--- title: "Customer acquisition cost formula for ecommerce | Product Metrics" description: "Customer acquisition cost is ad spend divided by new customers. See the formula, a worked example, and the most you can pay for a first order." canonical: "https://www.productmetrics.io/blog/customer-acquisition-cost-formula" pageType: article language: en alternates: en: "https://www.productmetrics.io/blog/customer-acquisition-cost-formula" de: "https://www.productmetrics.io/de/blog/cac-berechnen" x-default: "https://www.productmetrics.io/blog/customer-acquisition-cost-formula" publisher: "Product Metrics" author: "Berend Vrakking" datePublished: 2026-10-07 dateModified: 2026-10-08 image: "https://www.productmetrics.io/og/blog/customer-acquisition-cost-formula.png" --- > Content index: https://www.productmetrics.io/llms.txt # Customer acquisition cost formula for ecommerce ## Key takeaways - Customer acquisition cost (CAC) is ad spend divided by new customers. Google Ads defines it as ad spend allocated to new customers divided by unique new customers acquired. - Cost per order flatters it: €10,000 of ad spend and 200 orders give €50.00 per order, but only 120 orders were new customers, so each cost €83.33. - A new customer's first order can repay at most its profit: €40.00 at a €100 basket and 40% margin. An nCAC of €83.33 needs €43.33 more from later orders. - Product Metrics shows nCAC per product and as an average, because the average can hide which products bring new customers cheaply. Customer acquisition cost (CAC) is what you pay in advertising to win one customer. For a shop running Google Shopping or Performance Max, the formula is the easy part. The harder question is what you can afford to pay for a first order, because a first order is often the only purchase you can count on. nCAC (new customer acquisition cost) is how this post writes CAC, to make clear that only first-time buyers are counted, and section 3 turns it into a break-even you can set for your own products. The worked example uses round numbers you can check by hand, so swap in your own. For the short definition, see [CAC in the glossary](https://www.productmetrics.io/glossary/cac). ## 1. How do you calculate customer acquisition cost? The formula is customer acquisition cost = ad spend ÷ new customers. Google Ads defines it the same way: according to [Google Ads Help](https://support.google.com/google-ads/answer/15597581), Customer Acquisition Cost is "the ad spend allocated to new customers divided by the total of unique new customers acquired through a campaign." Take an example with round numbers (illustrative data). A shop spends €10,000 on Google Ads in a month and receives 200 orders at an average of €100. Of those, 120 came from customers who had never bought before, and each of them ordered once. | Measure | Result | |---|---| | Cost per order (CPA) | €50.00 | | nCAC | €83.33 | | ROAS | 2 | CPA is €10,000 ÷ 200 orders, nCAC is €10,000 ÷ 120 new customers, and ROAS is €20,000 revenue ÷ €10,000 of ad spend. To run the same sums on your own account totals, use the [MER and nCAC calculator](https://www.productmetrics.io/mer-calculator). > **Sidenote:** For simplicity, the example allocates the whole €10,000 to new customers. Google's definition counts only the ad spend allocated to new customers, so use the figure Google Ads reports for your own campaigns. **Figure: €10,000 of ads: what does each order and each new customer cost, in €?.** Each bar is the €10,000 of ad spend divided by orders or by new customers. Per order it is €50.00, per new customer €83.33, because 80 of the 200 orders came from returning customers. | What the ad spend is divided by | Ad spend per order or new customer | | --- | --- | | Cost per order | €50.00 | | Cost per new customer (nCAC) | €83.33 | _Source: Illustrative data. Calculated as €10,000 ÷ 200 orders and €10,000 ÷ 120 new customers_ Cost per order is the number that flatters you. It spreads the spend over 80 orders from returning customers, who were not acquired that month, so it understates what each new customer cost. The same split is what separates [cost per acquisition](https://www.productmetrics.io/glossary/cost-per-acquisition) from CAC. ## 2. nCAC, CPA and ROAS answer different questions nCAC tells you what a new customer costs, CPA what an order costs and ROAS what revenue each euro