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How do I calculate customer acquisition cost and payback period for an online store?
Customer acquisition cost (CAC) is sales and marketing spend in a period divided by the number of new customers won in that period. Payback period is CAC divided by the gross profit a customer generates per month, giving the months needed to recover the spend.
Example: 3,000 currency units spent and 100 new customers gives a CAC of 30. If each new customer yields 10 gross profit a month, payback is three months.
It matters because growth that costs more than a customer returns drains cash.
Commonly misread:
- Counting only advertising spend and leaving out agency fees, tools and staff time.
- Counting all orders, including repeat customers, as new customers.
- Using revenue instead of gross profit for payback.
Calculate it per channel, since blended CAC hides expensive sources.
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