Glossary - Acquisition and attribution
Customer acquisition cost (CAC)
Customer acquisition cost (CAC) is the average amount a business spends to win one new customer, calculated as acquisition spend divided by the number of new customers acquired in the same period. Ecommerce operators compare it with the margin a customer returns to decide whether growth is paying for itself.
| Variable | Definition |
|---|---|
| Acquisition spend | The spend you are holding to account. All sales and marketing spend for blended CAC; paid acquisition spend (media, agency fees, affiliate, paid creative) for new-customer CAC. |
| New customers | First-time buyers only, counted from your own order data, not platform-reported conversions. Repeat buyers never go in the denominator. |
The formula is simple; the argument is always about which spend and which customers. That is why there is not one CAC but three, each answering a different question. The three CACs walks through them side by side:
- Blended CAC: total sales and marketing spend divided by all new customers, organic included. What does the average new customer cost the whole business?
- New-customer CAC: paid acquisition spend divided by first-time customers from paid channels. Is the paid engine economical on its own?
- Marginal CAC: the change in spend divided by the change in new customers. What does the next customer cost, and should spend scale?
Worked example
One month, one ad account, three honest answers. Blended CAC of A$66.67 looks comfortable because 400 organic customers sit in the denominator for free. The paid engine is really paying A$120. The last A$10,000 bought customers at A$166.67 each. Against A$45 of first-order margin, every version needs repeat purchase to pay back, and the marginal tranche needs the most. Which number you report decides whether spend goes up next month, so name it every time.
What is a good customer acquisition cost?
There is no good CAC in isolation, only a CAC that your margin can carry. The ceiling is set by what a new customer returns in contribution margin, first order plus repeat orders, inside a payback window your cash can fund. A brand clearing A$60 of margin per order with strong repeat can afford a CAC that would sink a brand clearing A$20 from one-time buyers. Benchmarks borrowed from other stores ignore all of that.
Judge CAC with its partners: the LTV:CAC ratio tells you whether a customer is eventually worth more than they cost, and CAC payback tells you how long your cash waits. If payback is the problem, when acquisition takes too long to pay back sets out the fixes. Work yours out with the blended CAC calculator.
CAC vs related metrics
| Metric | What it tells you | How it differs |
|---|---|---|
| ROAS | Revenue per dollar of ad spend | Counts every order, new and repeat; CAC counts only new customers, per head. |
| MER | Total revenue over total marketing spend | An account-wide efficiency ratio, not a per-customer cost. |
| Customer lifetime value | What a customer is worth over time | The other side of the scale: CAC is the price, LTV is what you get for it. |
| CAC payback | Months until margin repays CAC | Adds time: two brands with the same CAC can wait very different lengths for their cash. |
Common mistakes
- Reporting blended CAC as the cost of paid growth. Organic and word-of-mouth customers in the denominator make paid acquisition look cheaper than it is.
- Counting customers from platform conversions. Platforms over-claim and their windows overlap, so the same customer can be counted by two channels. Count first orders in your own data. See platform over-claiming.
- Letting repeat buyers into the denominator. A returning customer who clicks an ad is not a new customer. Including them deflates CAC every month.
- Scaling on average CAC. Returns diminish as spend rises, so the next customer costs more than the average. Scaling decisions belong to marginal CAC.
- Comparing CAC to revenue or AOV. A customer pays you back in margin, not revenue. Compare CAC to contribution margin per customer.
FAQ
Divide acquisition spend by the number of new customers acquired over the same period. A$60,000 of paid spend that brings in 500 first-time customers is an A$120 CAC. Decide first whether you mean blended, new-customer or marginal CAC, because each uses a different spend and customer count.
For new-customer CAC: paid media plus the variable costs of paid acquisition, such as agency fees, affiliate commission and paid creative. For blended CAC: all sales and marketing spend. Product cost, shipping and discounts are not acquisition spend; they belong in the margin CAC is compared with.
CPA, cost per acquisition, is usually a platform figure for any conversion the platform claims, including repeat buyers and actions that are not purchases. CAC counts only genuinely new customers from your own order data. CPA describes a campaign; CAC describes the cost of growing the customer base.
Cut the spend tranches with the highest marginal CAC first, target lookalikes of your highest-margin customers rather than all buyers, and stop ads retargeting people who would have bought anyway. Raising first-order margin also works: it does not lower CAC, but it raises how much CAC you can afford.
Updated September 2026