of ads returned. They use the same ad spend but divide it by different things, so they can disagree about the same campaign. | Metric | Formula | Counts | Question it answers | Example | |---|---|---|---|---| | nCAC | Ad spend ÷ new customers | New customers only | What does a first order cost? | €83.33 | | CPA | Ad spend ÷ orders | All orders | What does an order cost? | €50.00 | | ROAS | Revenue ÷ ad spend | Revenue | How much revenue per euro of ads? | 2 | | POAS | Profit after variable costs ÷ ad spend | Profit | Did the ads earn back more than they cost? | 0.8 | The example looks acceptable on CPA and ROAS, but at a 40% margin its break-even ROAS is 2.5, so a 2 ROAS loses money. POAS is ROAS multiplied by the contribution margin, here 2 × 0.40 = 0.8; see [POAS vs ROAS](https://www.productmetrics.io/blog/poas-vs-roas) for the maths. For where each metric sits at account level, see [ROAS, MER, POAS and nCAC](https://www.productmetrics.io/blog/marketing-efficiency-ratio-vs-roas). nCAC adds what ROAS cannot: how much of the spend went on customers who had never bought. A campaign can show a strong ROAS because it reaches people who would have bought anyway, and a high nCAC shows you are not reaching new ones. ## 3. Break-even nCAC The most a new customer can cost on their first order is the profit from that order. That is the break-even nCAC: basket value × contribution margin, with prices excl. VAT and the margin after cost of goods and variable order costs. **Figure: A €100 first order: how much can a new customer cost, in €, at each margin?.** Each bar is the profit on a €100 first order, the most a new customer can cost. The dashed line is the €83.33 the example pays. The red part is the shortfall: at 40% the order covers €40.00, and even at 50% every first order loses money. | Contribution margin on the order | Most a new customer can cost (break-even nCAC) | | --- | --- | | 20% | €20.00 | | 30% | €30.00 | | 40% | €40.00 | | 50% | €50.00 | Reference line: nCAC the example pays (€83.33). _Source: Illustrative data. Calculated as basket value × contribution margin_ In the example, the basket is €100 and the margin is 40%, so first-order profit is €40.00. The nCAC is €83.33, so the first order loses €43.33 per new customer. **Figure: One new customer: first-order profit against the cost to win them, in €.** Each bar is an amount per new customer. The first order earns €40.00 of profit, winning the customer cost €83.33 (nCAC), so the first order leaves €43.33 for later orders to repay. | Profit, cost and the gap between them | € per new customer | | --- | --- | | First-order profit | €40.00 | | nCAC | €83.33 | | Shortfall on the first order | €43.33 | _Source: Illustrative data. Calculated as €100 × 40% margin, and €83.33 − €40.00_ A first-order loss can be a deliberate bet. If customers come back, later orders can repay it, and shops that can wait for repeat orders may accept a gap. Place the bet on the number of orders you actually see, not on hope. If you value new customers on a forecast instead, [predicted LTV](https://www.productmetrics.io/blog/predicted-ltv) explains how to check it against the orders that follow. **Figure: How many €100 orders until a new customer repays their €83.33 cost?.** The line is the total profit from one customer, €40.00 per order. The dashed line is the €83.33 it cost to win them. Two orders reach €80.00, still short; the third, at €120.00, is the first to repay it. | Number of orders the customer has placed | Total profit from the customer so far (€) | | --- | --- | | 1 | €40.00 | | 2 | €80.00 | | 3 | €120.00 | | 4 | €160.00 | Reference line: Cost to win the customer (nCAC) (€83.33). _Source: Illustrative data. Calculated as order number × €40.00 profit per €100 order at a 40% margin_ At €40.00 profit per order, this customer needs a third order: two orders reach €80.00, which is still €3.33 short of €83.33. If your new customers rarely place a third order, the nCAC is too high, whatever the average nCAC says. [LTV:CAC for ecommerce](https://www.productmetrics.io/blog/ltv-cac-ratio-ecommerce) covers how to count those later orders. To find the break-even for a product, start from its margin with the [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator). ## 4. How Google counts new customers Google Ads can report customer acquisition, but only for Purchase