Customer acquisition costs drop for online marketers
Propelled by smarter marketing and declining costs in a competitive online advertising market, customer acquisition costs for web retailers are dropping, says Jupiter Media Metrix. At the Jupiter Media Metrix Retailing Forum in Chicago this week, Jupiter analyst Rudy Grahn presented data from a cross section of online marketers that demonstrates the downward trend. Apparel e-retailer Bluefly.com’s acquisition cost per customer dropped the most dramatically over the past 12 months, falling to $41 in the first quarter of this year from $104 in Q1 2000. Travel site Expedia.com’s per-customer acquisition cost dropped to $37 from $60 during the same period, while Buy.com’s dropped to $22 from $32, Amazon’s fell to $12 from $13; and Ebay’s dropped to $8 from $10.
“There’s a shift toward the quality of the customer rather than just the quantity of customers,” says Grahn of online marketers’ changing priorities. “Experience has affected our customer acquisition cost,” confirms Tim Zuckert, vice president and chief marketing officer of 800.com, another presenter at the session. “Predictability has higher value than growth these days.” As a result, the company is putting resources into segmenting the lifetime value of different customers based on buying behavior, an initiative that Zuckert says helps keep marketing costs at 800.com at no more than 7-8% of revenues.
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