CAC (Customer Acquisition Cost)
CAC (Customer Acquisition Cost) is how much it costs to acquire a new customer. Calculation: total marketing spend ÷ number of new customers. A healthy ratio is CAC below 30% of LTV.
CAC (Customer Acquisition Cost) is the average cost of acquiring one new customer. Basic calculation: CAC = total marketing and sales spend ÷ number of new customers acquired in that period. For example, a business that spent 20,000 ILS on advertising in a month and acquired 100 new customers has a CAC of 200 ILS per customer. CAC is a critical metric precisely because it doesn't mean much on its own — it always needs to be evaluated against LTV (the total value a customer brings over time). A common industry rule of thumb is that a healthy LTV-to-CAC ratio is at least 3-to-1, meaning CAC shouldn't exceed roughly a third of LTV. The most common mistake is calculating CAC using only direct ad spend while ignoring indirect marketing costs (content, marketing staff salaries, tools). In StoreChart, BI surfaces customer metrics including AOV, purchase frequency, and LTV, letting you calculate a real LTV/CAC ratio and price campaigns accordingly.
CAC tends to rise over time within any single channel as easy, cheap audiences get exhausted first and a business has to bid for progressively more competitive traffic — a phenomenon often called channel saturation. This is why tracking CAC trend over time, per channel, matters more than a single snapshot number: a channel with rising CAC and flat LTV is quietly becoming unprofitable even if it looked healthy six months earlier, and catching that trend early is cheaper than discovering it after a quarter of overspending.
A bi-analytics view that segments CAC by channel is what turns this metric from a lagging vanity number into an actionable one — without that breakdown, a rising blended CAC just looks like 'marketing got more expensive,' while a channel-level view might show one specific channel quietly souring while the others stayed healthy. Pairing CAC per channel against that channel's own customer LTV, not the blended average, is the only way to know whether a specific spend decision is actually working.
A quick sanity check any business can run without complex tooling is dividing last month's total marketing spend by the number of genuinely new customers acquired — if that number has been climbing three months in a row on the same channel, it's a concrete early signal worth investigating before committing next quarter's budget the same way.
Related terms
LTV (Lifetime Value) is the total value a customer brings to the business over the entire relationship. Simple calculation: AOV × purchase frequency × average customer lifespan. A higher LTV justifies a higher CAC.
Conversion rate describes the percentage of website visitors who complete a desired action, such as a purchase or a signup. The average eCommerce conversion rate is 2-3%. Improving conversion rate is one of the central challenges for every online store.
Frequently asked questions
No — CAC specifically measures the cost of acquiring a new customer. Returning customers who buy again organically shouldn't be counted in that calculation, since their repeat purchase reflects retention economics, not acquisition spend.
Different channels have different levels of competition, targeting precision, and buyer intent — paid search targeting people already searching for a product typically has a lower CAC than broad social ads reaching people who weren't actively looking to buy.
When CAC approaches or exceeds roughly a third of LTV, or when it's been rising for several consecutive months on the same channel without a corresponding rise in AOV or retention, both signal it's time to diversify acquisition channels rather than keep scaling spend on the same one.