CAC is only meaningful next to what a customer is worth. On a first-order basis, the maximum CAC you can afford is your contribution per order; with proven repeat purchases you can stretch towards contribution lifetime value.

Be explicit about which CAC you mean. Paid CAC divides paid spend by customers acquired through paid channels; blended CAC divides all marketing spend by all new customers.

Formula

CAC = Marketing spend ÷ New customers acquired

Example

₹9 lakh of spend producing 1,000 new customers is a CAC of ₹900.

Work it out: LTV:CAC and payback

Model contribution lifetime value from repeat behaviour, then see your LTV:CAC ratio and payback month.

Related terms

Where this comes up

ROAS is not a business metricReturn on ad spend tells you how the platform sees your campaigns. Contribution margin tells you whether the business is better off. Here is how to run paid media on the second.

Part of the growth marketing glossary by Shiva Sharma.