What is Customer Acquisition Cost (CAC)?

Customer acquisition cost (CAC) is what it costs, on average, to win one new customer for your store. It adds up everything you spend on marketing and sales and divides it by the number of people who placed their first order in the same period.

On its own, CAC tells you very little. It only means something next to what a customer is worth. A store that pays more to acquire a customer than it ever earns from them is buying growth at a loss - however good the monthly sales chart looks.

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What Is CAC?

CAC measures how efficiently your store turns marketing money into new customers. The key word is new: a returning customer placing their fifth order is not an acquisition, even if they clicked an ad on the way in.

A useful CAC is fully loaded. Ad spend is the obvious part, but agency fees, marketing tools, influencer payments, first-order discounts and the time you or your team spend on marketing all belong in the total.

🧒 Explained simply You spend $10 printing flyers for your lemonade stand and hand them out around the block. Five new kids show up because of them. Each new customer cost you $2. That's CAC. Now the real question: will each of those kids spend more than $2 at your stand over the summer? If they come back every week, the flyers were a bargain. If they buy one cup and never return, you lost money.

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How to Calculate CAC

CAC = Marketing and sales spend ÷ New customers

Example: Say a store spends $6,000 in a month - $4,500 on ads, $1,000 on an agency and $500 on email and design tools - and 200 people place their first order that month.

CAC = $6,000 ÷ 200 = $30

Each new customer cost $30 to win, in this example.

Some points to get right:

• Count new customers only. Use first orders, not total orders and not total customers. Returning buyers inflate the denominator and make CAC look better than it is.
• Match the periods. Spend and new customers should come from the same month or quarter. If you sell something people think about for weeks, a longer window smooths out the lag.
• Separate paid and blended CAC. Blended CAC divides all spend by all new customers, including those who found you organically. Paid CAC divides ad spend by customers those ads brought in. Both are useful; just do not mix them up.
• Include first-order discounts. A 15% welcome code is a real cost of acquiring that customer.

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Why CAC Matters

It tells you whether growth pays for itself. Compare CAC with customer lifetime value. If customers are worth comfortably more than they cost to win, you can spend more to grow. If not, more spend just loses more money.

It shows which channels are worth it. CAC by channel - paid social, search, affiliates, marketplaces - shows where each dollar works hardest and where it is wasted.

It sets your cash needs. Online stores pay to acquire a customer up front and earn it back over time. The longer the payback, the more cash you need to fund growth.

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What Is a Good CAC?

There is no single good CAC figure for online stores. A $30 CAC can be excellent for a store selling high-margin products people reorder, and ruinous for one selling a single low-margin item.

The common rule of thumb is to aim for a customer lifetime value at least three times your CAC. Treat that as a starting point rather than a law. What is affordable depends on your margin and how often customers come back, so calculate CAC against profit-based lifetime value, not revenue.

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How to Lower CAC

1. Improve conversion before buying more traffic

If your store converts better, every ad dollar produces more first orders. Fixing product pages, shipping clarity and checkout often lowers CAC faster than tweaking campaigns.

2. Cut channels that only look good

Rank channels by CAC and by the quality of customers they bring. A cheap channel that delivers one-time bargain hunters can be worse than a pricier one that brings repeat buyers.

3. Grow organic and referral customers

Search content, referral programmes and word of mouth bring new customers without a per-click cost, which pulls blended CAC down over time.

4. Raise the value of the first order

Bundles and free-shipping thresholds increase average order value on the first purchase, so each customer earns back more of their CAC immediately.

5. Make the second order more likely

Lowering CAC is only half the equation. Good post-purchase emails and a great first delivery raise lifetime value, which makes the same CAC more affordable.

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How to Track CAC

Chartsy for Ecommerce connects to your BigCommerce store with read-only access and syncs your orders and customers hourly. It counts new customers - first orders - each month, which is the denominator you need. Marketing spend comes from your ad platforms and accounts; Chartsy does not have ad spend, so divide your total spend by Chartsy's new customer count to get CAC.

With ChartsyAI you can also ask questions about the customer side and get a chart or report back, for example:

• "How many new customers did we get each month this year?"
• "Show first orders by month for the last 12 months"
• "Compare new customers and net sales by month this year"

Try Chartsy for Ecommerce free for 14 days →

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