It’s not always feasible to rely on your existing customer base to drive revenue. Without a steady stream of new customers coming your way, growth will stagnate—particularly if you’re selling products that don’t naturally lend themselves to regular repeat purchases.
Customer acquisition metrics are the hard facts that indicate how effective your acquisition model is. Glowing data points act as evidence of traction, proving that you can attract new customers systematically—and helping build your case for more marketing budget.
But with so many data points at your disposal, it can be difficult to figure out which truly show the effectiveness of your customer acquisition strategy. This guide shares seven of the most important metrics, complete with benchmarks and recommendations for if you fall short.
Customer acquisition cost (CAC) measures the cost of converting someone into a customer. It’s calculated by dividing the total cost of a marketing campaign by the number of new customers acquired.
CAC can be difficult to calculate since there are multiple direct and indirect costs of acquiring a customer—like sales team fees, advertising spend, discounts used to lure customers in, and subscriptions for marketing automation software. Here’s the formula to calculate yours:
CAC = (sales and marketing costs + wages + overheads ) / customers acquired
CAC is an important metric for ensuring that acquisition strategies are financially sustainable. It’s all well and good to drive 10,000 new customers this month, but if you only have 10% of your initial marketing budget left to spread out across the final two months of the quarter, that’s not a sustainable customer acquisition model. Pace will slow down significantly, leading to confusion among both stakeholders and customers.
Analyzing CAC by channel also helps optimize budgets. For example, it might cost $50 to acquire a customer on a saturated channel like Instagram, but just $23 on TikTok. It makes sense to reallocate resources—including your team’s time and marketing spend—toward channels where you can acquire more customers for the same overall spend.
📌 Pro tip: Compare all of your most important acquisition metrics without leaving your Shopify admin. The all-new Analytics tab pulls data from all sales channels to show key customer acquisition metrics at a glance, and benchmark certain data points against others.
Customer lifetime value (CLV) represents the total value a customer brings to a business over their lifetime. It’s the sum of all purchases, and can be calculated by multiplying the customer value by the average customer lifespan. If customers tend to spend $120 each year and stay with your business for three years, for example, your CLV would be $360.
With CLV, you can work backwards to find out which of your customer segments are most profitable, and allocate most of your resources to those channels. This will drive customers who bring the most revenue in the long term, reducing the need to constantly replace low-value customers with new ones.
The CLV metric also helps predict future revenue. If you drive 500 new customers through the acquisition model, for example, a CLV of $360 would predict $180,000 in revenue. This is powerful evidence you can take to stakeholders to show the value of marketing and request more budget.
Both CAC and CLV are useful in their own right. Compared against each other, the ratio shows whether acquiring new customers is profitable in the long term.
A good CAC-to-CLV ratio is 1:3, which means that for every dollar you spend on acquisition, you’ll make back three times that amount over the customer’s lifetime.
Balance is essential for maximizing profitability and sustainable growth. The last thing you want is to spend $100 acquiring a customer who’ll only drive half of that in revenue throughout their lifetime. This strategy is unsustainable: The influx of new customers might make it appear like the campaign is a success, but you’ll feel the negative impact on revenue in the long term.
The CAC-to-CLV ratio also helps demonstrate the ROI of your marketing efforts and gives you insight to optimize your new customer acquisition strategy.
Say your Google Ads strategy has the highest acquisition cost out of all channels at $50, whilecustomers who come your way through Pinterest ads have a lower CAC of $30. On the surface, it looks like you should readjust budgets and assign more to Pinterest—it’s cheaper to acquire customers on that channel.
However, further digging shows that the CLV of Google Ads customers is $350, making the CLV:CAC ratio 1:7. Pinterest customers spend less and have a ratio of 1:3—meaning that although the upfront cost of acquiring a customer through Google Ads is more expensive, the long-term ROI is much higher and worth the initial outlay.
Acquisition rate is the percentage of your audience on a particular marketing channel who become customers. If you reached 20,000 website visitors on TikTok throughout the month and 900 of those people bought something, your TikTok customer acquisition rate would be 4.5%.
This customer acquisition metric helps gauge the effectiveness of campaigns in converting interest into actual sales. Vanity metrics like views, likes, and comments only paint one half of the story. (The story of the Instagram influencer who could only sell 36 T-shirts to her social media following of over two million springs to mind here.)
Low acquisition rate means there’s a mismatch somewhere—it could be that your product offering doesn’t match what you’re advertising, or that there’s no clear call to action to drive customers to your site. It could also signal conversion rate optimization (CRO) issues on your website: People are clicking through and engaging with content on the channel, but leaving once they interact with your online store.
Return on advertising spend (ROAS) is a financial metric that tells you how much revenue you generate for every dollar spent on advertising. It looks at revenue in the short-term: how much revenue you make on the transactions directly attributed to the advertising campaign.
