Customer Acquisition Cost (CAC)
Also known as: Customer Acquisition Cost
CAC (Customer Acquisition Cost) is the total cost of sales and marketing required to win one new paying customer over a given period.
CAC tells you how much you're paying to acquire each customer. Unlike cost per lead, it counts only customers who actually paid — making it the number that matters for unit economics.
A complete CAC includes more than ad spend: agency or team salaries, software, creative production, and sales costs all belong in the numerator. Leaving them out produces a flattering but misleading figure.
CAC is only meaningful next to customer lifetime value (LTV). The LTV:CAC ratio is the real signal of a sustainable business — a widely used benchmark is 3:1, meaning each customer is worth three times what it cost to acquire them.
Formula
CAC = Total sales & marketing cost ÷ New customers acquired
Example
You spend ₹3,00,000 on marketing and sales in a month and gain 100 new customers → CAC = ₹3,000.
Frequently asked questions
What is a good LTV to CAC ratio?
3:1 is the common benchmark — each customer is worth roughly three times their acquisition cost. Below 1:1 you lose money on every customer; far above 3:1 may mean you're under-investing in growth.
Related terms
Customer Lifetime Value (LTV)
LTV (Customer Lifetime Value) is the total profit a business can expect from a single customer across the entire relationship.
Return on Ad Spend (ROAS)
ROAS (Return on Ad Spend) is the revenue you earn for every rupee spent on advertising. A ROAS of 4 means ₹4 of revenue for every ₹1 of ad spend.
Conversion Rate
Conversion rate is the percentage of visitors who complete a desired action — a purchase, sign-up, or enquiry — out of everyone who had the chance to.
Marketing Funnel
A marketing funnel is the journey a person takes from first discovering your brand to becoming a customer, usually framed as awareness, consideration, and decision stages.
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