Average Customer Acquisition Cost for Ecommerce 2023 – Average CAC for Ecommerce – Costs Explained

We researched every website on the internet with data on the average acquisition cost for ecommerce. Then we used math to determine the average customer acquisition (CAC) for ecommerce from all that data and calculate customer acquisition cost. We found that the average ecommerce customer acquisition cost is $49.06. We took the consumer data we found and calculated the customer acquisition cost for each ecommerce consumer industry. Here are the costs for customer acquisition for each ecommerce industry:

• The arts and Entertainment ecommerce products industry has a customer acquisition cost of $21.

• The business & industrial ecommerce products industry has a customer acquisition cost of $533.

• The clothing, shoes, and accessories ecommerce industry has a customer acquisition cost of $129.

• The food, beverages, and tobacco ecommerce products industry has a customer acquisition cost of $462.

• The health & beauty ecommerce industry has a customer acquisition cost of $127.

• The home and garden ecommerce industry have a customer acquisition cost of $129. 

According to Oberlo, the order value for ecommerce is $106.89, with customer acquisition costs of $49.06; this leaves more or less 50% for profit without factoring in the cost of goods and services. Now the question becomes how do I reduce the costs of good acquisition costs and sales? 

There are two ways to reduce customer acquisition cost (CAC):

1. Increase your Customer Lifetime Value (CLV)

    

2. Decrease your Costs for Marketing and Production.

You may need to become more familiar with customer lifetime value; it is the total amount of money a customer spends with a business over the lifetime of the relationship. For instance, our CBD clients have an customer lifetime value of $588 which means the customer spends $588 on CBD over the lifetime of their relationship with the CBD brand. If they have a customer acquisition cost of $49.06 and their order value is $129. They could spend up to $196 per customer in marketing costs to acquire a new customer. This is because the best customer acquisition cost is a 1 to 3 CAC (customer acquisition cost) ratio with customer lifetime value. Meaning you should spend at most 33% of your customer lifetime value to acquire a new customer this way, you can still make a healthy profit of a 1 to 3 CAC (customer acquisition cost) ratio. 

If you wanted to reduce your acquisition cost to acquire a new customer as a CBD brand, you could increase your customer lifetime value from $588 to $1,764; then, you would reduce your acquisition cost by three times. If it costs you $49.06 to acquire a new customer and your CLV is $588, then you are spending 8.3% of your CLV on acquisition cost to acquire a new customer. However, suppose you increase your CLV from $588 to $1,764 while keeping your costs to acquire a new customer at $49.06. In that case, you only spend 2.7% of your CLV to acquire a new customer. This is about a three times reduction in acquisition cost and a three times increase in profit while keeping your total marketing spend the same. This is why CLV is largely known as the most important cost metric to evaluate marketing success. 

Now the question becomes, how do you increase your CLV?

To answer this question, we must understand how to calculate CLV in the first place. Your CLV is your order value multiplied by your purchasing frequency to determine your CLV. For instance, in the CBD industry, the order value is $129, and the customer makes a purchase 4.55 times over the lifetime of a relationship with a CBD business. To calculate the CLV, we multiply the order value of $129 by the purchasing frequency of 4.55 to get a CLV of $588. Therefore if you would like to increase your CLV, you need to increase your AOV or purchasing frequency and ideally both to maximize your lifetime value per customer (LTV CAC). For context, LTV is just another way of saying CLV which is important for your SEO conversion rate and customer experience. 

To increase your AOV per customer, you could execute upsells and cross-sells at checkout and post-checkout. Even more, you could create new products for your business that are in need by your existing customer base and sell them to your customers too increasing your number of sales as an example. 

One of the best example to increase purchasing frequency and AOV for your business is email marketing. For instance, one CBD establishment surveyed by Metrilo has a 99.3% retention rate which means they have a very high number of purchasing frequency and LTV. They earned a high number of retention rate by utilizing personally timed replenishment emails based on the time a customer runs out of CBD of 61.1 days. Email marketing effectively allowed the establishment to have a high retention rate, purchasing frequency, AOV (value per order), and LTV. 

What if you have higher than business customer acquisition costs due to expensive fees for marketing and advertising?

How do you reduce your acquisition cost to reduce your CAC and increase your gross margin profit marcgin? 

There are multiple ways to reduce the sales costs of marketing and, therefore, your CAC (customer acquisition cost). One of the best ways to reduce your CAC (customer acquisition cost) and the expense of marketing is to reduce your business dependence on paid advertising  and Amazon for sales to earn new customers. Since the expense of paid advertising for sales only goes up over time, here is how much paid advertising for sales has been increasing year over year:

• Meta (previously known as Facebook) CPM (expense per thousand) increased 61% year over year to $17.60/CPM for businesses. 

