CAC is defined as

• A. Expenditure on sales and advertising / number of new customers
• B. Lifetime value divided by churn
• C. Number of customers gained per month
• D. Revenue per user

Answer: (A)

CAC is the cost to acquire a customer. It’s calculated by dividing the total sales and marketing expenditure by the number of new customers gained in a given period. This measures how efficiently the business is turning marketing and sales spend into new customers, which is essential for budgeting and evaluating marketing ROI. In practice, you compare CAC to how much a customer is worth over their lifetime (LTV) to judge sustainability — a lower CAC relative to LTV is desirable.

The other options don’t fit CAC because: revenue per user is ARPU, not cost; the number of customers gained per month is the acquisition rate, not the cost; and lifetime value divided by churn relates to the value and payback timeline of a customer, not the cost of acquiring them.