A simple example
If the acquisition activity being measured costs £1,000 and brings 25 new customers, CAC is £40. This is an illustrative calculation, not a client result.
Use a consistent formula
CAC = acquisition costs ÷ new customers acquired. State which costs are included: advertising alone, or a broader scope including creative, agency and sales costs. State the period and how a new customer is identified. Two CAC reports with different scopes are not directly comparable.
Illustrative calculation
If a business spends £12,000 on the acquisition activity being measured and acquires 300 new customers in the defined period, CAC is £40. This invented example is arithmetic, not an XnMark case result. If the same activity produces 500 orders, dividing by 500 gives cost per order, not CAC.
Questions before comparing markets
- Are customer identities consistent across stores?
- Are the costs expressed in a comparable currency?
- Does the period include the relevant purchase lag?
- Are returning customers excluded from the new-customer count?
- Does the offer produce different contribution or return rates?
Use CAC with value and payback
A lower CAC can still attract customers who return less or buy low-margin products. Compare acquisition cohorts with their observed contribution over a stated period. Set a spending ceiling that reflects the business’s cash and margin requirements rather than a generic industry ratio.
Compare acquisition cost on a consistent basis
Suppose one report divides advertising spend by all orders, while another divides total acquisition costs by new customers. Both may be labelled CAC, but they answer different questions. Before comparing markets or months, agree which costs and customers belong in the calculation. Returning customers should not silently inflate a new-customer acquisition measure.
A useful review connects acquisition cost with the value and margin of the customers acquired. A lower CAC can still be unattractive if the customers buy low-margin products or rarely return. Conversely, a higher initial cost may need evaluation over an agreed payback period, supported by observed customer cohorts rather than an optimistic forecast. Promotions, seasonality and changing channel mix also deserve context. Keep the formula visible in the report so decisions do not depend on a label that different teams interpret differently.
- Separate new customers from repeat orders in the chosen measure.
- Document included costs and apply the same basis across comparison periods.
- Review customer contribution and payback alongside the acquisition cost.
Connect acquisition with contribution →
Frequently asked questions
What is customer acquisition cost?
Customer acquisition cost (CAC) is the cost of acquiring new customers under a stated cost and time definition. It differs from cost per order because returning customers can place additional orders.
Is cost per order the same as CAC?
No. CAC uses new customers under a stated definition. Orders can include repeat purchases, so substituting the order count changes the metric.
What costs belong in CAC?
The scope must be stated. Advertising-only and fully loaded acquisition costs answer different questions. Use consistent periods and definitions before comparing results.
Sources and further reading
Primary material for the concepts discussed here. Our practical checklists and illustrative examples are editorial recommendations. Source links open in a new tab.