Case Study: This eCommerce Store Reduced Their CAC by 27.78% in 40 Days by Identifying the Best Paid Ad Channel

This eCommerce case study focuses on one of our clients, Unique Yarns Co.

Unique Yarns Co. is a London-based, artisan yarn-dyeing company with Italian roots. Each yarn this eCommerce store produces is created from a desire to produce something truly original. To achieve this, the Unique Yarns Co team is always developing new colouring methods, as well as sourcing interesting dyes and pigments from around the world. One of its amazing products is mineral yarn – a series of merino wools dyed with natural pigments from the earth. The company also boasts a glow-in-the-dark, phosphorescent range.

Image Credit: Unique Yarns Co

Unique Yarns Co launched their eCommerce online store to both increase their direct sales and displace sales from marketplaces such as Etsy to their own eCommerce store. Once the store was ready, it was still lacking in terms of ideal marketing infrastructure.

Why? Paid ad channels and audiences were not validated (which would help the business with their customer acquisition process). The online store needed the channel and audience validation, behaviour-based retargeting, customer segmentation and tagging along with other components of typical marketing infrastructure.

Case Study: This eCommerce Store Reduced Their CAC by 27.78% in 40 Days by Identifying the Best Paid Ad Channel

Initial Stage – Audit, Business Intelligence and Strategy Phase

Unique Yarns Co contacted GrowthRabbit in order to help with its customer acquisition strategy and the retention system that brings in repeat buyers automatically. The company’s founder explained to us that the months of December and January make for a busy period, as this is the time when both seasonal and regular knitters buys yarns in large quantities.

Initially, we didn’t have enough data to paint a clear picture in regards to the best performing paid ad channel – the one channel we can rely on. This was down to the fact that most of the store’s sales were coming from other marketplaces, such as Etsy. The direct sales through their own website was next to negligible.

The GrowthRabbit team jumped into action. We started by establishing and looking into their competitors while gathering intelligence.

Based on business intelligence received from the founder of Unique Yarns Co, a competitor analysis report and the fact that their competitors use paid advertising channels, we decided to optimise their seeding stage by validating their paid acquisition channels and audience.

The store’s average order value (AOV) isn’t an especially high one, so we’ve had to be very careful with their customer acquisition cost (CAC). Identifying the inexpensive paid ad channel was a must, and the number one priority.

We knew we had to find and establish the channel that spit sales at a low CAC. Otherwise, it would be very tough to grow their customer acquisition funnel.

Once the channel and audiences were validated, we were able to work towards activating the budget displacement strategy to reduce the CAC, increase the conversion rate and grow their sales – and that’s exactly what we did.

Validation Phase to Identify the Best Paid Ad Channels and Audiences

To strategically reduce the customer acquisition cost (CAC) and validate paid ad channels, we brought in both intent and non-intent based channels.

For instance, intent paid ad channels can include Google and Bing Ads; while non-intent paid advertising channels could present themselves as Facebook, Instagram and Messenger Ads. So, we brought these two types of paid ad platforms on board in order to start the channel validation process.

Next, we built initial buyer personas to help us validate audiences. This was a very crucial part of the process, and ultimately it was going to make or break the customer acquisition process.

It’s of huge importance to understand these buyer personas well from the outset because the needs of varying buyer personas could be the same – but their perspectives, thinking, mindsets and interests could be very different. All of this needed to be addressed and considered when curating ads, copies and creatives.

 

Determining the Maximum Amount to Spend on Customer Acquisition (CAC)

Then, we needed to figure out what the maximum amount we could spend on acquiring one customer was. This would first help us get a break-even Customer Acquisition Cost (CAC) and then lower the CAC.

After speaking with the founder of Unique Yarns Co, we found out the gross margin and product cost to establish what this maximum amount would be.

Trying to figure this amount out for yourself? Here’s an example calculation for you to work with.

Ignore all metrics at this point and keep things simple. Let’s say your average order value is $100 and your gross margin is $40. This means your product cost is $60 and the maximum you can spend to acquire one customer is $40. If your CAC is $40, you would break even – and this should be your first KPI.

After these, we activated a full funnel and customer acquisition process. Running 6-week sprints, we were able to validate and identify the best paid ad channels and audiences.

Why Do We Use Sprints for Validation?

It’s always good to do things in batches or sprints. Today, effective tech, product and growth teams work on sprint basis. Ultimately, it helps reduce marketing waste, carry out growth experiments quicker and get you growth results faster. Run between 5 to 8 sprints (each sprint lasts for one week). During these sprints, you will collect data that you can utilise to optimise.

During the optimisation process and sprints for Unique Yarns Co, we were able to identify inexpensive paid advertising channels and audiences we could rely on to grow the customer acquisition process, and most importantly reduce the CAC strategically.

Based on the collected data and insights, we activated the budget displacement strategy. We displaced a budget to a channel that was working and converting well.

Result – Reduced CAC and Increased Conversion Rate (%)

Here are two noticeable results of this eCommerce case study.

  1. The first result – reduced CAC. When we validated and identified inexpensive paid ad channel and audiences, we activated a budget displacement strategy and were able to reduce the overall customer acquisition cost (CAC) by 27.78% in just 40 days.
  2. The second result – an increased conversion rate. We increased the checkout conversion rate by 31.24% – again in just 40 days.

Now, these are great results – but they wouldn’t have been possible if we hadn’t decided to validate the paid acquisition channel and audiences in order to identify the best paid ad channel. Ultimately, It was a strategic and systematic approach.

As you have seen in this eCommerce case study, a lot of things had to be carried out during the customer acquisition process, and multiple skill-sets were needed to make it happen.

So, there you have it. We hope you enjoyed this eCommerce case study and picked up some points for your own business or startup!

If you’re in the same stage as Unique Yarns Co was back then, here are your options:

  1. You can make the most of a DIY approach and there’s absolutely nothing wrong with that.
  2. The GrowthRabbit team can help you instead – we literally work day and night to ensure the best possible results.

Over to you.

Need Help?

Here at GrowthRabbit, we’ve been working on a marketing model that enables small companies to reach their target audiences at a fraction of the amount they’re currently spending. For instance, Unique Yarns Co reduced their customer acquisition cost (CAC) by 27.78% in 40 days and increased the conversion rate by 31.24%

Is this something you think you could improve on?

If yes, please book a free consultation and we’ll gladly give you a call to explain further.

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Chintan Maisuria

Author Chintan Maisuria

Chintan Maisuria is the founder & CEO of GrowthRabbit.com He loves funnel building and paid acquisition. Spicy hot curry lover, big time foodie and fitness geek. Want him to assess your marketing and sales funnel? Click here --> Book your free strategy call now.

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