Find out the average cost of customer acquisition (CAC) by industry to give yourself a baseline to measure your own performance. Setting your marketing budget is a critical balance, especially when it comes to acquisition costs. Every dollar you spend should be contributing effectively to attracting and converting new customers, but it can be difficult to understand how much it actually costs to acquire a new customer. This is where customer acquisition costs (CAC) come into play. Learn why customer acquisition costs vary by industry, what factors influence costs, and what strategies you can use to reduce them.

What is Customer Acquisition Cost (CAC)?

Customer acquisition cost (CAC) is the cost to acquire a new customer. CAC is a useful metric that allows you to quantify the success of your marketing campaigns and the effectiveness of additional operating expenses. The goal is to have a CAC that is significantly lower than the amount each new customer spends on your product or service.

Why is it important to know the average CAC by industry?

Knowing the average cost of customer acquisition (CAC) for your industry can give you a baseline to measure your performance against. If your CAC is significantly higher than the industry average, this could indicate inefficiencies in your marketing strategy or sales process. Conversely, if your CAC is low, you may not be investing enough in customer acquisition. This comparison can help you identify areas for improvement and set realistic goals. Understanding industry average CAC can also help with strategic planning and budget allocation. Knowing how much other companies in your industry typically spend to acquire customers can help you more accurately forecast your marketing and sales budgets. This can help you ensure that you don’t overspend or underspend on your customer acquisition efforts.

How to calculate CAC

Calculating your CAC (customer acquisition cost) is relatively simple:

• Determine your marketing spend : Determine the period you want to calculate. This can be a fiscal year, a specific campaign, or a month.

• Determine your marketing and sales spend : Include all costs related to marketing. This includes all costs related to marketing, such as salaries, software costs, and advertising purchases spent during a set period.

• Determine the number of customers acquired : Calculate the total number of new customers acquired during the given period. This should only include new customers, not repeat or returning customers.

• Divide your marketing spend by the number of new customers : Once you have your marketing costs and the number of new customers, simply divide your marketing costs by the number of new customers.

The formula to calculate CAC is:

CAC = Total Marketing Spend / Number of New Customers

Let’s take Chic Boutique, a hypothetical e-commerce company in the fashion and accessories industry, as an example. In a particular quarter, Chic Boutique spent $9,891 on marketing. This amount included social media advertising, influencer partnerships, email marketing campaigns, and salaries for the marketing team. In that quarter, Chic Boutique acquired 63 new customers. Following this formula, Chic Boutique would divide $9,891 by 63 to find that its CAC for that quarter was approximately $157.

Customer Acquisition Cost (CAC) Industry Average

• Arts & Entertainment: $21
• Health & Beauty: $127
• Fashion & Accessories: $129
• Home, Furniture & Garden: $129
• Electronics: $377

Customer acquisition cost (CAC) varies significantly across industries and is an important metric. Shopify collected annual average CAC data for ecommerce brands with 4 or fewer employees in 2021. This figure provides a rough estimate of how much a business can spend to acquire a new customer. Because it’s an average, your actual cost will vary based on a number of factors, including the size of your business, your goals, and your target market. Early-stage companies can use these industry benchmarks to help inform budget decisions and strategic planning.

Arts & Entertainment: $21

The arts and entertainment industry includes a wide range of businesses, from visual artists and craftsmen to game developers and photographers. But all of these businesses have one thing in common: they have a broad appeal and their content is highly shareable. Social media platforms like YouTube, Instagram, and TikTok are a goldmine for this industry. Creators can reach large audiences at minimal cost, often relying on organic growth through viral content.

If your CAC is significantly higher than the industry average, here are some ideas to lower it:

• Leverage user-generated content : As an artist or entertainer, your work is very personal, so your customers are more likely to invest in your brand on a personal level. Leverage user-generated content by encouraging your fans to share their experiences with your work.

• Partner with micro-influencers : Mega-influencers have large audiences, but they can be expensive and may not be as effective as you might expect. Micro-influencers, on the other hand, have smaller, more fragmented followers and are more engaging because they provide more credibility and authenticity to their audience.

• SEO Optimization : Search Engine Optimization (SEO) is a long-term strategy that requires creating high-quality content, optimizing keywords, and building backlinks. For the arts and entertainment industry, this might include writing blog posts about your creative process, producing behind-the-scenes videos, and interviewing other artists.

