Customer Acquisition Cost
CAC is the customer acquisition cost: total sales and marketing spend divided by the number of new customers in the same period.
What is Customer Acquisition Cost?
Customer Acquisition Cost (CAC) is the average cost of acquiring one new customer. It is calculated as all sales and marketing costs in a period divided by the number of new customers acquired in that same period. A fully loaded CAC includes not just ad spend but also agency fees, salaries, creative production, and tooling — not media spend alone.
Why does Customer Acquisition Cost matter?
CAC decides whether your growth is profitable. Compared against customer lifetime value (LTV), the LTV:CAC ratio shows how healthy the math is: around 3:1 is typically considered healthy, while a ratio near 1:1 means acquisition eats the entire value before operating costs are paid. You can lower CAC by raising conversion rate or average order value, and a low churn rate improves the ratio by increasing LTV.
Common use cases
- Blended vs. paid CAC. Blended CAC divides all costs by all new customers; paid CAC counts only paid spend and customers from paid channels.
- Channel evaluation. Compare CAC across Google, Meta, and email to shift budget to where customers are cheapest.
- Budgeting and scaling. Set a CAC ceiling so ad budgets never exceed what a customer is worth.
- Reporting. Explain an acceptable CAC to leadership, investors, or an agency based on contribution margin, not just revenue.
Shopify perspective
Shopify does not calculate an accurate CAC out of the box. You assemble it yourself by pulling ad spend from Google and Meta and dividing by the number of new customers from Shopify’s customer report. Pair it with ROAS to see both the revenue and cost sides. After Apple’s ATT and the loss of third-party cookies, channel-level attribution has become less reliable, so many stores lean on blended CAC and server-side tracking.