What customer acquisition cost measures

Customer acquisition cost, CAC, is what it costs on average to win one new customer: everything spent on acquiring customers in a period, divided by the new customers won in that period. If a store spent 4,000 on ads and 500 on influencer gifting in a month and won 150 new customers, its CAC is 30.

CAC only means something next to what a customer is worth. A CAC of 30 is excellent for a store whose customers buy three times a year at a 50 gross profit, and a serious problem for a store whose customers buy once at 20 gross profit. So the calculator also shows how many orders it takes to pay CAC back, and a simple 12-month value to CAC ratio.

How it is calculated

  • CAC = (marketing spend + other acquisition costs) / new customers.
  • Gross profit per order = average order value x gross margin.
  • Orders to pay back CAC = CAC / gross profit per order.
  • First order profit after CAC = gross profit per order - CAC.
  • 12-month gross profit per customer = gross profit per order x orders per customer per year.
  • 12-month value : CAC = 12-month gross profit per customer / CAC.

A first order that does not pay back CAC is common and can be fine, as long as customers come back. A payback of more than a few orders, or a 12-month value below CAC, means growth is being bought at a loss. Many subscription and consumable brands aim for a 12-month value of at least three times CAC; a single-purchase product needs the first order itself to cover most of it.

How to fill it in

Ecommerce CAC is easy to get wrong by mixing periods or counting returning buyers, so keep every figure to the same period.

Use one period, such as a month or a quarter, for every figure. Count only new customers, not repeat buyers, and include every cost of winning them: paid ads, agency fees, influencer and affiliate payments, and discounts given only to first-time buyers if you want a full view. Order value and gross margin are optional; add them to see payback. Orders per customer per year is optional too; if you do not know it, a conservative guess of 1 to 2 is better than an optimistic one.

Limitations

This is a simple model on averages, not a lifetime value forecast. It does not separate channels, does not know which customers came from which campaign, and does not account for returns, discounts or the time value of money. Blended CAC also hides the difference between paid and organic customers. Everything runs in your browser and nothing is sent or stored.

Customers, after acquisition

ORVX reads your customers and orders from Shopify and shows what customers are actually worth after they are acquired, with real repeat purchases and real margins, so CAC can be judged against value you have observed rather than assumed.

Worked examples

Illustrative figures, not benchmarks.

Paid back on the first order

4000 of ads plus 500 of other costs won 150 customers: a CAC of 30. With 33 gross profit per order, the first order earns it back and leaves 3.

Paid back on the second order

The same spend won only 80 customers: a CAC of 50. The first order falls 17 short, so the business needs the repeat order. Over 12 months value is 1.06x CAC.

A low-margin first order

A 40 order at 30% margin earns 12. With a CAC of 15, and one order a year, 12-month value is 0.8x CAC: the customer never pays back.

Common mistakes

  • Dividing by all orders instead of new customers.
  • Leaving out agency, influencer and creative costs.
  • Using revenue instead of gross profit for payback.
  • Assuming repeat purchases you have not measured.

Questions

What is a good CAC?

One your gross profit pays back in a time your cash can carry. There is no universal number.

New customers from where?

Shopify's customer reports give first-time buyers for the period. Use the same period as the spend.