In plain words
Customer acquisition cost is what you spend to get one new customer. Over a period, it is the acquisition spend divided by the number of new customers it produced.
Seen from the page, it is the cost of bringing one visitor divided by the share of visitors who buy. That second form shows why the offer matters to it. The ad platform sets what a visitor costs. The offer sets how many of them buy. Raise conversion and every customer costs less, with no change to the ads.
Formula
- CAC = acquisition spend ÷ new customers won
- CAC = cost per visitor ÷ conversion rate
Worked example
If a visitor costs $0.90 to bring and 3.0% of them subscribe, each subscriber costs $30.00. At 3.6% conversion the same traffic delivers a subscriber for $25.00.
The subscriber is worth $53.29 over a year either way. The engine puts profit per subscriber at $23.29 at the lower conversion and $28.29 at the higher.
The example order
A $40.00 bag of coffee, shipped free, every cost counted
2 declared kinds cost nothing on this option
| Step | Grain | Amount |
|---|---|---|
| Revenue | – | $40.00 |
| Cost of goods | per unit | −$12.00 |
| Pick and pack | per order | −$1.18 |
| Packaging | per parcel | −$0.50 |
| Shipping label | per parcel | −$7.50 |
| Card fee per order | per order | −$0.30 |
| Refunds | percent | −$2.00 |
| Card processing | percent | −$1.16 |
| Contribution margin | – | $15.36 |
| 2 kinds costing nothing | – | $0.00 |
Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.
CAC is not cost per order
Acquisition cost belongs to new customers. Dividing spend by all orders, repeat orders and renewals included, gives a smaller and more comfortable number that describes nothing. A renewal cost nothing to acquire: the subscriber was already won.
Using it
Work it out per offer and per channel, for new customers only. Blended figures hide the campaign that buys customers at twice the average. Then set it against what that customer is worth, on the offer that won them. A cheap customer on an offer that loses money is no bargain.
In Offer Suite
Offer Suite's simulator takes the acquisition cost as an input, for the whole offer or per option, and reports profit per customer after it. The intro offer comparison works it out from a cost per visitor and each intro's conversion.
Source: Offer Suite's offer simulator.