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What is the price to pay to acquire one single new customer (Cost of Customer Acuisition)

The cost of customer acquisition (CAC) is the amount that it takes to get noticed and convince someone to become your customer.

If you are unaware of your CAC, your business could fail very fast and you could be losing money right now. A solid business knows that there will be a cost associated with acquiring new customers, and therefore a budget must be calculated and put aside for marketing and advertising. But you need to know which campaigns are effective and which ones aren't bringing you enough customers so that you don't waste your efforts in the wrong campaigns. Also, your CAC can reveal that your ads are effective for some customers but that you are mostly targeting the wrong demographics.

Indeed, any costs invested in your business should be monitored at all times to ensure that you are managing your investments effectively. Let's look at how to calculate the CAC, and how you can improve it.

Let's look at the simplest metric to determine how much it cost you to acquire one new customer.

Regardless of your business, if you spent 50,000$ on marketing campaigns and advertising, and you got 10,000 new customers, you apply this simple formula*:


CAC : Cost of customer acquisition
TCM : Total cost of marketing
CA : Customer Acquired

Therefore: CAC = 50,000/10,000 = 5$

In this case, the CAC for one acquired customer is 5$.

Note that the total cost of marketing (TCM) is the entire amount that you spent on all your marketing efforts for targeting and acquiring new customers. So if you spent money on a new website, landing page, product pictures, flyers, logos, new staff, or printing, you need to combine all those costs to figure out how much you spent in total.

Accoring to entrepreneur, these four industries spent the following amounts to acquire just one new customer**:

• Travel: Priceline.com: $7
• Telecom: Sprint PCS: $315
• Retail: Barnesandnoble.com: $10
• Financial: TD Waterhouse: $175

As you can see, the CAC can be high. Nowadays everyone has access to the internet, and there is more competition to get people's attention.

The CAC is not to be confused with the cost per action (CPA). This metric refers to the amount you pay to convert new and returning customers, or the cost that you will pay to make a conversion, whereas CAC is strictly for new customers.


Selling software as a (temporary) service (instead of as a product) is form of e-commerce that grows by acquiring new customers on a regular basis and at a fast speed.

If you want to calculate the CAC for an SaaS model business, the formula gets more complicated and you must take into account the lifetime value of your customer (LTV).
Refer to this page*** for these more complicated metrics and definitions.

And in order to calculate your return on investments (ROI) based on your CAC and LTV for any type of business refer to Ometria.com****

The lifetime value of your customer (we will get to this more in detail in another blog) is the total value that a customer will bring to your business for as long as he is your customer. Obviously, this amount needs to be much higher than your CAC.
According to Ometria, if your LTV: CAC ration is 1-1, you are losing money by acquiring a customer.

If your ratio is 3-1 you are at the perfect level and your business model was built solidly. If you have a ration of 4-1 or higher, you are probably under investing and you should be spending more to acquire more customers. Maybe it is time to look at a new marketing plan.

Improve your CAC

Finally, if you want to improve your CAC, you can take the following steps:

1) Make changes to your least effective campaigns, invest in better ones, learn more about existing customers so that you can target similar demographic in your next campaigns

2) Ask for feedback from your customers. Maybe it isn't about your marketing efforts. Perhaps people are dissatisfied with your goods or services and the bad reviews are keeping new customers from joining your business.

3) Use A/B testing features for your e-commerce site or landing page. At Upclick, our platform allows for you to perform A/B testing effortlessly on your checkout pages. By seeing which checkout page performs better, you can learn your customers' preferences and change your campaigns, landing pages, sites accordingly.

4) Invest in Affiliate channels and marketplaces (this mostly applies for SaaS). All our merchants get instant access to the Upclick Affiliate Marketplace where they can let other merchants and affiliates sell and promote their products in exchange of a sales percentage. This is a great and effortless way to acquire new customers at a very small cost.