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Marketing Glossary· CAC

What is CAC (Customer Acquisition Cost)?

By Nikhil Sharma · Updated 1 November 2026 · Marketing Glossary
Definition

Customer Acquisition Cost (CAC) is the total sales and marketing cost of winning one new customer — calculated as total acquisition spend divided by new customers acquired.

How to calculate CAC

CAC = Total sales & marketing spend ÷ Number of new customers acquired

Spend ₹5,00,000 to win 10 customers and your CAC is ₹50,000. Include everything it took — ad spend, agency fees, tools and salaries — for an honest number.

CAC vs CPL

CPL is the cost of a lead; CAC is the cost of an actual paying customer. Since only a fraction of leads convert, CAC is always higher than CPL — and it is the number that actually decides whether growth is profitable.

Why CAC matters

CAC only means something next to LTV. The LTV:CAC ratio (often targeted near 3:1) tells you whether each customer is worth more than they cost to win. Estimate your economics with our ROI calculator.

Related terms
LTVCPLROASMQLKPI
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Written & reviewed by Nikhil Sharma
Founder, Fabulous Media
Nikhil has led growth for 850+ brands across 35 nations since 2008. Fabulous Media is an invitation-only growth agency that reports on pipeline and revenue, not vanity metrics. Meet the team · Request an invite.

Questions, answered

There is no absolute figure — a good CAC is one comfortably below the lifetime value of the customer it wins. The LTV:CAC ratio, often targeted around 3:1, is the real test.

CPL is the cost to generate a lead; CAC is the cost to win a paying customer. CAC includes all the leads that did not convert, so it is always higher than CPL.

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