Glossary · Core metricsTOFU
CAC (Customer Acquisition Cost)
The short answer
CAC (Customer Acquisition Cost) is the average amount you spend to acquire one new customer. Divide your marketing spend for a period by the number of new customers acquired in that period: ₹4 lakh spent to win 500 new customers is a CAC of ₹800.
CAC only means something next to what a customer is worth. An ₹800 CAC is excellent if a customer generates ₹3,000 of gross profit over their lifetime, and ruinous if they generate ₹600.
Blended CAC vs new-customer CAC
- Blended CAC divides total spend by total customers, including returning ones. It flatters you as your repeat base grows.
- New-customer CAC divides spend by first-time buyers only. It's the honest measure of acquisition efficiency.
- Paid CAC uses paid media spend and paid-attributed customers only — useful, but prone to attribution disputes.
Track new-customer CAC weekly. Blended CAC can improve while acquisition quietly gets worse.
Setting an affordable CAC
- Calculate gross profit per customer over a period you're willing to wait — often 6 to 12 months.
- Decide how much of that you'll spend to acquire them.
- Check payback — how many months until gross profit covers CAC.
- Set channel targets from that number, not from benchmarks.
Common mistakes
- Leaving out creative, agency and tool costs when comparing channels
- Dividing by all orders instead of new customers
- Ignoring returns and RTO, which make CAC per delivered customer higher
- Using a competitor's CAC as a target without knowing their margins
Media CAC vs fully loaded CAC
| Version | Includes |
|---|---|
| Media CAC | Ad spend only |
| Fully loaded CAC | Ad spend + agency fees + creative + tools + marketing salaries |
Track both: media CAC for campaign decisions, fully loaded CAC for business planning. See the CAC:LTV calculator.
CAC in practice
A brand spends ₹5,00,000 on marketing in a month and acquires 800 new customers: CAC is ₹625. If each customer's first-order margin is ₹500, the brand relies on repeat purchases to recover the rest.
How to lower CAC
- Improve conversion rates on landing pages
- Refresh creative to reduce costs
- Target better-fit audiences
- Strengthen referrals and organic channels
CAC in India
Indian brands often see CAC rise sharply in festive seasons and in metro audiences. Tracking CAC by city tier and season helps budgets move to where customers are cheaper to acquire.
Frequently asked questions
What is a good CAC?
One that's comfortably below the gross profit a customer generates, with a payback period your cash flow can support. A 3:1 LTV to CAC ratio is a common rule of thumb.
Is CAC the same as CPA?
Not quite. CPA is the cost per any defined action, often a purchase — including repeat purchases. CAC counts only new customers.
How do we lower CAC?
Improve conversion rate, creative and targeting, raise AOV, strengthen retention-driven referrals and reduce wasted spend.
What's the difference between CAC and CPA?
CPA counts any action (a lead, a purchase); CAC counts new customers only.
Should CAC include salaries and tools?
Fully loaded CAC includes them; paid CAC includes media only. Use both, clearly labelled.
What's a good CAC?
One that pays back within your target period from contribution margin.
Is CAC the same as cost per lead?
No — CAC is the cost of a paying customer, which includes leads that never convert.
Related terms
Full glossaryDo the maths
Run your numbers before you spend a rupee.
Our free calculators turn margins, AOV and conversion rates into the targets that actually matter: break-even ROAS, affordable CAC and budget per stage.