Health & Beauty: $127

The health and beauty industry relies heavily on visual appeal, influencer credibility, consistent demand, and a wide range of products aimed at a broad audience. To succeed, health and beauty brands must build trust and stay ahead of the competition through high-quality content, customer testimonials, and effective influencer partnerships.

If you want to lower your CAC (customer acquisition cost), try these strategies:

• Invest in content marketing : Create detailed how-to guides, tutorials, and beauty tips to position your brand as an expert in your field. This will build trust and credibility, which will help you drive organic customer acquisition and reduce your reliance on expensive advertising.

• Offer a customer loyalty program : Loyalty programs not only increase the lifetime value of your customers, they also build community and trust. They encourage customers to stay with you instead of competing brands, and reduce the need to continually acquire new customers.

• Run Social Media Advertising : Social media also allows for precise targeting, allowing you to reach demographics that are likely to be interested in your product. You can use high-quality images and videos to grab the attention of your target audience.

Fashion & Accessories: $129

This sector has similar acquisition costs to health and beauty due to its fierce competition and need for constant innovation. Brands need to regularly refresh their marketing strategies with eye-catching campaigns and collaborations. Think glamorous photo shoots, fashion shows, and partnerships with influencers. It takes significant investment to stay on top of trends and maintain a strong brand presence, but it can help build a loyal following that continually searches for the latest styles.

To effectively manage your CAC (customer acquisition cost), consider these tips:

• Run limited-time promotions : Promotions are especially effective in the fashion industry, where trends change quickly and customers are motivated by fear of missing out (FOMO).

• Optimize your email marketing : Email marketing is especially useful in the fashion industry, where maintaining a relationship with your customers is crucial. Drive repeat purchases and lower your overall CAC with personalized content, special offers, and updates on new product collections.

• Invest in retargeting ads : Retargeting ads remind potential customers of the products they have viewed and encourage them to complete a purchase. Bringing back people who have already shown interest can increase conversion rates.

Home, Furniture & Garden: $129

Home, furniture and garden ecommerce businesses have unique challenges when it comes to acquisition marketing. High-quality visuals are essential. Customers want to see every detail before making a purchase. Companies are investing heavily in immersive marketing techniques such as virtual showrooms and augmented reality apps to give customers a comprehensive view of their products. Plus, there are the additional logistics costs of shipping bulky items, so you have to be prepared to pay more to close a sale.

Here are some strategies to reduce CAC (customer acquisition cost) in this industry:

• Create detailed product pages : Include high-quality images and videos of the products you sell, as well as a detailed description of them as possible. For example, if you sell media consoles, mention the materials used, as well as the size details so customers can comparison shop.

• Leverage Google Shopping : Listing your products on Google Shopping can help you attract shoppers who are actively searching for home, furniture, and garden items. Optimize your product data feed with detailed descriptions, high-quality images, and competitive prices to increase your visibility.

• Offer Free Shipping : Shipping costs can be a significant barrier to purchase, especially for bulky items. You can entice purchases by offering free or discounted shipping options.

Electronics: $377

Electronics have the highest customer acquisition costs of any small ecommerce business, and the reason is clear. These products are complex and expensive, and customers need detailed information to make a purchase decision. Marketing strategies include comprehensive technology reviews, comparison guides, and how-to videos, all of which require a significant budget. Because technology is advancing so quickly, businesses must constantly market new products, which adds to their costs. However, when tech-savvy consumers find the exact device they want, the investment pays off.

To keep your CAC (customer acquisition cost) as low as possible, try these tactics:

• Engage in community marketing : Create a community by creating a forum or group where tech enthusiasts can discuss your product. These communities will volunteer to promote your product. Join platforms like Reddit, Discord, and specialized tech forums and be an active participant for the best results.

• Use Affiliate Marketing : Affiliate marketing is when you partner with a tech blogger or reviewer to promote your product and earn a commission for each product sold. Affiliates can create detailed reviews, unboxing videos, and how-to guides that resonate with their followers, and you only pay when their referrals are successful.

• Offer bundled products : Bundling products helps increase average order value and reduce cost of acquisition per product. For example, bundling a smartphone with accessories such as a case, screen protector, and charger makes the package more attractive to customers and increases profit margins.