Customer Acquisition Cost Calculator

To calculate the Customer Acquisition Cost for a retail business, you can follow a straightforward two-step process. This calculation involves identifying the total costs associated with acquiring new customers and then dividing that by the number of new customers gained.

Here’s how it’s done:

1. Determine the total sales and marketing costs spent on acquiring new customers over a specific time period. This includes expenses like advertising, promotions, sales commissions, and any other costs directly related to customer acquisition.
2. Determine the total number of new customers acquired during that same time period.
3. Divide the total sales and marketing costs by the number of new customers acquired.

Use the formula: CAC = Total Sales & Marketing Costs / Number of New Customers Acquired

For example, let’s say a retail store spent the following on customer acquisition over the past month:

• $5,000 on digital advertising
• $2,000 on in-store promotions
• $3,000 on sales commissions

The total sales and marketing costs would be:
$5,000 + $2,000 + $3,000 = $10,000

During that same month, the store acquired 500 new customers. Plugging this into the formula:
CAC = $10,000 / 500 = $20 per new customer

So, the retailer’s Customer Acquisition Cost was $20 per new customer acquired that month.

What Is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the total cost a business incurs to acquire a new customer, including expenses like marketing, advertising, sales, and other customer acquisition activities. CAC is a vital metric because it helps businesses understand the effectiveness of their marketing strategies and how they impact the company’s profitability.

How to Calculate CAC

CAC = (Total Sales & Marketing Costs) / Number of New Customers Acquired

For example, a retailer spends $36,000 on sales and marketing efforts over a certain period. During this time, the retailer acquires 1,000 new customers. Using the formula above, your CAC would be calculated as follows:

CAC = $36,000 /1,000  = $36

This means for every new customer you gain, you’re spending $36.

Why is CAC an important metric?

CAC directly reflects the profitability and efficiency of a company’s customer acquisition efforts. Tracking and optimizing CAC is crucial for long-term business success.

What is a good or average CAC?

The average CAC across all industries is around $70 per new customer. However, there is no single “good” CAC, as it varies widely by industry. However, a CAC to Lifetime Value (LTV) ratio of 1:3 is generally considered a healthy benchmark.

• For traditional retail businesses, the average CAC is around $10 per new customer.
• For ecommerce businesses, the average CAC is around $70 per new customer.
• Higher-end products tend to have a higher CAC, around $45 or more.
• Within ecommerce, the CAC can range from $53 for food/beverage to $1,143 for jewelry.
• Automotive: $234 CAC for paid ads, $178 for organic
• Medical Devices: $126 paid ads, $120 organic

Costs like referral fees, marketing/advertising, and fulfillment can impact ecommerce CAC.

How does CAC differ across industries?

CAC can range from $68 in e-commerce to $315 in telecom, depending on the cost of customer acquisition in that particular market. The key takeaway is that CAC can vary widely based on the industry, product pricing, and business model.