{"id":1530819,"date":"2023-12-05T16:52:01","date_gmt":"2023-12-05T21:52:01","guid":{"rendered":"https:\/\/www.practicalecommerce.com\/?p=1530819"},"modified":"2023-12-18T08:53:47","modified_gmt":"2023-12-18T13:53:47","slug":"how-to-break-even-on-customer-acquisition","status":"publish","type":"post","link":"https:\/\/www.practicalecommerce.com\/how-to-break-even-on-customer-acquisition","title":{"rendered":"How to Break Even on Customer Acquisition"},"content":{"rendered":"

Last year I reported<\/a> my research showing that brands on average lost $29 for every customer acquired \u2014 up 222% in a decade. The size of the loss spotlights the dual importance of subsequent sales to recoup the initial costs while replacing the 40% customer churn in some sectors.<\/p>\n

Can merchants lower the acquisition cost to breakeven on the first sale or even a profit? Is making an initial profit the right goal?<\/p>\n

For most brands, getting close to breakeven is the better option. Brand shouldn’t aim to turn an initial profit as it suggests too-low spending on acquisition, hampering growth. Certainly there are exceptions, such as brands with $1,000 average cart values, but breakeven should be the goal for most.<\/p>\n

Acquisition Math<\/h3>\n

Say your average order is $100, product cost is $50, and shipping and handling is $32. That leaves a gross margin of $18. But if the acquisition cost is $35, you’re losing $17 for every acquired customer.<\/p>\n

Reducing the CAC<\/a> to around $18 gets to the magical first-order breakeven, likely from three levers:<\/p>\n