose specific metrics to focus on–do you need to acquire more customers? Get more organic traffic? Send more email? Examine this year’s data closely, and you’ll know exactly where you should be putting your focus to meet the sales numbers you want. More about goal-setting HERE.
The Results: A 44% Reduction in Customer Acquisition Costs
Melissa’s year-long commitment to tracking, analyzing, and optimizing paid off – literally. Her strategic approach resulted in a staggering 44% reduction in customer acquisition costs. But this wasn’t just a financial win; it brought clarity, direction, and a sense of control over her business.
The Real Deal Results
In summary, here are the 3 actions Melissa took to grow her sales and lower costs, and the results they yielded.
Melissa set up weekly tracking for the metrics she wanted to change
- Marking cost reduced to 15% of sales
- Cost of acquiring a new customer down by 44%
Melissa adapted the Sales Funnel training and applied what she discovered to her marketing strategy
30 Day snapshot
- 2022 Audience: 433k
- 2023 Audience: 1.1M (154% increase)
- 2022 – 34162 site visitors (43% organic)
- 2023 – 19,839 site visitors (84% organic)
Melissa shifted her advertising budget from the middle and the bottom of the funnel, and instead, used the $ to build the top of her funnel. She focused on building her email list, and used her Reliable Revenue plan to convert her “big pool of warm people” into buyers via email.
- 2022 .66%
- 2023 .65%
Average Order Value
- 2022 $157.09
- 2023 $166.32 (6% increase)
Your Path to Lower Customer Acquisition Cost
Melissa’s journey is a testament to the transformative power of strategic tracking and optimization. Whether you’re a seasoned e-commerce entrepreneur or just starting out, the lessons from Melissa’s story apply. Take control of your marketing spend, understand your customer acquisition costs, and let the insights guide your path to success.
Ready to unlock real, sustainable e-commerce growth? Dive into the numbers, embrace strategic tracking, and watch as your sales and profits soar.
Check out Melissa’s website www.bikepretty.com
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