In a perfect world, customers would flock to your online store, find exactly what they want, and leave you a nice review. But any drop shipper who has done it before knows that doesn’t always happen, especially if your online store is new. Even though customers are supposed to pay you, there are times when you have to pay for them.
This is what we call the cost of getting a new customer. It includes any fees or costs you have to pay to get people to come to your store. This could include, for example, PPC ads, ads on social media, email marketing, and salaries you pay to marketers or content creators.
Customer acquisition costs (CAC) can eat up your dropshipping profits quickly. How do you find the right balance between making money and having enough customers to keep your business going?
Here’s a closer look at how to get customers for your dropshipping business and how to keep your costs as low as possible.
How do you figure out the cost of getting a new customer?
Before we get into the details of how to lower the cost of getting a new customer, you need to know how to calculate it. The CAC is the total amount of money spent on getting new customers divided by the number of new customers you got during that time. This is how it looks:
CAC = Money Spent on Getting New Customers / Number of New Customers
For instance, let’s say you spend $100 on a Google PPC ad campaign for the month of October. Just from your ads, you get 50 new customers who pay you. The CAC for each customer would be $2.
To run a profitable dropshipping business, you must understand CAC from a business point of view. In order to stay in business, many drop shippers have to offer low margins. Sometimes, you have to spend money to make a sale if you want your business to grow. But if you don’t keep an eye on how much it costs to get new customers, you might spend more than you make.
How to get customers for less money
In the end, a lower CAC means that you keep more of your profit. Even though there are many parts of CAC that you can’t change, there are also many things you can do to keep costs down.
Let’s take a look at some:
Pay attention to the right groups of customers
You can’t sell to the right people if you don’t know who they are. Even if you’re selling something that everyone needs, like clothes, you should still figure out what kind of person is most likely to buy from you.
When it comes to customer segments, it is better to cast a deep net than a wide one. If you try to hit everyone, you end up hitting no one. Taking this road can be expensive, and most of the time you won’t find what you’re looking for.
Spend some time figuring out who you want to reach. If you already have a store, look at the kinds of people who buy from you and try to make ads and content that will appeal to them. If your store is new, think about the kind of customers you want to bring in. Who will be most interested in your products?
When you know who your audience is, you can make content and ads that speak their language and meet their specific needs. Your ads become more effective on their own, which can lead to more conversions and lower customer acquisition costs.
How do you define the people you want to reach? Here are some things to think about:
- Who do you think will use your product the most?
- What facts about your audience (like their income, gender, age range, etc.) do they all have in common?
- How ready are they to buy? Are they just looking for information or are they ready to buy?
- What are their biggest problems or places where they hurt?
Try to learn as much as you can about your customers. Find out what they might have in common so you can build lookalike audiences for your paid ad campaigns.
Think about marketing outside of paid ads.
Businesses that drop ship often use paid ads because they get results quickly. But they aren’t the only way to get customers. Other ways to market can take a little longer to start working, but they cost less to get customers and are more valuable in the long run.
This is very clear in the case of content marketing. A blog on your website can help you improve your SEO, give you content to share on social media, and get you backlinks from other websites.
Using your blog to get new customers can help lower CAC because it requires a small investment and, unlike ads, your blog will still be there after you stop paying for it. Your only “investment” is time, not money (unless you pay someone to write your blog).
Blogs get more useful over time. The more often you write blog posts, the more information you can share with your readers. When you keep giving your audience useful and interesting content, they are more likely to keep coming back for more.
Drop shippers like social media because it’s free to use. You can pay for ads on social media sites to get more people to follow you and reach more people. But you can also post free content that brings people to your website.
Focus on getting more people to follow you on social media. More people will see your content (and maybe share it!) if more people like your profile or page.
Test your ad campaigns with A/B
The easy part is making an ad campaign. It’s something else to know if your ad is as good as it can be.
This is why A/B testing is so important to marketers. This lets you make two different versions of an ad and test them to see which one gets more clicks. With this information, you can get rid of the ad that isn’t working and use the best one to get more sales. The cost of getting a new customer goes down as your conversion rate goes up.
Make sure that when you A/B test, you only look at small differences between the ads. Changes should be kept to a minimum, like adding a picture or a headline. So, you can compare your ad to similar ones and find out what about it made the most difference. Use what you’ve learned here to make better ads in the future.
Influencers can help you reach more people.
No one wants their name to be linked to a shady business or low-quality goods. Influencer marketing gives your business more credibility because it shows that other people trust it.
If you want to reach more people, use the knowledge of a key figure in your field. They can tell their own audiences about your products and send them to your site.
This is a very effective way to boost sales while keeping the cost of getting new customers low, because influencers can put you in touch with a large group of people who are interested in what you have to say.
Count on content made by users
Free advertising is not as impossible as it sounds. One way to get more people to see your website or brand is to ask your customers to make their own content for it. User-generated content can come in many different forms, such as a video of someone opening their package when it arrives, a video or picture of them using their purchase, or a video testimonial.
You can post user-generated content on your social media accounts and ask your followers to do the same. This lets you reach out to the friends and family of your customers. This can give your brand instant credibility and get more people to check out your store.
Make sure search engines can find your website.
SEO, or search engine optimization, is every dropship store owner’s dream. If you can rank on the first page of Google for the products you sell, people will come to your site for free.
Studies show that most people click on the first result on a Google search. It’s more likely to get a click than any other first-page result by more than 10 times. After the 10th spot (Page 2 and beyond), the number of clicks goes down a lot, which is why store owners want to move up as high as possible in the rankings.
SEO is a marathon, not a sprint, so keep that in mind. It can take time to move up in Google’s rankings, especially if your store is new. Optimizing your product descriptions, writing meta descriptions, using the right keywords for your products, and focusing on your website’s technical SEO criteria will give you the best chance of ranking high.
Invest more in keeping customers
Adding up the lifetime value of each customer makes it harder to figure out how much it costs to get a new customer. Even if it cost you $10 to get a customer, for example, that cost goes down every time that customer buys something from you.
That’s why it’s important to not only get new customers, but also keep the ones you already have coming back. Keep giving people things that are useful, like coupons, news about new products, content, and updates, so that you can stay in people’s minds and make great experiences.