Definition
CAC (Customer Acquisition Cost) is the total cost of acquiring a new customer, including all marketing and advertising expenses.
CAC is calculated using the formula: CAC = Total Marketing & Advertising Cost ÷ Number of New Customers Acquired
Explanation
In dropshipping, CAC is a critical metric because many stores rely heavily on paid traffic. It shows how much it costs to bring in each customer and helps determine whether a product or campaign is profitable.
Costs included in CAC may involve:
- Advertising spend (social media, search ads)
- Influencer or affiliate fees
- Creative production costs (videos, images)
To be profitable, dropshippers aim to keep CAC lower than the profit generated per customer (e.g., through AOV and repeat purchases).
Example
A dropshipping store spends $1,000 on ads and acquires 50 new customers.
CAC calculation: $1,000 ÷ 50 = $20
This means it costs $20 to acquire each customer. If the average profit per customer is higher than $20, the campaign is profitable.
Key Takeaway
CAC helps dropshipping businesses measure how efficiently they acquire customers, making it essential for controlling costs and scaling profitably.