ROAS works similarly to the CAC:CLV ratio, but only includes advertising costs in the CACcalculation—leaving out other costs like salaries, subscriptions, and discounts.
If you’re in negative ROAS, that’s not to say the campaign is a complete write-off. Compare ROAS against CLV to determine whether each customer’s next purchase will be profitable—you might lose $5 for every dollar spent on ads to acquire that customer, but if they spend $50 on their next purchase, there’s still a net positive return.
ROAS is a metric that can be directly impacted by platform changes. Bushbalm, for example, experienced a 20% year-over-year decline in ROAS alongside attribution challenges. They turned to Shopify Audiences to build custom audience lists which their marketing team could target to acquire new buyers. The result: a 24% higher ROAS for those new ultra-targeted campaigns.
“Shopify Audiences has consistently outperformed our best campaigns by 20-30%,” Bushbalm’s cofounder David Gaylord said. “Sustained results across several three-week campaigns, and inflight ad performance measurement has helped us to invest in the right areas.”
Click-through rate is the percentage of people who’ve clicked a specific link out of everyone who’s seen it. You can monitor click-through rates for almost any marketing channel, from clicks on your Facebook advertising campaigns to cart recovery emails—even touchpoints as small as how many people clicked the link in your Instagram bio.
CTR shows us how effective your campaigns are at convincing people to take the next step. Map out the journey someone takes from first becoming aware of your brand to making their first purchase, including the channels they’re using, and check the CTR for each interaction.
Here’s what that might look like:
Benchmark the average CTR for each channel against your own data. For example: Say the average CTR of a Facebook retargeting campaign falls between 0.62% and 1.61%. This figure falls below the benchmark, so the brand should prioritize optimizing their campaign—whether that means building more targeted audiences, adjusting the copy, or using a different ad format.
Instead of generating the bulk of your revenue from new customers—which is risky when a change in platform regulations can see revenue drop overnight—implement a customer retention strategy that convinces those you’ve already acquired to spend more. It’s cheaper to retain existing customers than to acquire new ones.
Customer retention directly impacts CLV. An impressive retention rate means the customers you acquire contribute more to your business over time, freeing up cash to spend on more expensive acquisition channels or experimental campaigns. You’ll make that initial investment back during the customer’s lifetime.
Studies show that the average retention rate in ecommerce is 30%, though this figure can be as low as 26% for apparel brands and as high as 31.5% for retailers in the pet industry.
If you’re falling below these benchmarks, implement retention strategies like:
Understanding industry benchmarks helps you set realistic goals and optimize your customer acquisition and marketing strategy.
The problem is that customer acquisition costs vary dramatically by industry due to factors like competition, market trends, and industry regulations. Different channels also limit how brands can reach customers on them—like Apple’s cookie-tracking limitations, which caused advertisers to lose 40% accuracy on targeting algorithms and sabotaged an estimated $10 billion in ad revenue.
What’s more important is knowing your “normal”, and continuously tracking and optimizing customer acquisition strategies based on key performance indicators (KPIs) such as customer lifetime value (CLV), monthly recurring revenue (MRR), and return on investment (ROI).
Advanced data analytics and business intelligence tools are indispensable for tracking these KPIs and how they fluctuate based on changes to your customer acquisition model.
Shopify does all of this for you on autopilot, with no manual setup required. You’ll even see how your KPIs compare against industry benchmarks, helping you figure out which percentile you’re in—and whether your customer acquisition model is in dire need of improvement.
Marketing platforms are limiting how brands interact with followers to force them into paying for ads—and the sheer volume of comparable products on the market means you need to do something truly special to stand out from the noise.
Here are a few ways to minimize the cost of acquiring new customers:
Customer acquisition isn’t an exact science—it’s a series of experiments. It takes trial and error to figure out which channels, messages, and promotions drive the most valuable customers—those who don’t need a huge outlay to acquire, but who will drive long-term revenue for your brand.
Luckily, you don’t have to be a data scientist to unveil these metrics for your business. The all-new Shopify Analytics collects data across all sales channels—including your online store, social media storefronts, marketplace listings, and physical stores—to calculate customer acquisition metrics.
You can even slice and dice the data by channel to pull detailed insights, and build your own custom explorations to monitor key metrics and prove your value to stakeholders.
There are multiple metrics that businesses use to measure the effectiveness of their customer acquisition model, including customer acquisition cost (CAC), customer lifetime value (CLV), and the relationship between the two.
The customer acquisition cost (CAC) to customer lifetime value (CLV) ratio helps you determine whether you’ll turn a profit on each new customer throughout their lifetime. It dictates how profitable your acquisition strategy is.
Customer acquisition cost shows how much you’ll spend to acquire a new customer. Compare this against the lifetime value of each customer to figure out whether you’re spending more on acquisition than you’ll generate in revenue.
The ideal CAC-to-LTV ratio is 1:3. This means that for every dollar you spend acquiring a new customer, they’ll bring $3 in revenue over their lifetime.
