What is Customer Acquisition Cost (CAC)?
Customer Acquisition Cost (CAC) represents the $ amount that it costs you, on average, to acquire a new customer. This is a critical metric for your ecommerce business as you always want to drive down CAC compared to the lifetime value (LTV) of your customers. In fact, one of our most important analyses in Peel is our LTV:CAC ratio. This directly compares how much value a customer is bringing to your store over time, compared to the amount it takes to acquire them.
How to Calculate Customer Acquisition Cost
To calculate your Customer Acquisition Cost (CAC) simply divide your sum of your marketing spend for a given period by the total number of customers acquired in that same period of time. Expressed as a formula: CAC = Total Marketing Spend / Customers Acquired. Peel can automate this process with the information that you connect from your marketing channels. Our automated analysis pulls your total marketing spend and automatically calculates your CAC based on the amount of those customers who have converted on your site.