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Measurement and metrics

CAC (Customer Acquisition Cost)

Also called customer acquisition cost, cost per acquired customer, acquisition cost per customer, cost to acquire a customer.

Short answer

CAC (customer acquisition cost) is the total cost of acquiring customers divided by the number of new customers in the same period. It tells you what a new customer costs – not what a sale costs – and is always read alongside lifetime value.

Definition of CAC (Customer Acquisition Cost).

The numerator has to be defined before the figure means anything. A narrow CAC contains only the variable media spend: ad buying and commission. A full CAC also includes network fees, tools, agency fees and the salaries of the people working on the channel. Both are useful, and neither can be compared with the other. Always state which of the two the figure is.

The denominator is new customers, not orders. A customer who buys three times in the period counts as one. Use orders instead and you are measuring CPA or CPO – a different, lower figure that does not answer what growth costs. The mistake is easier to make than to spot, because both figures look plausible in a spreadsheet.

CAC is used for two decisions. The first is whether the business can afford its growth: a common rule of thumb is that lifetime value should be at least 3 times CAC, but that is a guideline, not a law of nature. The second is payback period: how many months pass before the customer’s contribution margin has covered what it cost to acquire them.

How it is calculated

CAC = total acquisition costs ÷ number of new customers

total acquisition costs
everything paid to acquire customers in the period – media buying, commission, network fees, tools and salaries, stated excluding VAT
number of new customers
unique customers who bought for the first time in the period, not the number of orders

Example

Media buying
DKK 40,000
Commission to affiliates
DKK 18,000
Network fee (20 % of the total price)
DKK 4,500
New customers
310
CAC
DKK 201.61

A CAC of DKK 202 is neither good nor bad on its own – it has to be held up against the contribution margin on the first order and against what the customer buys afterwards.

CAC vs. CPA

AspectCACCPA
Denominatornew customersactions – orders, leads, sign-ups
Numeratorall costs of acquiring customerswhat is paid for the individual action
Repeat purchasesdo not count – the customer has already been acquiredevery order counts as a new action
Used forbudget, growth and pricingday-to-day channel management and bidding

Use CPA to steer a channel from day to day, and CAC when you need to answer whether the business can afford its own growth.

How it goes wrong

  • 01

    Orders used as the denominator

    Use the number of orders instead of the number of new customers and CAC looks better than it is. The more repeat purchases the store has, the bigger the error – and the more confidently a wrong budget gets set.

  • 02

    Only media buying is counted

    Leave out commission, network fees, tools and salaries, and the figure can be compared neither with other channels nor with itself last quarter, if the definition has changed in the meantime.

  • 03

    CAC measured without incrementality

    Customers who would have bought anyway are counted as acquired. That gives an artificially low CAC in channels that sit at the end of the customer journey, and an artificially high CAC in the ones that created the demand earlier on.

At Affilyflow

CAC (Customer Acquisition Cost) in practice

The affiliate channel’s contribution to CAC can be calculated before the sale happens. The store sets a total price per sale, the network fee is 20 % of it, and the affiliate gets the 80 %. A total price of DKK 150 therefore gives the affiliate DKK 120 and DKK 30 in fees. Commission is calculated excluding VAT – although via the Shopify app it is calculated on the value of the goods without shipping, where it has not yet been confirmed whether VAT has been deducted.

The cost only becomes real once the sale is approved. A conversion never automatically credits a balance – everything is created as pending, and the store has the program’s approval period (30–90 days) to reject it with a reason the affiliate can read. If nothing happens, the sale is approved automatically.

Frequently asked questions

How do you calculate CAC?

Add up all the costs of acquiring customers in the period – media buying, commission, network fees, tools and salaries – and divide by the number of customers who bought for the first time in the same period. Use new customers as the denominator, not the number of orders, and state the amounts excluding VAT.

What is the difference between CAC and CPA?

CAC measures what a new customer costs and only counts customers buying for the first time. CPA measures what a single action costs and counts every order or lead separately. A customer who buys three times produces three CPA events but only one CAC. CPA steers the channel from day to day, CAC steers the budget.

What is a good CAC?

There is no general figure, because CAC only means something when compared with what you earn on the customer. Two questions decide it: does the contribution margin on the first order cover the cost, and how many months pass before the customer has paid back their acquisition cost. A common guideline is that lifetime value should be at least 3 times CAC.

Does affiliate commission count towards CAC?

Yes. Commission is a direct cost of acquiring the customer and belongs in the numerator, and so does the network fee. Leave them out and the affiliate channel looks artificially cheap compared with channels where the full media spend is visible from the start.

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