Customer Acquisition Cost is a Marketing ROI metric. It basically looks at how much money a company spent to acquire new customers.\u00a0<\/span><\/p>\n Customer Acquisition Cost= Total Amount Spent on Customer Acquisition (Sales + Marketing)\/Number of Customers Acquired.\u00a0<\/span><\/p>\n For example, if a company spent $10,000 to acquire new customers and acquired 500 customers, their CAC is $20.\u00a0<\/span><\/p>\n For retailers hoping to benchmark CAC costs, they vary widely between industries as well as business models. According to a survey done by Propeller in 2017, the average CAC for retail was $10. This number however can seem low for a luxury retailer or a niche market.<\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span>CAC is an important measure of the health of a business and its sustainability. . In 2019, eCommerce retailers, like many other highly competitive markets had to face the reality that CAC costs had simply gone too high. Years of focusing largely on customer acquisition had pushed the cost of acquisition over Customer Lifetime Value (CLV). What this effectively meant was that retailers could no longer hope to make back the amount they spent on acquiring a customer. This forced eCommerce companies to look at customer retention as the only sustainable strategy for growth.\u00a0<\/span><\/p>\n CLV or Customer Lifetime Value is a measure of how much revenue can be expected from a customer during their \u201clifetime\u201d interacting with your brand. CAC to CLV ratio is therefore an indication of the profitability of a business. What the optimal CAC to CLV ratio depends on many factors but obviously the lower the CAC, the better. Some experts believe the ration should be around 1:3.\u00a0<\/span><\/p>\n Ways to gain a healthy CAC to CLV ration:<\/strong><\/p>\n
\nWhat is a Good CAC for eCommerce?\u00a0<\/b><\/h2>\nWhy is it important to measure CAC?\u00a0<\/b><\/h2>\n
CAC to CLV ratio<\/b><\/h2>\n
\n