In recent years, the rising Customer Acquisition Cost (CAC) has become one of the primary challenges for eCommerce and digital marketing companies. This increase is driven by several factors that, combined, have made acquiring new customers more expensive and difficult. According to a study by ProfitWell, customer acquisition costs have risen by 60% over the past five years due to market saturation and increased competition for advertising space.
Causes of rising acquisition costs
1. Increased competition and market saturation
With the growing number of businesses investing in paid campaigns on platforms like Google Ads and Facebook Ads, competition for visibility has become extremely intense. This has led to a sharp increase in cost-per-click (CPC) and cost-per-thousand impressions (CPM), making it more expensive to reach new potential customers. According to WordStream data, the average CPC on Google Ads for competitive sectors like retail has increased by about 20% in the past year.
Similarly, CPM on Facebook has steadily increased, with peaks of 47% recorded in 2021 alone (Source: Social Media Examiner). These increases reflect the growing saturation of advertising platforms, where brands are competing for the attention of an audience increasingly bombarded with promotional messages.
2. Changes to platform algorithms and privacy
Another key factor contributing to rising acquisition costs is the changes in advertising platform algorithms and privacy regulations. Recent iOS updates and the reduction of third-party cookies have limited companies’ ability to effectively track users and personalize ad campaigns.
Additionally, with the implementation of regulations such as GDPR in Europe and CCPA in California, businesses must comply with stricter data handling rules, further reducing their ability to collect valuable data for targeting. This has led to increased reliance on first-party data, which requires more time and resources to collect and manage.
3. Declining conversion rates
Despite increased investments in digital marketing, conversion rates have not grown proportionally. In many cases, the amount spent to acquire a new customer exceeds the value generated from the first transaction. According to a report from HubSpot, the average conversion rate for digital campaigns has decreased by about 12% compared to previous years, making it even harder for businesses to achieve a positive return on investment (ROI).
In particularly competitive sectors like online retail, CAC can exceed the profit margin of the first sale, pushing many companies to seek alternative solutions to improve long-term profitability.
With the growing number of businesses investing in paid campaigns on platforms like Google Ads and Facebook Ads, competition for visibility has become extremely intense. This has led to a sharp increase in cost-per-click (CPC) and cost-per-thousand impressions (CPM), making it more expensive to reach new potential customers. According to WordStream data, the average CPC on Google Ads for competitive sectors like retail has increased by about 20% in the past year.
Similarly, CPM on Facebook has steadily increased, with peaks of 47% recorded in 2021 alone (Source: Social Media Examiner). These increases reflect the growing saturation of advertising platforms, where brands are competing for the attention of an audience increasingly bombarded with promotional messages.
2. Changes to platform algorithms and privacy
Another key factor contributing to rising acquisition costs is the changes in advertising platform algorithms and privacy regulations. Recent iOS updates and the reduction of third-party cookies have limited companies’ ability to effectively track users and personalize ad campaigns.
Additionally, with the implementation of regulations such as GDPR in Europe and CCPA in California, businesses must comply with stricter data handling rules, further reducing their ability to collect valuable data for targeting. This has led to increased reliance on first-party data, which requires more time and resources to collect and manage.
3. Declining conversion rates
Despite increased investments in digital marketing, conversion rates have not grown proportionally. In many cases, the amount spent to acquire a new customer exceeds the value generated from the first transaction. According to a report from HubSpot, the average conversion rate for digital campaigns has decreased by about 12% compared to previous years, making it even harder for businesses to achieve a positive return on investment (ROI).
In particularly competitive sectors like online retail, CAC can exceed the profit margin of the first sale, pushing many companies to seek alternative solutions to improve long-term profitability.
The role of Post-Shipping marketing in optimizing your marketing budget
Post-shipping marketing not only enhances the customer experience but also becomes a crucial lever for optimizing the lifetime value (LTV) of customers, counterbalancing the rise in acquisition costs. Here’s how:
- Customer Retention
Retention is significantly more cost-effective than acquiring new customers. According to Invesp, acquiring a new customer can cost five times more than retaining an existing one. Moreover, a loyal customer spends up to 67% more than a new customer on average. Implementing a post-shipping marketing strategy, involving personalized communications and updates on delivery progress, can help turn occasional buyers into loyal customers. - Increasing average order value (AOV)
- Reducing Returns
A crucial yet often overlooked aspect of post-shipping marketing is return management. Efficient handling and clear communications can reduce the number of returns and improve brand perception. Setting precise rules for accepting or rejecting returns avoids creating false expectations for customers and eases the workload of Customer Care teams. - Improving Customer Experience
Post-purchase marketing is also an opportunity to improve the customer experience. Well-designed and timely post-purchase communications, such as shipping notifications, order status updates, and personalized tracking pages, strengthen the bond between brand and customer. Over 64% of shoppers say that a positive shipping experience directly influences their decision to purchase again from a specific store (Source: Shopify).
Through personalized post-purchase emails or tracking pages, businesses can promote related products or upsell, thus increasing the Average Order Value (AOV). For example, using tracking emails with targeted upsell or cross-sell offers can boost sales after the first purchase.
Tools and strategies for Post-Shipping Marketing
To implement an effective post-purchase marketing strategy, companies should leverage a combination of tools and tactics:
- Personalized transactional emails: automate emails to inform customers about their order status, including product recommendations, promotional banners, and CTAs for various marketing or commercial purposes.
- Branded tracking pages: provide a consistent and personalized experience during the shipping tracking phase, integrating special offers or relevant content.
- Loyalty programs: encourage customers to return with special offers, loyalty points, and exclusive discounts for future purchases.
- Optimized return management: offer a simplified return process that reassures customers, promoting trust and satisfaction.
Cristina Massa
Head of Sales, Qapla’
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