CAC represents the total cost required to acquire a new customer. It includes marketing expenses, advertising spend, sales team costs, and other related expenses divided by the number of new customers gained. CAC is a critical business metric because it determines profitability and scalability. If CAC is higher than customer lifetime value (LTV), the business model may not be sustainable. Companies aim to reduce CAC through better targeting, automation, and improved conversion rates while maintaining growth.
| Metric | Value |
|---|---|
| Total Sales & Marketing Cost | ₹50,000 |
| New Customers Acquired | 100 |
| CAC Formula | Total Sales & Marketing Cost ÷ New Customers |
| Calculation | ₹50,000 ÷ 100 |
| CAC (Customer Acquisition Cost) | ₹500 per customer |