In one sentence
Customer acquisition cost is what you spend, on average, to win one new customer, found by dividing marketing and sales spend by new customers, and it tells you whether growth is profitable.
How to calculate customer acquisition cost
Divide total marketing spend for a period by the number of new customers you won in it. Spend $10,000 in a month, win 200 new customers, and your CAC is $50.
Decide what goes into spend and stick with it. Ads alone gives you paid CAC. Ads plus agency fees, tools, influencer costs and content gives you a truer blended CAC.
Blended CAC vs. paid CAC: what's the difference
Why customer acquisition cost matters for ecommerce brands
CAC is the price of growth. When it rises faster than what customers are worth, every new customer makes the business weaker.
Read it next to customer lifetime value (LTV) and first-order margin. If a first order covers CAC, you're profitable on day one. If it doesn't, you need repeat purchases to earn it back.
How to lower customer acquisition cost
- Raise conversion rate, so the same traffic produces more customers.
- Build channels you don't pay per click for: email capture, referrals, organic traffic and AI answers.
- Cut ad audiences and placements that bring one-time customers.
- Earn mentions in the reviews and roundups shoppers and AI both read.
CAC FAQs
Should CAC include discounts and free shipping?
If they exist only to win first orders, yes. A 20% first-order discount is part of what that customer cost you.
What's the difference between CAC and cost per acquisition (CPA)?
CPA is what an ad platform reports per conversion, which can include repeat customers. CAC counts only new customers, so it's the better number for judging growth.
How long should it take to earn back CAC?
It depends on your cash position and how often customers reorder. Track payback period: the months it takes a customer's cumulative margin to cover what you paid to win them.
About the author
Jenn Starr, Co-founder, Selix
Jenn has spent 20+ years helping SaaS startups build their marketing and implementation playbooks. She has bootstrapped three marketing agencies and is a 500 Startups alum. At Selix, she leads the work of getting ecommerce brands named in AI answers.
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