Customer Acquisition Cost: How To Reduce It (2026)

Customer acquisition cost (CAC) is the total amount a store spends on sales and marketing to gain one new customer.

No matter how successful your brand is, customer acquisition can be a challenge, especially for store owners just starting. In fact, marketing and finding customers top the list of Year 1 challenges, according to a Shopify Survey of Store Owners, at 37% and 36%, respectively.*

This guide covers what CAC measures, how to calculate it, how to use it to assess store profitability, and strategies for reducing CAC when it’s higher than desired.

What is customer acquisition cost?

Customer acquisition cost (CAC) is the total cost of acquiring a single customer, including money spent on sales and marketing tied to converting a lead into a paying customer.

Your CAC is an important indicator of business health, as well as a major determining factor when it comes to your profitability. When CAC is lower than the revenue a customer generates, the store profits from that customer relationship. When CAC exceeds customer revenue, the store loses money on that acquisition.

High-revenue stores ($1 million and up) track CAC at a 30% rate, compared to 5% for low-revenue stores—a six-times difference, according to a Shopify Survey of Store Owners, Q4 2025.

While much of customer acquisition hinges on marketing, it’s important to know where to spend your money, and whether those costs are moving the needle for your brand. Marketing budgets have fallen to their lowest share of company revenues and budgets in several years, accounting for 9% of revenues and 9.6% of overall budgets, according to The CMO Survey.

Customer acquisition cost vs. cost per acquisition (CPA)

CAC and CPA measure different things:

• Scope. CPA measures cost within a single campaign, channel, or ad. CAC measures cost across all sales and marketing spending over a set period.
• Action measured. CPA tracks a specific action, such as a click, form submission, or email sign-up. CAC tracks only completed customer acquisitions.

CPA and CAC use different denominators. CPA divides spending by the number of times the target action occurs; CAC divides spending by the number of new paying customers.

How to calculate customer acquisition cost

To calculate CAC, add up all costs associated with acquiring new customers in a specific time period, then divide that total by the number of new customers who made purchases during that period.

Customer acquisition cost = Total acquisition costs / Number of new customers

The number of new customers refers only to first-time customers. It excludes returning or retained customers, since retention costs are separate from acquisition costs. For example, a store spending $4,000 on sales and marketing in a quarter and gaining 200 new customers in that period has a CAC of $20.

Blended CAC vs. Paid CAC

Blended CAC divides total sales and marketing spending, including organic and owned channels, by the total number of new customers acquired across all channels.

Paid CAC divides spending on paid channels only, such as paid search or paid social, by the number of new customers acquired through those paid channels specifically.

Costs to include in total marketing spend

Total marketing spend for a CAC calculation includes:

• Marketing software and tools. Subscriptions to customer relationship management (CRM) systems, analytics platforms, and email marketing services.
• Marketing staff salaries. Compensation for marketing team members, including salaries, benefits, and freelance or contract work.
• Advertising fees. Costs for online and offline advertising, including pay-per-click (PPC) campaigns, social media ads, and traditional media buys.
• Discounts and promotional offers. The value of discount codes, coupons, and special offers used to attract new customers.
• Content creation. Expenses for creating marketing content, such as blog posts, videos, and infographics.
• Sales commissions. Commission payments made to sales staff for closing new customer deals.
• Agency and consultant fees. Payments to external marketing agencies or consultants for campaign management, strategy, or creative work.
• Allocated overhead. A proportional share of shared costs, such as office space or equipment, tied to marketing and sales activities.

Tom Jauncey, co-head of Nautilus Marketing, allocates 40% of the marketing budget to ad spending, 30% to salaries, 15% to software, 10% to content creation, and 5% to sales costs.

Metrics to use with CAC

Customer lifetime value, gross margin, return on ad spend, and sales efficiency each combine with CAC to show whether acquisition spending generates profit for a store.

• Customer lifetime value
• Gross margin
• Return on ad spend
• Sales efficiency

Customer lifetime value

Customer lifetime value (CLV), also called lifetime value (LTV), is the total revenue a store expects from a single customer over the full length of their relationship with the store.

