State the action, denominator and formula chain
Scenario inputs
- Define the customer conversion action and eligible visit or interaction denominator. (not complete)
- Choose one period, currency and indirect-tax basis. (not complete)
- State contribution per converted customer and its cost boundary. (not complete)
- State media and fixed acquisition costs included. (not complete)
- Treat every conversion rate as a user scenario, not a benchmark or forecast. (not complete)
expected customers = traffic × conversion rate; gross contribution = expected customers × contribution per customer; campaign contribution = gross contribution - total acquisition cost; CAC = total acquisition cost ÷ expected customers
- traffic
- Eligible visits or interactions for the defined action and period (visits or interactions) — business or platform record
- conversion rate
- User-entered expected customer conversions divided by eligible traffic (percentage) — user scenario
- contribution per customer
- Retained amount after the explicitly stated cost-to-serve boundary (currency units per customer) — business record or user scenario
- total acquisition cost
- Included media and fixed acquisition cost for the period (currency units per period) — business record or user scenario
At zero expected customers, CAC is undefined. Do not display zero or infinite efficiency.
Worked example: 10,000 visits at three conversion rates
Invented neutral scenario: 10,000 visits, 30 currency units contribution per customer and 2,000 total acquisition cost. Only the conversion-rate assumption changes.
| Conversion rate | Expected customers | Gross contribution | Campaign contribution | CAC |
|---|---|---|---|---|
| 1.0% | 100 | 3,000 | 1,000 | 20.00 |
| 2.0% | 200 | 6,000 | 4,000 | 10.00 |
| 2.5% | 250 | 7,500 | 5,500 | 8.00 |
For this simplified boundary, break-even conversion rate = 2,000 ÷ (10,000 × 30) = 0.006667, or 0.6667%. This is the arithmetic boundary under entered assumptions, not a claim that the rate can be achieved.
Interpret the scenario without turning it into a forecast
- Confirm that the conversion action represents an acquired customer for this decision.
- Check that traffic and conversions use the same counting and attribution window.
- Compare campaign contribution and CAC, not revenue alone.
- Test capacity and any cost changes at the higher customer count.
- Move to campaign profitability when incrementality and full campaign cost are the next decision.
Conversion economics questions
- Which conversion should count?
- Use the action that matches the acquired-customer decision and state its denominator, counting rule and window. Do not mix leads, sign-ups, orders and customers silently.
- When are two funnel-stage rates comparable?
- Name the event numerator and immediately preceding eligible denominator for each stage, then keep the cohort, window and counting rule aligned. If those bases differ, do not compare or multiply the rates. This definition check supplies no benchmark, forecast or causal uplift claim.
- Does a higher conversion rate always increase profit?
- Not necessarily. Contribution per customer, acquisition cost, fulfilment, service and capacity can change as volume changes.
- Is the break-even conversion rate a target?
- No. It is a threshold under the entered scenario and held-constant assumptions, not a benchmark, forecast or guarantee.
- What happens at zero expected customers?
- Campaign contribution remains negative by the included acquisition cost, while CAC is undefined because its denominator is zero.
Sources and methodology
- Conversion Economics methodology — Margin101: Product-owned expected-customer, contribution and CAC formulas.
- Conversion rate: Definition — Google Ads Help: Platform-qualified terminology; the article scenario is not a Google Ads benchmark.
- About attribution models — Google Ads Help: Official attribution terminology; attributed conversions are not treated as causal lift.
Test conversion, then the campaign boundary
- Conversion Economics Planner
Translate traffic and conversion assumptions into contribution and allowable acquisition spend
- Campaign Profitability Planner
Evaluate total campaign contribution after incrementality and campaign cost
- Customer Acquisition Cost Planner
Measure loaded and marginal customer acquisition cost across aligned channels