Customer Acquisition Cost (CAC) is the total amount spent to acquire a single customer.
Tracking this metric helps you understand the resources that go into acquiring customers for your business. You can also filter this metric based on channels of marketing. This will help you make better decisions on which channels you should allocate your marketing budget to.
A common point of confusion among many merchants is whether or not to calculate CAC based all channels (including free). You should only consider customers acquired through a paid channel when calculating your CAC.
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A reasonable customer acquisition cost depends on the industry and business type you're running. According to Shopify data, the average customer acquisition cost for a small e-commerce business is around US$ 58.64.
This number alone does not provide you with enough insights to determine the profitability of your business. You should compare your CAC to your gross margin and your Customer Lifetime Value. You should make sure that the cost of acquiring customers does not exceed your ability to monetize these customers.
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