conversions. According to [Google Ads Help](https://support.google.com/google-ads/answer/12077475), "Customer acquisition reporting only works with 'Purchase' conversions in Google Ads." Three parts of Google's setup decide how nCAC is counted: - **Detection:** for each conversion, Google can auto-detect whether it is new, or you can report it yourself via the conversion tag, which Google says allows better accuracy. The tag parameter is `new_customer`, and for Google Analytics or uploads it is `customer_type` with the values `new` and `returning`. - **Lapse window:** 540 days is recommended and set by default, but not required. It decides how long a past customer still counts as existing. - **Goals:** per [Google Ads Help on customer lifecycle goals](https://support.google.com/google-ads/answer/12080169), New Customer Value tells Google to "bid higher for new customers than existing ones". New Customer Only means "only bid for new customers". New Customer Value works with Target ROAS and Maximise conversion value in Search, Performance Max, Shopping and Demand Gen campaigns. A first order is the signal Google gets at bid time, so the quality of the new or returning flag matters. With Full Signal Tracking every order is marked new or returning, so you can increase priority for first orders. It gets through every adblocker on a unique endpoint on your own domain, so the new customer purchases a blocker would otherwise remove are still counted. Details are on the [Full Signal Tracking page](https://www.productmetrics.io/server-side-tracking). New customers get their own conversion action in Google Ads. Product Metrics delivers these as separate conversion actions: Product Metrics - New Customer, New Customer Profit, Returning Customer, Returning Customer Profit, Revenue, Profit, Revenue LTV and Profit LTV. That lets Smart Bidding value a first order differently from a repeat one. > **Sidenote:** nCAC depends on what the ad platform and your shop recorded: an order that never reaches Google is missing from both the spend side and the new customer count. ## 5. A weekly nCAC routine Keep nCAC under what a first order earns, or know exactly why you accept the gap. **Manage nCAC in five steps** 1. **Send new or returning status with every purchase.** Google can auto-detect it, but reporting it yourself on the conversion gives better accuracy. With Full Signal Tracking every order is marked new or returning. 2. **Set New Customer Value on your purchase campaigns.** It works with Target ROAS and Maximise conversion value and needs at least one Purchase conversion goal. 3. **Work out first-order profit for each product.** Take the price excl. VAT minus cost of goods and variable order costs. That figure is the break-even nCAC for a first order. 4. **Compare nCAC with first-order profit every week.** Look at each product as well as the average. Where nCAC is above first-order profit, you are relying on repeat orders. 5. **Check the repeat orders you are relying on.** Count how many later orders your new customers actually place, and how much profit they add, before you accept a gap. Keep the weekly check short. Take last week's ad spend and new customers, calculate nCAC and put it next to first-order profit. Allow for conversion lag before you judge a recent week, because orders can arrive days after the click. Judge a change over several weeks, not one. A single week with few new customers swings nCAC sharply. Write down the window you compare, so a month of promotions is not set against a quiet one. **Figure: Same €10,000 of ads: how nCAC (€) moves with the number of new customers.** Each bar is €10,000 of ad spend divided by the new customers won. 100 new customers give an nCAC of €100.00 and 150 give €66.67, so a quiet month alone can move it by €33.33. | New customers won in the period | Ad spend per new customer (nCAC) | | --- | --- | | 100 new customers | €100.00 | | 120 new customers | €83.33 | | 150 new customers | €66.67 | _Source: Illustrative data. Calculated as €10,000 ÷ new customers_ ## 6. nCAC per product nCAC per product shows which products bring new customers cheaply and which do not. Product Metrics shows nCAC per product and as an average. **Figure: What a new customer costs per product (nCAC, €), against the average.