Analyzing Customer Acquisition Costs In Ecommerce

We slashed $70 CAC to $28 without using a single discount. When an e-commerce brand came to me, their customer acquisition cost was sitting at $70. They thought they had tried everything: → Discounts → Free shipping → “Limited time” offers → Influencer shoutouts But what they didn’t have? A clear ads strategy built on data, not hope. Here’s what we did differently: 1. Rebuilt their audience structure We split cold traffic, warm traffic, and returning customers into isolated ad sets with different creative and messaging for each. Most brands lump them together and wonder why ROAS tanks. 2. Refreshed creative with intentional storytelling Instead of polished product photos, we launched ad sets with raw UGC. Real customers showing real use cases. Result: scroll-stopping attention at half the CPC. 3. Streamlined the landing experience The original landing page had 5 calls-to-action. We simplified it to 1. Added social proof near the buy button. Shortened the load time. The conversion rate jumped by 2.4x. 4. Paused 3 of their “best performing” campaigns Why? Because they were top-of-funnel campaigns serving to people already on their email list. Attribution was misleading. We reinvested that budget into a retargeting sequence that actually moved people through the funnel. The result? ✔️ CAC dropped from $70 to $28 in just 6 weeks with no price cuts, no new offers, and no magic tricks. ↳ Want help cutting your CAC without discounts? ↳ Drop “ADS” in the comments and I’ll tell you the next step.

Are You Spending Too Much to Acquire a Customer, Or Not Enough? E-commerce brands often focus on lowering their customer acquisition costs (CAC). But what if cutting CAC is actually hurting growth? The real question isn’t just how much does it cost to acquire a customer? It’s how much should you be spending? If you knew with certainty that a customer would generate $500 in long-term profit, would you hesitate to spend $100 to acquire them? Probably not. But many brands take a one-size-fits-all approach, capping CAC at an arbitrary percentage of their first purchase revenue. This can lead to underinvestment in acquiring high-value customers and overinvestment in customers who won’t stick around. A better approach is to align CAC with long-term customer equity, not just at a blended level, but dynamically across customer segments. Some customers have significantly greater revenue potential than others. The challenge is identifying which customers will create sustainable profitability over time. The chart illustrates that customer acquisition cost (CAC) and lifetime value (LTV) are not linear, spending more on acquisition can lead to higher-value customers, but only up to a certain point. Key Insights: There is an optimal CAC range. - Spending too little on CAC (left side of the chart) may result in acquiring lower-value customers, limiting long-term profitability. - Spending too much (right side of the chart) can lead to diminishing returns, where LTV does not justify the extra spend.   The breakeven threshold matters. - The red dashed line represents where CAC = LTV, meaning any spend above this line is unprofitable unless justified by strategic goals (e.g., market share growth). Smarter spending, not just lower spending, drives profitability. - Many brands mistakenly focus only on reducing CAC, but the real goal is to align CAC with future LTV dynamically across customer segments. What This Means for Retailers Instead of asking, “How much does it cost to acquire a customer?”, the real question is: - How much should we spend to acquire the right customers? - How long will it take to break even on acquisition costs? - Which acquisition channels and products lead to the highest-value customers? Retailers who leverage AI-driven insights to align CAC with future Customer Equity, not just at a blended level but dynamically across customer segments, can spend smarter, scale faster, and drive long-term profitability. If you want to go deeper on this topic, Professor Peter Fader has done extensive research on customer-centric growth strategies. Check out this fascinating podcast with Nick Hague on how businesses can take a more data-driven approach to optimizing CAC. https://lnkd.in/eGu5EM5g #CustomerAcquisition #EcommerceGrowth #MarketingStrategy #CustomerEquity #GrowthMarketing #CACvsLTV #RetailStrategy #Profitability #WGBTpodcast

I've talked with hundreds of eCommerce brands in 2024, and they've all told me the same thing: they want to lower their customer acquisition costs (CAC). Sending server-side CAPI data to solve signal loss on Meta, Google, and TikTok is now a table-stakes commodity. The real opportunity is to leverage that data to lower CAC and drive business growth. Here are four examples of how 8-figure annual revenue brands have reduced their CAC by 20% or more by using custom data activation. ▶ 𝗘𝘅𝗮𝗺𝗽𝗹𝗲 𝟭: 𝗛𝗼𝗺𝗲 𝗴𝗼𝗼𝗱𝘀 𝗯𝗿𝗮𝗻𝗱 𝘄𝗶𝘁𝗵 $𝟵𝟮𝗠 𝗶𝗻 𝗮𝗻𝗻𝘂𝗮𝗹 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 More than half of this brand's prospecting ads were reaching existing customers because ad exclusions aren't reliable anymore. By adding custom logic to their data connection, they segmented new purchasers into a distinct data stream. Prospecting campaigns now reach new customers 75% of the time and with a 25% lower CAC. ▶ 𝗘𝘅𝗮𝗺𝗽𝗹𝗲 𝟮: 𝗛𝗲𝗮𝗹𝘁𝗵 & 𝘄𝗲𝗹𝗹𝗻𝗲𝘀𝘀 𝗯𝗿𝗮𝗻𝗱 𝘄𝗶𝘁𝗵 $𝟭𝟭𝗠 𝗶𝗻 𝗮𝗻𝗻𝘂𝗮𝗹 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 90% of this brand's orders are low-value sample packs, flooding their pixel with low-value customers and hurting high-value prospecting campaigns (with 5-10x higher lifetime value/LTV). By splitting full-value orders from sample pack orders, they segmented high-value customers into their own data stream. High-value prospecting campaigns now have a 35% lower CAC, with prospecting ad budgets scaling up 15X. ▶ 𝗘𝘅𝗮𝗺𝗽𝗹𝗲 𝟯: 𝗙𝗮𝘀𝗵𝗶𝗼𝗻 𝗮𝗰𝗰𝗲𝘀𝘀𝗼𝗿𝗶𝗲𝘀 𝗯𝗿𝗮𝗻𝗱 𝘄𝗶𝘁𝗵 $𝟰𝟵𝗠 𝗶𝗻 𝗮𝗻𝗻𝘂𝗮𝗹 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 This brand carries thousands of unique product SKUs across four business units. Their ad reporting assumed all campaign purchases were for the intended business unit, leading to inaccurate media decisions. By adding product-specific logic, they segmented purchases by business unit. Native ad platform reports now break out purchases by business unit, enabling the business to scale up the right ads and lowering CAC by over 20% on key campaigns. ▶ 𝗘𝘅𝗮𝗺𝗽𝗹𝗲 𝟰: 𝗖𝗼𝗻𝘀𝘂𝗺𝗲𝗿 𝗴𝗼𝗼𝗱𝘀 𝗯𝗿𝗮𝗻𝗱 𝘄𝗶𝘁𝗵 $𝟭𝟯𝗠 𝗶𝗻 𝗮𝗻𝗻𝘂𝗮𝗹 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 This brand runs a subscription business but also sells one-off products. Their ad pixels treated all purchases the same, despite new subscription starts having a 10X higher lifetime value. By adding segmented events for one-off orders, new subscription starts, and automated renewals, prospecting campaigns now focus on acquiring new subscribers, lowering CAC by 25%. ▶ 𝗦𝗨𝗠𝗠𝗔𝗥𝗬 It's not enough to send data server-side; you need to leverage that data to unlock growth and lower CAC. Custom data activation and strategy are Popsixle's specialties, setting us apart from basic data connectors and larger competitors who have too many customers to offer bespoke strategic services. If you know a brand that needs help lowering customer acquisition costs, drop me a DM or tag them in the comments below.