How Can I Reduce My Customer Acquisition Cost?

Customer Acquisition Cost (CAC) is basically how much you spend to get each new customer, and if you're in e-commerce in 2025, it's probably too high. Sorry to be the bearer of bad news.

The Harsh Truth About CAC:

UK e-commerce CAC has increased significantly over the past few years. What used to cost you £25 per customer now costs £35-40. Ad platforms are more competitive, iOS tracking changes have made advertising less efficient, and everyone's fighting for the same eyeballs.

Calculate Your Actual CAC:

Total marketing spend ÷ new customers = your CAC

Make sure you're counting everything: ad spend, email software, agency fees, your time, content creation costs - all of it. And only count first-time customers, not repeat purchases.

The Fastest Ways to Reduce Customer Acquisition Cost:

Improve your conversion rate. This is the quickest win because you're getting more customers from the same traffic. If you improve conversion from 1.5% to 2%, you've just reduced your CAC by 25% without changing anything about your ads.

Stop showing ads to people who've already bought. Sounds obvious, but I see this constantly - brands wasting money on acquisition campaigns to existing customers. Exclude purchasers from your cold prospecting campaigns (this doesn't mean you shouldn't be retargeting to them! Just in a controlled campaign structure you have budget control over).

Focus on your best channels. If Google Shopping delivers customers at £30 CAC and Facebook delivers them at £50 CAC, shift budget to Google until it stops being efficient. Don't spread budget equally across channels "for balance".

The Long-term CAC Reducers:

Build organic channels aggressively. SEO, content marketing, social media presence - these take time but eventually deliver "free" traffic that dramatically improves your blended CAC.

Get serious about retention. Every repeat purchase improves your effective CAC because you're not paying to acquire them again. Email marketing is your weapon here.

Build a referral program that actually works. Your existing customers are your best acquisition channel if you give them a reason to tell their friends.

What's a Good CAC?:

Your CAC should be recoverable within 6-12 months through repeat purchases. If your average customer buys 3 times in their first year spending £50 each time (£150 total), you can afford to spend £40-60 acquiring them and still be profitable.

The rule of thumb is Customer Lifetime Value should be at least 3x your CAC. So if you're spending £40 to acquire customers, they should be worth at least £120 to your business over time.

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