Customer lifetime value = Average revenue per customer x average customer lifespan

Customer lifetime value to customer acquisition cost ratio = Customer lifetime value / Customer acquisition cost

Comparing CLV to CAC shows whether the revenue a customer generates exceeds the cost to acquire them.

Gross margin

CLV shows expected revenue from a customer. Gross margin, which is the percentage of revenue remaining after cost of goods sold (COGS), shows how much of that revenue is profit.

Multiplying CLV by gross margin shows profit per customer. For example, a gross margin of 40% and a CLV of $300 earns a business a profit of $120 per customer.

If profit per customer is lower than CAC, that means that the store spends more acquiring the customer than it earns from them.

Return on ad spend

Return on ad spend (ROAS) is the revenue generated for every dollar spent on advertising. Comparing ROAS with CAC shows whether advertising spend generates revenue relative to acquisition cost.

Return on ad spend = Revenue attributable to advertising / Total advertising spend x 100

For example, a store that spends $10,000 on advertising and generates $50,000 in revenue from those ads has a ROAS of 500%, or $5 in revenue for every dollar spent.

Sales efficiency

Sales efficiency measures revenue generated by the sales team relative to total sales and marketing costs.

Sales efficiency = Revenue generated by sales / Total sales and marketing costs

A sales efficiency ratio of 2:1 means a store earns $2 in revenue for every $1 spent on sales and marketing.

CAC payback period

CAC payback period is the time it takes for the revenue generated by a customer to cover the cost of acquiring them.

CAC payback period = Customer acquisition cost / (Average monthly revenue per customer x gross margin)

A shorter payback period means a store recovers acquisition costs sooner. A longer payback period means recovery takes more time. For example, a store with a CAC of $120, average monthly revenue per customer of $50, and a gross margin of 40% has a CAC payback period of six months.

What is a good customer acquisition cost?

There’s no single CAC that is considered good across every store. What’s reasonable depends on product category, average order value, and how CAC compares to customer lifetime value.

Store owners weigh CAC against how quickly, and how often, a customer returns. “If we break even on the first purchase, I think that’s worth it because the customers come back,” says Dan Demsky, cofounder and CEO of Unbound Merino, on Shopify Masters. “We know that with a 4 ROAS, we’re quite profitable on the first purchase. Just keep scaling until it’s break-even.”

Median CAC varies by product category, based on data from more than 4,000 Shopify brands tracked by Polar Analytics:

Retail and arts and entertainment brands see the lowest median CAC, at $26.04 and $22, respectively, while business and industrial brands see the highest, at $96.85. Health and wellness brands see a median CAC of $91.94, which is still more than three times higher than retail.

CAC efficiency also shifts with store revenue. According to Polar Analytics, ecommerce brands earning between $5 million and $20 million see the lowest CAC efficiency of any revenue tier, while brands earning more than $100 million report the strongest performance across conversion metrics.

CAC also varies by acquisition channel. Ecommerce stores see an average organic CAC of $64, and an average paid CAC of $68, according to First Page Sage’s B2C analysis of client data across industries. For B2B ecommerce specifically, First Page Sage’s B2B report shows a combined average CAC of $86, made up of $87 in organic CAC and $81 in paid CAC.

Comparing CAC against customer lifetime value gives more context than a raw dollar figure. A CAC that generates at least three times its value in customer lifetime revenue—a 3:1 LTV to CAC ratio—is First Page Sage’s general benchmark for sustainable acquisition spending, based on an average ecommerce LTV of $255 against an average CAC of $84 across the client base it tracks.

Digital advertising costs, which drive a large share of paid CAC, continue to rise. US digital advertising revenue reached $294.6 billion in 2025, a 13.9% increase year-over-year, according to the IAB/PwC Internet Advertising Revenue Report. Social media advertising grew fastest among channels, up 32.6%, to $117.7 billion, while programmatic advertising rose 20.5%, to $162.4 billion.

How to reduce customer acquisition cost

Customer acquisition costs have risen about 60% over the past couple of years across most industries, driven largely by rising media prices and increased competition, writes Forbes contributor Sonia Thompson.

