How To Calculate Customer Acquisition Cost (CAC)

Ever wondered how much it really costs to acquire a new customer and calculate CAC? Let’s break it down…

I’ve previously posted about customer unit economics and why you should focus on them – make sure to go and check it out.

To recap, CAC = customer acquisition cost or simply how much it costs to acquire a new customer.

To calculate CAC, you need to divide your total marketing costs by the number of new customers you acquired within a time period, such as a month or a year.

I know what you’re thinking…

What do you include in “total marketing costs”?

It’s a great question and it comes down to which type of CAC that you are trying to calculate – fully loaded CAC, blended CAC or paid CAC.

Fully loaded CAC includes all the costs associated with acquiring a customer, including overhead expenses such as salaries and office rent. This tends to be used by founders or investors and is not often used within eCommerce & Marketing.

Blended CAC, on the other hand, only includes the direct marketing costs, such as ad spend and agency fees and excludes overheads.

Finally, paid CAC only includes the costs of paid marketing channels, such as Google Ads or Facebook Ads. In your calculations you must only include customers acquired via paid channels. This is a great metric to understand paid channel effectiveness.

So, which CAC should you focus on as an eCommerce or DTC channel?

Blended CAC.

Blended CAC gives you a clear picture of your marketing efficiency.

By focusing on Blended CAC you can compare the effectiveness of different channels on your Blended CAC (I.e. how has this piece of activity affected my CAC?) and allocate your resources appropriately.

This will inform you on which marketing channels are driving the most customers at the lowest cost.

By keeping a close eye on your CAC and continuously optimising your marketing efforts, you can acquire new customers profitably and scale your business to new heights. 📈