Customer Acquisition Costs by Industry (2024)

Setting your marketing budget is a delicate balance—especially when it comes to acquisition costs. Every dollar you spend must contribute effectively to attracting and converting new customers, but understanding how much it actually costs to win over a new customer can be challenging. This is where customer acquisition cost comes into play.

Learn why customer acquisition cost varies by industry, what factors influence costs, and which strategies you can use to reduce them.

What is customer acquisition cost (CAC)?

Customer acquisition cost (CAC) is the cost of gaining a single new customer. CAC is a useful metric because it lets you quantify the success of your marketing campaigns and the efficiency of additional operating costs. The goal is to have a CAC that is significantly lower than the amount of money each new customer spends on your product or service.

Why is it important to know the average CAC of your industry?

Knowing the average CAC of your industry provides a benchmark to measure your own performance against. If your CAC is significantly higher than the industry average, it could indicate inefficiencies in your marketing strategies or sales processes. Conversely, if your CAC is lower, it suggests you may not be spending enough on acquisition efforts. This comparison can help you identify areas for improvement and set realistic goals.

Understanding the industry’s average CAC also aids in strategic planning and budget allocation. By knowing what other businesses in your industry typically spend to acquire a customer, you can better estimate your marketing and sales budgets. This ensures that you are neither overspending nor under-investing in your customer acquisition efforts.

How to calculate CAC

Calculating CAC is relatively simple:

Determine marketing spend for a particular period. Decide what period you’d like to examine, whether it’s a calendar year, particular campaign, or month.
Determine how much money you spent on marketing and sales. Include all the costs related to marketing, including salaries, software, and ad buys you spent during the period you established.
Identify how many customers you gained. Count the total number of new customers acquired during the time period, ensuring that you only include new customers and not repeat or returning customers.
Divide marketing spend by new customers. Once you have your marketing spend and new customer totals, simply divide your marketing costs by the number of new customers.

Here’s the formula for calculating CAC:

CAC = Total Marketing Spend / New Customers

Let’s take the example of a hypothetical e-ommerce business in the fashion and accessories industry called Chic Boutique. Over a specific quarter, Chic Boutique spent $9,891 on marketing. This amount includes costs for social media ads, influencer partnerships, email marketing campaigns, and salaries for the marketing team. During this quarter, Chic Boutique acquired 63 new customers. Following the formula, Chic Boutique can divide $9,891 by 63 to determine that its CAC for the quarter is approximately $157.

💡TIP: If your business operates through Shopify, you can find your customer acquisition cost by navigating to your overview dashboard.

Customer acquisition cost is a crucial metric that varies significantly across industries. Shopify collected data in 2021 that breaks down the annual average CAC for ecommerce brands with fewer than four employees.

These figures provide a general idea of what businesses might expect to spend to acquire new customers. Keep in mind, these are averages; actual costs can fluctuate based on factors like business size, goals, target market, and more. Think of them as ballpark figures rather than precise numbers. For early stage companies, these industry benchmarks can help guide budget decisions and strategic planning:

Arts and entertainment: $21

The arts and entertainment industry includes a whole host of different types of businesses, from visual artists and artisans to game developers and photographers. But all these types of businesses have one thing in common—they’re widely appealing and the content is highly shareable.

Social media platforms like YouTube, Instagram, and TikTok are goldmines for this industry. Creators can reach massive audiences with minimal spending, often relying on organic growth through viral content.

If your CAC is a lot higher than the industry average, here are a few ideas for bringing it down:

Leverage user-generated content. Your work as an artist or entertainer is deeply personal which means your customers are likely to be personally invested in your brand. Tap into that relationship by encouraging fans to share their experiences related to your work—a.k.a. user-generated content.
Collaborate with micro-influencers. Whereas mega-influencers come with massive audiences, they’re often expensive to work with and may not provide as much bang for your buck as you might expect. Micro-influencers, on the other hand, have smaller, more tailored followings that are highly engaged because they seem more credible and authentic to their audiences.
Optimize SEO. Search engine optimization(SEO) is a long-haul strategy that requires creating high-quality content, refining keywords, and building backlinks. For the arts and entertainment industry, this could mean creating blog posts about your creative process, behind-the-scenes videos, and interviews with other artists.

Health and beauty: $127

The health and beauty industry relies heavily on visual appeal, influencer credibility, consistent demand, and a diverse range of products that cater to a wide audience. To succeed, health and beauty brands need high-quality content, customer testimonials, and effective influencer partnerships to build trust and outpace the competition.

If you’re looking to lower your CAC, try these strategies:

Invest in content marketing. Consider creating detailed how-to guides, tutorials, and beauty tips to position your brand as an expert in the field. By building this trust and credibility, you can encourage organic customer acquisition and reduce reliance on expensive ads.
Offer loyalty programs. Loyalty programs increase the lifetime value of your customers but also foster a sense of community and trust. Reward customers for staying with your brand over competitors and reduce your need to constantly acquire new customers.
Run social media ads. Additionally, social media allows for precise targeting, enabling you to reach the demographics most likely to be interested in your products. Use high-quality images and videos showcasing your products to capture the attention of your target audience.

