Meta Ads for subscription e-commerce: what CAC should you accept based on retention and margin?

When a brand sells a monthly box, the first order tells you almost nothing about the profitability of a Meta campaign. A subscriber who stays for ten months generates ten times the margin of a single delivery. Conversely, a subscriber who cancels after the welcome box may cost more than they bring in. For Poiscaille, we reduced the cost per subscription on Meta from €112 to €27 in three months, and subscriber lifetime was the key data point used to evaluate this figure. In our Meta Ads agency, we set the maximum CAC before touching any campaigns. We detail the calculation here, step by step.

Key takeaways

• The acceptable CAC depends on the margin per delivery and the average number of deliveries a subscriber receives.
• To estimate a subscriber's lifetime, divide 1 by the monthly churn rate.
• We set two caps: a portion of the LTV in margin, and a payback period compatible with cash flow. The chosen CAC is the lower of the two.
• In our example of a €39 box, the maximum CAC drops from €90 to €30 when the monthly churn rate rises from 5% to 30%.
• Retention should be measured by cohort and by channel, as subscribers from Meta do not necessarily stay as long as those from Google.

Why is the first-order ROAS not enough?

The ROAS displayed by Meta compares spending to the revenue of the first order. With a subscription, most of the value comes in the following months. A campaign with a ROAS of 1 on the first box can be very profitable if subscribers stay for a year. A campaign with a ROAS of 2 can lose money if it mainly attracts customers who came for a discount and leave after the first shipment.

We therefore start with three figures: the margin per delivery, the churn rate, and the CAC paid for each new subscriber.

Step 1: How much does each delivery earn?

We calculate the contribution margin of a delivery, which is what remains after all costs associated with that shipment:

• the price of the box, excluding taxes;
• minus the cost of goods;
• minus packaging and preparation;
• minus shipping;
• minus payment fees;
• minus average discounts, gifts, and refunds.

To illustrate the calculation, we have used the example of a monthly subscription box sold for €39 excluding tax.

Step 2: How long does a subscriber stay?

Thechurn rate monthly corresponds to the share of subscribers active at the start of the month who cancel during that month. For an initial estimate, we calculate the average lifetime of a subscriber as follows:

Average lifetime (in months) = 1 ÷ monthly churn rate

With a 12% monthly churn rate, a subscriber stays for an average of 1 ÷ 0.12, or about 8.3 months.

This formula assumes that the churn rate is stable from one month to the next. In reality, cancellations are more frequent after the first and second box. As soon as you have a few months of history, track each cohort : out of 100 subscribers recruited in January, how many are still receiving a box in February, March, April, etc.? Then, use this actual curve instead of the formula.

Step 3: What is the value of a subscriber?

TheLTV in margin corresponds to the cumulative margin a subscriber generates throughout their entire lifetime:

LTV margin = contribution margin per delivery × average lifetime

In our example: €15 × 8.3 months, or approximately €125.

If we calculated LTV based on the price of the box (€39 × 8.3, or €324), we would end up with an acceptable CAC that is nearly three times too high. We always work based on the margin.

Step 4: What is the maximum acceptable CAC?

We calculate two ceilings and keep the lower one.

The profitability ceiling

This is the portion of the LTV that you are willing to spend to acquire a subscriber. We often start at 60%, which leaves 40% of the margin for fixed costs and profit. This percentage is adjusted based on your overhead costs and your growth rate.

In the example: €125 × 60% = €75.

The cash flow ceiling

Thepayback period is the number of months required for the delivery margin to cover the CAC. The longer this period, the more money you are fronting, and the more you are relying on retention that has not yet been observed. Set a maximum period compatible with your cash flow, for example, 6 months.

In the example: €15 × 6 months = €90.

The maximum CAC retained is therefore €75.

What CAC should you accept based on the churn rate?

The table uses the same box (€15 margin per delivery), with a profitability ceiling at 60% of the LTV and a payback period of 6 months.

When churn is low, cash flow limits the CAC before profitability does. Above a 20% monthly churn rate, the acceptable CAC becomes so low that it is often more useful to work on retention (box content, the ability to skip a month, communication with subscribers) before increasing the Meta budget.

The Poiscaille case: cost per subscription divided by four on Meta

Poiscaille sells subscriptions for sustainably sourced seafood. Between November 2022 and January 2023, we reorganized their Google Ads and Meta Ads campaigns into three stages: discovery, engagement, and conversion.

• On Meta, the cost per subscription dropped from €112 to €27.
• On Google, it went from €77 to €6.
• More than 2,000 subscriptions were generated over the period, and the overall acquisition cost was divided by seven.

Poiscaille estimated the average lifetime of its subscribers to be between 8 and 10 months. With eight to ten deliveries per subscriber, a cost per subscription that would have seemed high for a single order became acceptable. Read the Poiscaille case study

The two platforms did not have the same role. Google reached people who were already looking for a fish subscription. Meta presented the offer to people who hadn't thought of it yet, which explains the higher cost per subscription. We detail this breakdown in the article on the Meta Ads vs. Google Ads budget for e-commerce.

How do you apply this CAC in Meta Ads?

Track the right events

• Send Meta a purchase event specific to new subscribers, distinct from monthly renewals.
• Install the Conversions API Conversions API alongside the pixel so that subscriptions are attributed even when browsers block cookies.
• Exclude current subscribers from prospecting audiences.

Compare Meta CAC to the actual number of new subscribers

The cost per result displayed by Meta includes sales the platform claims without having generated them. Each week, divide your Meta spend by the number of new subscribers recorded in your subscription tool.

Track retention by channel

Compare the retention curve of subscribers acquired via Meta, Google, and direct traffic. If Meta subscribers churn faster, recalculate their maximum CAC using the lifetime value specific to that channel.

Evaluate the welcome offer over several months

A half-price first box lowers the displayed CAC, but it often attracts people who leave after the first shipment. To judge a welcome offer, look at how many subscribers from that cohort pay for their third box at the regular price, and factor the discount into the first month's margin.

To set a cost-per-acquisition target for each platform, we detail the method in our article on calculating target CPA on Google, Meta, and LinkedIn.

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