Quick Summary
CAC measures how much a company spends to acquire one new customer. It is a critical metric for evaluating marketing efficiency and unit economics.
Customer Acquisition Cost (CAC) is the total cost incurred to acquire a new customer, including all marketing and sales expenses. It is a fundamental metric for understanding unit economics and evaluating the efficiency of growth strategies.
CAC Formula
CAC =
(Total Marketing Expenses + Total Sales Expenses) / Number of New Customers Acquired
What to Include in CAC
| Include in CAC | Do Not Include |
|---|---|
| Paid advertising costs | Product development costs |
| Marketing salaries & commissions | Customer success costs (post-acquisition) |
| Sales team salaries & commissions | Account management (retention) |
| Marketing software & tools | General overhead |
| Content creation costs | Referral rewards to existing customers |
| Events & trade shows | Brand awareness campaigns (hard to attribute) |
CAC by Channel
Calculate CAC separately for each acquisition channel to identify the most efficient:
- Paid Social: Ad spend / Customers from social ads
- SEO/Content: Content costs / Customers from organic search
- Sales Team: (Salaries + Tools) / Customers from sales
- Partnerships: Partnership costs / Customers from partners
Industry Benchmarks for CAC
| Industry | Average CAC Range |
|---|---|
| B2B SaaS (Enterprise) | ₹50,000 - ₹5,00,000+ |
| B2B SaaS (SMB) | ₹5,000 - ₹50,000 |
| E-commerce | ₹500 - ₹5,000 |
| Fintech | ₹2,000 - ₹20,000 |
| Healthcare | ₹10,000 - ₹1,00,000 |
CAC Payback Period
The time it takes to recover the cost of acquiring a customer:
CAC Payback Period = CAC / Monthly Revenue per Customer
Example: If CAC is ₹6,000 and monthly revenue per customer is ₹1,000, payback period is 6 months.
Strategies to Reduce CAC
- Improve conversion rates through better targeting
- Invest in organic channels (SEO, content, referrals)
- Optimize marketing funnels and landing pages
- Leverage customer referrals and word-of-mouth
- Focus on high-intent channels
- Improve sales efficiency with better tools and training
Key Points
- Total cost to acquire one new customer
- Includes marketing and sales expenses
- Calculated by channel for optimization
- Should be compared to Lifetime Value (LTV)
- LTV:CAC ratio of 3:1 is healthy
- Payback period ideally under 12 months