How Much Should a D2C Brand Spend on Ads at Each Stage?

“What percentage of revenue should we spend on marketing?” There’s no universal percentage. The right budget depends on what a customer is worth to you, and how quickly you need to get that money back.

Start with your maximum affordable CAC

Maximum CAC = Contribution per order × Orders expected within your payback period

Numbers in the examples below are illustrative.

Your contribution per order before marketing is ₹636. Customers order 1.5 times on average within six months. Maximum CAC for a six-month payback = ₹636 × 1.5 = ₹954.

If you’re acquiring customers below ₹954, you can scale spend with confidence. Above it, you’re losing money on each new customer within that window.

Watch incremental CAC, not just average CAC

As spend grows, each extra customer usually costs more.

• ₹5 lakh spend brings 1,000 customers: CAC = ₹500
• ₹8 lakh spend brings 1,400 customers: average CAC = ₹571

But the extra ₹3 lakh brought only 400 extra customers, so the incremental CAC is ₹750. The average hides how expensive the new customers are.

Spending by stage

Early stage: testing

Spend small amounts across a few channels to learn your real CAC and conversion rates. The goal is learning, not scale.

Finding fit: focusing

Double down on channels where CAC is comfortably below your maximum, and track payback closely.

Scaling: disciplined growth

Increase budgets step by step, watch incremental CAC, and invest in retention so repeat revenue supports growth.

Five rules for setting your budget

1. Know your contribution margin by channel.
2. Set a maximum CAC and payback period.
3. Increase spend in steps, checking incremental CAC each time.
4. Budget for retention, not only acquisition.
5. Review weekly, and cut what isn’t working quickly.

FAQs

Is ROAS enough to judge ad performance?

ROAS measures revenue per rupee spent, but it ignores margins and repeat purchases. Contribution-based metrics are more reliable.

Should I stop ads if CAC rises?

Not automatically. Check whether customers still pay back within your target period.

How much should I spend on retention?

Enough to meaningfully lift repeat rate. Retention usually costs far less per order than acquisition.