What is customer acquisition cost (CAC)?
Customer acquisition cost is the average amount spent to bring in each new customer over a defined period. For a practical estimate, divide the marketing spend for that period by the number of new customers acquired in the same period. Include the channels and costs you want to evaluate consistently; mixing a monthly spend figure with customers from a different time window can distort the result.
This free e-commerce customer cost and value calculator pairs CAC with an estimate of customer lifetime value. It helps store owners compare acquisition spend with the gross profit that repeat orders may contribute over an expected customer relationship.
How the calculator estimates customer value
- CAC: marketing spend Γ· new customers acquired.
- Lifetime orders: orders per customer each year Γ customer lifespan in years.
- Lifetime revenue: average order value Γ estimated lifetime orders.
- Lifetime gross profit: lifetime revenue Γ gross margin percentage.
- LTV to CAC ratio: lifetime gross profit Γ· CAC.
- Gross profit after CAC: lifetime gross profit β CAC.
For example, if a store spends $5,000 to acquire 100 new customers, its estimated CAC is $50. With a $75 average order value, three orders per year, a two-year lifespan, and a 55% gross margin, estimated lifetime gross profit is $247.50 per customer, or 4.95 times the CAC.
How to use this e-commerce CAC and LTV tool
- Enter marketing spend and new customers for the same reporting period.
- Enter your average order value and gross margin as a percentage.
- Estimate typical yearly orders per customer and the customer lifespan in years.
- Select Calculate customer economics and review CAC, lifetime revenue, gross profit, ratio, and profit after CAC.
- Adjust assumptions to compare scenarios, such as improving repeat purchase frequency or reducing acquisition spend.
Understanding your LTV to CAC ratio
The ratio compares estimated lifetime gross profit with the cost of acquiring a customer. A ratio above 1:1 means the modeled gross profit exceeds CAC before other expenses. It does not by itself prove that a channel or store is profitable. Fulfillment, returns, payment processing, customer service, discounts, overhead, and the time value of money can all change the real outcome.
Use the calculator to make consistent comparisons over time and across channels. Recalculate with cohort-based order and retention data when available, and avoid treating an industry benchmark as a target without accounting for your margins, cash flow, and business model.
Ways an online store can improve customer economics
- Measure acquisition spend and new customers over matching periods and channels.
- Improve product pages, checkout clarity, and campaign targeting to reduce wasted spend.
- Encourage useful repeat purchases through relevant follow-up, replenishment reminders, and customer support.
- Track gross margin after product costs and discounts rather than relying on revenue alone.
- Compare estimates with actual customer cohorts and update lifespan assumptions as evidence changes.
Frequently asked questions
What is a good customer lifetime value to CAC ratio?
There is no single ratio that fits every store. A ratio above 1:1 indicates modeled lifetime gross profit exceeds CAC, but your business still needs to cover operating costs and cash-flow needs. Compare channels using the same definitions and your actual margin structure.
Should I use revenue or gross profit for LTV?
This calculator uses lifetime gross profit for the LTV-to-CAC ratio because it accounts for the gross margin you enter. Revenue is also shown separately, but revenue alone does not account for product costs.
What costs should I include in acquisition cost?
Choose a consistent definition. You may include paid media, agency fees, creative costs, affiliate commissions, or other sales and marketing costs. State clearly whether the figure covers all channels or just one campaign.
Does the estimate include returns, fees, and fulfillment?
No. The estimate uses average order value, gross margin, order frequency, lifespan, and acquisition spend. Include returns, shipping, payment fees, discounts, support, and overhead in a fuller financial model.
How accurate is customer lifetime value?
It is only as reliable as the assumptions and data entered. Customer behavior can change, and a simple average does not model churn timing or discount future cash flows. Use cohort data when possible and treat the output as an estimate.