CAC (Customer Acquisition Cost) is the cost of acquiring one new customer: all marketing and sales spending for a period divided by the number of new customers in that same period. CAC shows what each new buyer costs your store, and together with LTV it answers the central business question: are you earning or subsidising every sale?
The CAC formula
The basic formula looks like this:
CAC = acquisition spending / number of new customers
The numerator includes every hryvnia spent to bring customers in: ad budget, payments to contractors and freelancers, the cost of producing content, first-purchase discounts, partner commissions. If you do the marketing yourself, it is fair to include the cost of your own time.
The denominator is new customers, not all orders. This matters: counting all orders including repeats makes CAC artificially low and leads to wrong decisions. That is why it helps to track a second metric alongside it:
CPO (cost per order) = ad spending / number of orders
Example. In a month the store spent 20,000 UAH on ads and 5,000 UAH on a contractor. It gained 100 new customers. CAC = 25,000 / 100 = 250 UAH. That is the price of a new buyer — everything else is compared against it.
CAC and LTV: the key pair of numbers
On its own CAC means nothing: is 250 UAH expensive or cheap? LTV gives the answer.
LTV (Lifetime Value) = average order value × number of purchases over the customer's lifetime × margin
And then comes the central ratio of unit economics:
LTV / CAC
- LTV / CAC below 1 — you pay more for a customer than you earn from them. Every new buyer increases the loss.
- LTV / CAC around 1 — breaking even: there is turnover but no profit.
- LTV / CAC clearly above 1 — the model works, and increasing advertising increases profit.
This is exactly why a store selling a cheap one-off product can be unprofitable with perfectly normal advertising, while a store selling consumables can be profitable even with a high CAC: the customer comes back.
One important nuance is payback time. If LTV accumulates over two years while ad money must be paid today, the store needs working capital. So alongside LTV/CAC, look at how many purchases it takes for a customer to pay back their acquisition.
How to calculate CAC per channel
An average CAC across the whole store is a blunt instrument. Real decisions come from seeing the cost of a customer for each channel separately. The minimum set: search ads, social media, organic search, price aggregators and shopping ads, referrals and repeat sales.
| Channel | How CAC is formed | Comment |
|---|---|---|
| Search advertising | Budget / new customers from the channel | The fastest start, but CAC rises with competition and in season |
| Shopping ads (product feed) | Budget / new customers from the feed | Often the cheapest paid channel in e-commerce: the ad already shows price and photo |
| Social media | Budget + creative production / new customers | More expensive on cold audiences, cheap on retargeting |
| Organic search (SEO) | Content and work costs / new customers from organic | Slow to ramp up, but CAC falls over time — the page keeps working |
| Email and repeat sales | Tool and content cost / orders | Formally not new customers, but this is the channel that lowers the store's average CAC |
| Referrals and word of mouth | Bonus costs / new customers | The cheapest channel; scales slowly and only on genuinely good service |
For such a calculation to be possible at all you need two things: traffic source tagging in your links, and orders reconciled with spending. Orders and revenue by period are visible in the Turboshop dashboard analytics, spending comes from your ad accounts, and integrations with analytics services connect the two.
A store never simply "has a high CAC". It has several channels with very different customer prices — and the owner's job is not to cut the budget but to move it to where customers are cheaper.
How to reduce CAC
There are two ways to lower CAC: reduce the numerator (spending) or increase the denominator (customers acquired with the same money). The second is almost always the better deal.
1. Raise site conversion
This is the fastest lever. If the same advertising produces more orders, CAC drops automatically with no budget changes at all. The basics work: a fast mobile site, complete product pages, honest stock levels, simple checkout without forced registration.
2. Use retargeting
Advertising to people who already visited your store costs less than cold audiences, because they already know you. The most valuable segments are those who viewed a product page and those who abandoned a cart. Retargeting does not replace new acquisition, but it noticeably lowers average CAC.
3. Earn from repeat sales
A repeat purchase requires no new acquisition: the customer is already yours. Every additional purchase increases LTV and improves the LTV/CAC ratio even if CAC itself is unchanged. What to do:
- Build your customer base from the first purchase and stay in touch with it.
- Remind customers about products running out and about seasonal updates.
- Offer complementary items and bundles instead of single products.
- Keep service strong: fast delivery and easy exchanges bring people back better than discounts.
4. Grow organic traffic and SEO
Organic search is the only channel where CAC decreases over time: a page built once brings customers for years. The initial return is slow, so SEO should run in parallel with advertising, not instead of it. What to do at the start is on the SEO for online stores page.
5. Connect a product feed
Shopping ads show the photo, price and title before the click, so they bring warmer visitors and often deliver a lower CAC than plain text ads. Turboshop stores generate a product feed for Google — one of the simplest ways to make acquisition cheaper in e-commerce.
6. Close the holes your budget leaks through
- Advertising products that are out of stock.
- Broad queries with no commercial intent — traffic without orders.
- Channels you do not measure: without numbers you do not know what works.
- Ad budget spent on categories with minimal margin.
Common mistakes when calculating CAC
- Counting only the ad budget. Contractor work, content and bonuses are acquisition costs too.
- Dividing by all orders. The denominator must be new customers, otherwise CAC is understated.
- Looking at CAC without LTV and margin. A cheap customer with zero margin is worse than an expensive one with a high margin.
- Comparing your CAC with someone else's. Normal values differ by niche and order value; compare yourself with yourself over time.
- Judging a channel after a week. Some purchases are delayed — short periods give a false picture.
Frequently asked questions
What CAC is considered normal?
One that is clearly lower than LTV after margin. The absolute figure says nothing: 500 UAH is expensive for a cheap one-off product and cheap for high-ticket electronics with repeat purchases.
How is CAC different from CPO?
CPO is the cost of one order, including repeat orders. CAC is the cost of a new customer. In a store with repeat purchases CPO is always lower than CAC, and the two must not be confused.
How do I calculate CAC for a store that has just launched?
Take a full month: divide all marketing spending by the number of new customers. At the start the figure will be high — that is normal; what matters is the month-to-month trend, not the first value.
Can CAC be reduced to zero?
No, but it can be reduced substantially through channels that do not require constant pay-per-click: organic search, repeat sales and recommendations. In yourpricing page.
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