Fashion and accessories: $129

This sector sees similar acquisition costs to health and beauty, driven by fierce competition and the need for constant innovation. Brands must refresh their marketing strategies regularly with eye-catching campaigns and collaborations. Think glamorous photo shoots, fashion shows, and influencer tie-ins. Staying on trend and maintaining a strong brand presence requires substantial investment, but it helps build a dedicated following that keeps coming back for the latest styles.

To keep your CAC under control, consider these tips:

Run limited-time promotions. Promotions are particularly effective in the fashion industry, where trends change rapidly and customers are motivated by the fear of missing out (FOMO).
Optimize email marketing. Email marketing is especially useful in the fashion industry, where staying top-of-mind with customers is key. Send tailored content, special offers, and updates on new collections to encourage repeat business and lower your overall CAC.
Invest in retargeting ads. Retargeting ads remind potential customers of items they viewed or added to their cart, nudging them to complete their purchase. By bringing back people who have already demonstrated interest, you can increase conversion rates.

Home, furniture, and garden: $129

Home, furniture, and garden ecommerce businesses have their unique challenges related to acquisition marketing. High-quality visuals are essential here—customers want to see every detail before making a purchase. Companies invest heavily in immersive marketing techniques—like virtual showrooms and augmented reality apps—to give customers a comprehensive view of their products. Plus, the added logistics of shipping bulky items mean these businesses must be prepared to spend more to close a sale.

Here are some strategies to reduce CAC in this industry:

Create detailed product pages. In addition to high-quality images and videos of the products you’re selling, include descriptions that go into as much detail as possible. For example, if you’re selling a media console, mention the materials used as well as measurement details so customers are equipped with all the information they need to comparison shop.
Leverage Google Shopping. Listing your products on Google Shopping can attract high-intent shoppers actively searching for home, furniture, and garden items. Optimize your product data feed with detailed descriptions, high-quality images, and competitive pricing to improve your visibility.
Offer free shipping. Shipping costs can be a significant barrier to purchase—especially for bulky items. Incentivizing purchases with free or discounted shipping options can drive more sales.

Electronics: $377

Electronics have the highest customer acquisition costs of small ecommerce businesses, and it's easy to see why. These products are complex, expensive, and require detailed information to convince customers to make the investment. Marketing strategies include comprehensive tech reviews, comparison guides, and how-to videos—all of which demand a significant budget. The fast pace of technological advancements means companies must constantly market new and improved products, adding to the costs. But the investment pays off when tech-savvy consumers find the exact gadgets they’re looking for.

To keep your CAC as low as possible, try these tactics:

Engage in community marketing. Build forums or groups where tech enthusiasts can discuss your products, fostering a community that markets your products on your behalf. Join platforms like Reddit, Discord, and specialized tech forums and actively participate for the best results.
Use affiliate marketing. Affiliate marketing involves partnering with tech bloggers and reviewers who promote your products in exchange for a commission on every item they sell. Affiliates can create detailed reviews, unboxing videos, and how-to guides that resonate with their followers—and you only pay when their pitches are successful.
Offer bundled deals. Product bundling encourages higher average order values and reduces acquisition costs per product. For example, bundling a smartphone with accessories like a case, screen protector, and charger can make the package more attractive to customers and increase your profit margin.

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Customer acquisition cost by industry FAQ

What’s a good LTV-to-CAC ratio?

Customer lifetime value (or LTV) quantifies the income a customer brings to your business for the duration of their relationship with it (called the average customer lifespan). What makes a good CAC-to-LTV ratio depends on the industry, business size, target audience, and goals. The only hard-and-fast rule is that your customer acquisition cost should be less than the profit you receive from a customer over the course of your relationship.

How do I decrease my CAC?

To reduce your customer acquisition cost, spend less on marketing, either by decreasing your marketing efforts or shifting to more organic marketing strategies. You might implement a customer referral program, invest in search engine optimization, or raise the price of your product to lower your CAC.

Does the size of a business affect its CAC in different industries?

Yes, businesses with many employees will spend more to gain customers, since the salaries of their marketing teams (and any other employees in the sales cycle) factor into CAC. However, large businesses with high marketing costs also typically gain more customers from their campaigns.

Is it possible for businesses to reduce their CAC in their respective industries?

Businesses in any industry can reduce their customer acquisition cost (CAC) by looking at the individual variables that make up the CAC formula. If you have a high customer acquisition cost relative to competitors in your industry, the simplest way to reduce it is to cut your marketing spend, either by decreasing your marketing efforts or shifting to a more cost-effective, organic marketing strategy.