Thompson identifies four additional leaks that drive CAC higher: friction in the customer experience, fragmented media and discovery, ad fatigue, and messaging that never earns consideration.

If you find your customer acquisition costs are higher than you’d like, take these steps to lower them:

1. Improve your site’s SEO

Between January 2022 and June 2025, the average cost per lead for ecommerce businesses was $83 from organic channels versus $98 from paid channels, according to First Page Sage.

When Renaissance Digital Marketing set out to reduce its CAC, the founders focused on search engine optimization through content optimization, technical SEO enhancements, and backlink building.

“As a result, we saw a significant increase in organic traffic by 45% within six months,” says Managing Director Doug Darroch. “This directly contributed to a 30% reduction in CAC, as organic leads tend to be more cost-effective compared to paid acquisition channels.”

2. Identify your most effective marketing channels

The average cost per lead in Google Ads rose 5.13% year over year, from $66.69 in 2024 to $70.11 in 2025, according to WordStream.

Digital marketing agency Nautilus Marketing reviewed its marketing channels to identify which ones performed best. The team reallocated budget toward its highest-performing digital ads and cut spending on channels that underperformed. “By implementing these changes, we successfully reduced 15% of CAC within around six months,” says Tom Jauncey, Nautilus marketing co-head.

Shopify’s built-in marketing analytics reports break down sales, orders, and sessions by channel and campaign, showing which are driving the most customers at the lowest cost. Shop Campaigns let you set a maximum customer acquisition cost when running ads through the Shop app, keeping spending within that target automatically.

3. Focus on high-value customer segments

Nautilus Marketing also reduced its CAC payback period (the time it takes to recoup the cost of acquiring a customer) by focusing its acquisition efforts on customers likely to spend more or be more loyal. “By focusing on higher-value customer segments, we have successfully reduced our CAC payback period from six months to four and a half months,” says Tom.

To try this strategy, use a segmentation tool to profile your customer base and identify high-value groups based on spending and loyalty patterns. Shopify Audiences uses commerce data to build custom and lookalike audiences for ad targeting on platforms including Meta, Google, TikTok, Pinterest, Snapchat, and Criteo, helping surface likely high-value customers to target with acquisition campaigns. It’s available to Shopify Plus stores in the US and Canada using Shopify Payments.

Once you’ve identified high-value groups, tailor your marketing to speak directly to their needs, preferences, and behaviors.

4. Invest in email marketing

Email marketing reaches existing customers and subscribers directly, without paying per message the way paid ad channels charge per click or impression.

Email can carry a significant share of revenue even at scale. “We’re doing eight figures in business, and we have very tight attribution on Klaviyo. Even then, we do about 18% to 20% of our revenue through email. You can’t ignore it. There’s no replacement for it, even with everyone’s crowded inboxes,” says Sean Reyes, founder of Shock Surplus, on Shopify Masters.

Shopify’s built-in marketing automation tools send messages automatically based on customer behavior, such as an abandoned cart or a first purchase. Shopify Messaging automations can be built from pre-built templates or as custom workflows using Shopify Flow, and are available on the Basic Shopify plan and higher.

5. Grow word-of-mouth and creator channels

Fifty-three percent of merchants cite word of mouth as their most common Year 1 growth strategy, according to a Shopify Survey of Store Owners, Q4 2025.*

Some store owners minimize CAC by becoming the brand’s public face. “We are the face of the brand, and we will continue to be, because that’s the only way to maintain a zero CAC in this day and age and in this industry,” says Leah Marcus, cofounder of Good Girl Snacks, on Shopify Masters.

Referral programs, customer reviews, and creator partnerships extend word-of-mouth reach beyond a store’s existing customer base. Creator partnerships put a store in front of audiences who already follow and trust the person making the recommendation, rather than a store competing for attention through a paid ad.

* Disclaimer: Based on a 2025 survey of 500 Shopify merchants conducted in English across Australia, Canada, the United Kingdom, Ireland, New Zealand, and the United States. Respondents were established merchants with two or more years on the platform. Results reflect the experiences of this specific sample and may not be representative of all merchants.