CAC

What does CAC mean?

Customer Acquisition Cost (CAC) refers to the total money a business spends to bring in a new customer. This includes costs like marketing, advertising, sales efforts, and any related expenses, divided by the number of new customers gained during a specific period.

It’s a key metric for understanding how cost-effective your growth is. A lower CAC means you’re gaining customers without spending too much, which is great for your bottom line. On the other hand, a high CAC may suggest that your marketing is too expensive or that your sales process needs improvement.

The CAC can be calculated by dividing the total marketing and sales spend by the number of customers acquired during that period.

CAC = Total Sales & Marketing Costs ÷ Number of New Customers

Why is CAC important in ecommerce and subscriptions?

CAC is essential for ecommerce and subscription businesses because it directly impacts your bottom line. Knowing your CAC helps you measure the effectiveness of your campaigns and determine if your customer lifetime value (LTV) is high enough to cover the cost of acquisition.

Example of CAC

Let’s say you invest $1,000 in advertising for a month and end up gaining 50 new customers. That means your cost to acquire each customer is $20. Now, if every customer goes on to generate $100 in revenue, your acquisition strategy is working well.

Driftcharge Tip

Always track your CAC alongside CLTV (Customer Lifetime Value). Focus on increasing retention, optimizing onboarding, and improving customer experience to ensure your acquisition costs lead to long-term profitability.

Ganesh Pawar

• 

Ganesh Pawar is the founder of Driftcharge, a subscription management app designed to help Shopify merchants streamline and scale their subscription businesses. With a deep focus on solving real-world pain points—like legacy account page support, flexible subscription options, and advanced analytics—Ganesh is passionate about building tools that drive growth and retention.