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How To Acquire New Customers Online

I am often asked by online retailers, “What is the most cost effective way for me to acquire new customers online?” Before answering this question, it is important to understand how to calculate and measure the cost to acquire a customer (CAC) for each online marketing channel you use, and the lifetime value of a customer (LTV) to your business. In turn, this will help you to properly analyse the success of each channel, allowing you to properly apportion your marketing budget between them.

Understanding the Value of a New Customer

The Cost to Acquire a customer through a marketing channel can be calculated by taking your business’s entire cost of sales and marketing in a particular channel over a given period and dividing it by the number of customers that your business acquired in that period.

The Lifetime Value of a customer can be calculated by looking at the average revenue earned from a customer over a given number of years. For start-ups, this can be a difficult figure to gauge, but is important information to consider, as the cost of customer acquisition can be high initially. However, an early indication that a marketing channel is working for you is when the cost of acquiring a customer through that channel becomes less than the revenue generated by that customer.

For online retailers, measuring these values is made easier through the use of website analytics software such as Google Analytics. Google Analytics provides real, cross channel insight with full “path to conversion” metrics and in-depth analysis into how customers interact with your website.

So what is the most cost effective way for me to acquire new customers online?

Unfortunately there is no single answer that fits every online retailer; the fact is that success in each channel varies greatly based on a number of factors - none of which are more important than the way a business differentiates themselves from their competition in that channel.

Having said this, I am in a position to provide some sound guidance based on the results of my clients and my own personal experience as an online retailer. In doing this, I will focus on some of the more traditional online marketing channels, whilst also exploring some emerging trends such as marketplaces and social media.

Leverage the Social Presence of your Customers

Of course, just as in any “bricks and mortar” business, the least expensive customer is the one who is referred by a satisfied existing customer. Consequently, word of mouth or “viral” marketing is at the top of the list when it comes to cost effective customer acquisition strategies. It is therefore, important to make it as easy as possible for your existing customers to make a referral. Social media is now a key driver for this form of marketing and should be embraced by all retailers.

If you are a small retailer with limited resources, building your own social presence (eg: maintaining your own Facebook or Twitter account) can be time consuming and therefore costly. Instead, think about ways to make the products and the service you offer intrinsically social. Give your customers a reason to speak about your business and make it easy for them to do so. Incorporate Facebook “like”, Twitter and Pinterest buttons on product pages, set auto follow up emails to encourage customers to review their most recent purchase and reward customers for their loyalty. By doing this, you will be leveraging their social presence to create interest in your offering.

Be Found In Search Engines

Another low cost customer acquisition strategy that you should explore is Search Engine Optimisation (SEO). SEO is about optimising your website to rank for keywords or phrases in popular search engines such as Google, Yahoo and Bing. I firmly believe that every online retailer should invest in SEO. Whether this means investing in a self help course (I recommend, or employing the services of an SEO firm, the long term benefit of a well optimised keyword or phrase usually far outweighs the initial investment.

What’s more, organic SEO traffic usually has a higher conversion rate than paid traffic. Pay Per Click (PPC) advertising on search engines (also know as Search Engine Marketing or SEM) is also a viable option for some businesses, however the cost can be prohibitive.

As more retailers compete for keywords, the Cost Per Click (CPC) of adverting through this channel continues to rise. It is commonly accepted that a good conversion rate for a paid search marketing campaign is around 3%. When considering an average CPC of around $1.40, this would put your cost of customer acquisition at nearly $50 without taking into account other business expenses. It is therefore important to carefully monitor your Return on Investment (ROI) using tools such as Google Analytics.

Use Comparison Shopping Websites

A more targeted and controlled CPC channel for online retailers is Comparison Shopping Engines such as, and These engines display your products in a format that is easy for consumers to price compare across multiple retailers. You pay the engine for each lead (click) they deliver.

Comparison Shopping Engines usually deliver higher conversion rates than paid Search Engine Marketing due to the fact that consumers are presented with all the information they need to make a purchase decision prior to visiting your website. Additionally, the average CPC rates on Comparison Shopping Engines are often lower than that of Search Engines.

Exploit Online Marketplaces

Online marketplaces such as eBay can be a cost effective customer acquisition channel for both start-ups and established online retailers. Recent fee changes for business sellers has made eBay an even more attractive option for retailers, who are now able to calculate their expected return on investment (ROI) upfront and factor this into their pricing policy prior to listing.

It’s important to understand that eBay is more than a means to moving stock; it’s a powerful marketing tool with over 6.5 million Australian users. Taking ownership of these users and converting them to customers is up to you, but here are a few tips to get you started:

  • Take advantage of the fact that you can have links to your website and information about your “off eBay” offering on your eBay “About Me” page.
  • Include links to your own newsletter subscription form on your “About Me” page, this will help to grow your subscriber base and start a line of communication.
  • Include links to your Facebook and Twitter pages in your eBay listings. 
Customer Retention

Now that you have some ideas around ways to effectively acquire new customers, it’s important to remember the value of keeping these customers. After computing the Life Time Value of your customers you will quickly find that it costs less to retain than to acquire. Make customer retention a focus of your online marketing strategy by giving your customers a reason to keep coming back. 
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