Customer acquisition cost is the total amount you spend to win one new paying customer. It covers everything from ad spend and sales tools to the salaries of the people running your campaigns.
The formula is straightforward:
CAC = Total Sales & Marketing Spend ÷ Number of New Customers
If you spent $10,000 on ads, email tools, and creative last month and acquired 200 new customers, your CAC is $50.
Why CAC Matters for Ecommerce
CAC tells you whether your growth is sustainable or whether you’re burning cash to look busy. A store can double revenue every quarter and still go broke if each customer costs more to acquire than they’ll ever spend.
The real insight comes from comparing CAC against customer lifetime value (LTV). The widely accepted benchmark is a 3:1 LTV-to-CAC ratio — meaning every dollar you spend on acquisition should return three dollars in lifetime revenue. Drop below 2:1 and you’re likely losing money after accounting for product costs, shipping, and returns. Push above 5:1 and you’re probably underinvesting in growth, leaving market share on the table.
What Does a Good CAC Look Like?
For most ecommerce businesses, CAC falls between $50 and $90. But “good” depends entirely on what you sell and what your margins look like.
| Factor | Lower CAC | Higher CAC |
|---|---|---|
| Product type | Consumables, food & beverage | Luxury goods, electronics |
| Price point | Under $50 AOV | Over $200 AOV |
| Purchase frequency | Repeat buyers (subscriptions) | One-time purchases |
| Geography | Southeast Asia, India | US, Australia |
A $120 CAC is perfectly healthy for a premium furniture brand with a $2,000 average order. The same number would sink a store selling $30 phone cases.
The metric that connects these two is CAC payback period — how many purchases it takes to recover your acquisition cost. For most ecommerce products, you want payback within the first or second purchase.
How to Actually Reduce Your CAC
Most advice here boils down to “spend less” or “convert more.” Both are true, but the leverage points are more specific than that.
Fix your conversion funnel first. If your store converts at 1.2% instead of the 2.5% ecommerce average, you’re paying roughly double what you should for every customer. Enable guest checkout (25% of shoppers abandon when forced to create an account), speed up your pages, and make your product pages do the selling.
Shift spend toward owned channels. Email marketing and SMS cost a fraction of paid acquisition per customer. A well-built post-purchase email sequence turns one-time buyers into repeat customers, which amortizes your original CAC across multiple orders and effectively lowers it.
Build referral loops. Referred customers cost significantly less to acquire than paid traffic and tend to have higher lifetime value. Even a simple “give $10, get $10” program creates a compounding acquisition channel that improves over time.
Double down on what’s working. Most stores spread budget across too many channels. Look at your CAC by channel — not just your blended average — and reallocate toward the two or three sources that bring profitable customers. Cut or pause the rest.
CAC vs. ROAS: They Measure Different Things
ROAS (return on ad spend) measures revenue generated per dollar of advertising. CAC measures total cost to acquire a customer across all channels.
A 4:1 ROAS looks great in your ad dashboard. But if your blended CAC including organic, email, and sales costs still exceeds your average order profit, you have a problem. ROAS is a channel-level metric. CAC is a business-level metric. Track both, but make decisions based on CAC and LTV together.