** Each bar is what one product pays in ads to win a new customer. The dashed line is the €83.33 average. Product A costs €40.00 and Product C €150.00, nearly four times as much, and the average describes neither. | Product | Ad spend per new customer (nCAC) | | --- | --- | | Product A | €40.00 | | Product B | €60.00 | | Product C | €150.00 | Reference line: Average nCAC of the three (€83.33). _Source: Illustrative data. Average assumes each product brings the same number of new customers_ In this example, Product C costs nearly four times as much to win a new customer as Product A. The average of €83.33 describes none of them. A product with a low nCAC and a good margin is a place to increase priority. A product that only wins customers at a high nCAC needs a closer look at its price, margin or ads before it takes more budget. Seeing nCAC per product next to the average is what makes Product C's €150.00 visible before it takes more budget. [Product Segmentation](https://www.productmetrics.io/product-segmentation) then places each product in one of six segments by its ad clicks and return, so you see where every product stands without working through them one by one; it suggests, and you decide what each product gets. Read product-level nCAC with the same care as the average. It rests on the orders and new customers your ad platform and shop recorded, so a product whose purchases are missing from either looks cheaper or dearer than it is. So get the purchase data complete first, with [server-side tracking](https://www.productmetrics.io/server-side-tracking) where a blocker eats orders, and only then act on these numbers. ## Start with one best seller The [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator) gives you the margin-based floor for each product, and [break-even ROAS per product](https://www.productmetrics.io/blog/break-even-roas-per-product) walks through the maths. To send new and returning customers to Google Ads, see [Full Signal Tracking](https://www.productmetrics.io/server-side-tracking), which comes with the Pro subscription at no extra charge; see the [pricing page](https://www.productmetrics.io/pricing). I'd start with one best seller. Work out its break-even nCAC (price excl. VAT times contribution margin), divide last month's ad spend by its new customers, and compare the two. If nCAC comes out higher, count how many later orders those new customers actually place. ## Frequently asked questions ### What is a good customer acquisition cost? A good customer acquisition cost is one your customers repay in profit. Compare it with the profit from a first order, which is the break-even nCAC, and then with the profit later orders add. With a €100 basket and a 40% margin, an nCAC of €40.00 breaks even on the first order, and an nCAC of €83.33 needs €43.33 more from repeat orders. There is no benchmark figure here on purpose: the right number depends on your margin and how often customers come back. ### What is the difference between CAC and CPA? CPA is cost per acquisition, usually ad spend divided by all conversions, which here means all orders. CAC counts only new customers. In the example, €10,000 over 200 orders is a CPA of €50.00, while the same spend over 120 new customers is a CAC of €83.33. ### How do I calculate new customer CAC in Google Ads? Divide the ad spend allocated to new customers by the number of unique new customers. Google Ads reports Customer Acquisition Cost as exactly that, but only for Purchase conversions. Google can auto-detect whether a conversion is new, or you can report it with the new_customer parameter on the conversion tag, which gives better accuracy. The default lapse window is 540 days. ### What is nCAC? nCAC is new customer acquisition cost: the ad spend needed to win one customer who has not bought before. It is the same figure as CAC, ad spend divided by new customers, written nCAC to make clear that repeat buyers are excluded, and it is the number to hold against the profit from a first order. Product Metrics shows it per product and as an average: new customers have their own conversion action in Google Ads, and the average is ad spend divided by new customers. Also available in: [Deutsch](https://www.productmetrics.io/de/blog/cac-berechnen) --- Written by Berend Vrakking, founder of Product Metrics. Last updated 2026-10-08. HTML version: https://www.productmetrics.io/blog/customer-acquisition-cost-formula