Customer acquisition cost (CAC)
Customer acquisition cost (CAC) is the marketing cost you pay to gain a new customer. In ecommerce, usually the first order incurs a loss because most brands rely greatly on ads and influencer campaigns for customer acquisition.
Generally, if CAC is too high, you're in a weak financial position, not making enough profit on each sale. Your profitability in the long run depends on balancing CAC and CLTV - CAC is best kept below 30% of CLTV for healthy margins. This way, you’ll be able to invest back, expand, and even pay more for acquisition if needed.
CAC should be tracked by marketing channel in order to optimize ROI and avoid needless spending on channels that don’t perform well.
Additional resources
Acquisition: AARRR Metrics Part 1on Metrilo Blog
See also
Marketing ROIPopular— Marketing ROI is a measurement of the effectiveness of marketing efforts. It compares the marketing investment and the increase in sales attributed to it. Marketing ROI is usually calculated for each campaign or marketing investment: mROI = (Sales increa
— Customer acquisition is part of the customer lifecycle and a focus for ecommerce marketing. It is the process of converting customers for the first time after they already know about your company and brand. It can be free - through organic search or socia
— Profit margin or just margin is an accounting term, showing what percentage of the retail price your profit is. It is the ratio between the profit and the retail price. The profit margin formula is: Margin = (retail price - cost of goods) / retail price
— Acquisition channel is the marketing channel where people come from and convert. You can work on many channels, but the one finals stop that converts the customer counts as the acquisition channel. No matter what other interactions with you they’ve h
