business
Customer Acquisition Cost (CAC)
The total cost of acquiring one paying customer, including advertising spend, marketing overhead, and onboarding costs.
Customer Acquisition Cost (CAC) represents the full expense of converting a prospect into a paying customer. Unlike Cost Per Install, which only measures the price of getting a download, CAC includes all costs along the funnel - from ad spend and creative production to onboarding flows and sales efforts. It is calculated by dividing total acquisition-related costs by the number of new paying customers gained during that period.
CAC vs. CPI
CPI measures what it costs to get someone to install your app, while CAC measures what it costs to get someone to pay. Since only a fraction of installs convert to paying customers, CAC is always higher than CPI. For example, if your CPI is $2 and 10% of installs become paying users, your CAC is $20. Understanding this distinction is critical for building accurate financial models and setting realistic growth budgets.
Managing CAC Effectively
A sustainable business requires that Lifetime Value (LTV) exceeds CAC by a healthy margin. Most benchmarks suggest an LTV-to-CAC ratio of at least 3:1. To lower CAC, focus on improving conversion rates at every funnel stage, invest in organic channels like ASO, and refine audience targeting to reach users with the highest intent. Regularly auditing acquisition channels and cutting underperformers keeps overall CAC in check.