• Google’s programmatic display CPM (expense per thousand) increased 75% year over year. Search ad CPC (expense-per-click) increased 14% year over year for businesses.

• TikTok’s CPM (expense per thousand) has increased 185% year over year, averaging USD $9.40/CPM for businesses.

• Instagram’s CPM (expense per thousand) increased 23% year over year for businesses.

Advertising costs only go up over time due to increased demand and competition for pricing. If your business depends on paid ads for your customers, you may spend double your current CAC pricing over the next year to two years. Remember that your business should focus on short-term tactics like paid advertising. Still, in the long term, your business needs to diversify its marketing strategy to gain new customers at a lower CAC. 

The best marketing and advertising tactics and marketing strategy to generate traffic and bring down your mean/median CAC (customer acquisition cost) aka your costs or total cost of acquiring a single customer while increasing your LTV are earned and owned media for businesses.

Earned Media

Earned media is traffic and exposure that is earned and not bought this reduces your acquisition costs. The benefit of earned media is that even after your business stops investing in attracting earned media, all the traffic and customers gained continue for your business. Unlike paid marketing, where the moment your business stops paying for traffic and customers is the moment all traffic and customers stop coming to your business. Earned media reduces your CAC by providing leveraged returns on your investment over time, unlike paid advertising, where your returns are given as soon as you pay for exposure driving up your acquisition costs over time. 

The returns for earned media compound over time, so you get greater returns for the same investment over time further reducing your acquisition costs. Investing in earned media can help your business reduce your marketing spend dependency on paid media and your CAC. Remember that it takes time to receive leveraged returns on earned media. You may not see a return for months when you begin investing in earned media. Still, your returns exponentially grow over time while your marketing spend stays the same. A good rule of thumb is to use paid media in the short term while you await exponential returns from your long-term investment in earned media. 

Examples of Earned Media:

• SEO.

• Social Media Marketing.

• Digital PR.

• Traditional PR.

• Content Marketing.

• Video Marketing.

• SEO Services.

• Services SEO for existing customers and thought leadership with or without user consent.

Owned Media

To calculate your expense of acquisition, you take all of the spend used to gain new customers (marketing) and divide the total by the number of customers gained during the spend on marketing to gain new customers. For example, if a establishment spent $21,000 on marketing to gain new customers over a year. If the establishment gained 1,200 new sales over the year, then the company’s CAC is $17.50. 

To determine a good customer acquisition spend, let’s use the example above, where a establishment has a CAC of $17.50. How do you know this is a good CAC to gain new customers and sales? We would use the spend ratio we discussed earlier in the article. For instance, this establishment has an overview LTV of $52.50 from customers. Meaning customers spend $52.50 with the brand before they stop spending with the establishment. To determine if $17.50 is a good CAC for $52.50, we would divide the LTV by the CAC, and if we got more than 3, then the CAC is not good. For instance, $52.50 divided by $17.50 (CAC) is exactly 3, which means the ratio is 1:3 for every customer the establishment makes three times this amount over the lifetime of those customers. 

What is the Average Cost Per Acquisition For Ecommerce?

The average cost per acquisition (or customer acquisition cost) for ecommerce is $49.06. This number was derived from extensive research on various websites providing data on the average acquisition cost specific to ecommerce.

What is the CAC (Customer Acquisition Cost) for an Ecommerce Site?

The CAC, or Customer Acquisition Cost, is the amount spent on marketing and other related expenses to acquire a new customer for an ecommerce site. This can vary by industry. For instance, the arts and entertainment ecommerce industry has a CAC of $21, while the business & industrial sector’s CAC stands at $533. Other industries like clothing, shoes, and accessories have a CAC of $129, and so on. 

What is the Average Customer Acquisition Cost?

The average customer acquisition cost (CAC) across various ecommerce industries is $49.06. This is calculated by taking into account all the expenses (like marketing and advertising costs) required to get a new customer to make a purchase from an ecommerce site. 

What is a Good Customer Acquisition Cost Rate?

A good customer acquisition cost rate is one that aligns with the 1:3 ratio of CAC to customer lifetime value (LTV). This means that for every dollar spent on acquiring a new customer, the business should ideally earn three times that amount over the lifetime of the customer’s relationship with the company. Using the provided example, if an establishment has a CAC of $17.50 and the overall LTV of its customers is $52.50, this forms a 1:3 ratio, indicating that the CAC is in a good range.