Is your referral program actually cheaper than paid?
Reward payouts feel free because nobody sees a media invoice. They're not. This prices the program against the acquisition channel you already measure.
Your numbers
Referred signups or purchases that actually converted, not clicks or invites sent.
What you pay out per successful referral: cash, credit or discount value.
Software subscription plus the time cost of running the program, for the same period as your referral count.
First-order value, or full LTV if you want the program's real long-run return instead of the conservative case.
Your current average cost to acquire a customer through paid channels.
Referral program ROI
+671%
$27000 in referred revenue against $3500 total program cost.
Cost per referred customer
$23.33
Reward payouts plus overhead, divided by successful referrals.
vs. blended CAC
$65.00
Referrals are cheaper
Net profit
$23500
Referred revenue minus total program cost (reward payouts plus overhead).
This program is both profitable and cheaper than your paid acquisition. At $23.33 per referred customer against $65.00 blended CAC, it's an underpriced channel worth funding harder before you scale paid spend further.
Use full customer LTV instead of first-order value if you want the program's real long-run return. Referred customers frequently retain better than paid-acquired ones, which this conservative first-order view won't capture.
Calculated in your browser. Nothing is sent anywhere, and nothing is stored.
The maths, so it isn't a black box.
It totals the real program cost
Reward payouts across every successful referral, plus platform subscription and admin overhead for the same period: the two costs that almost never appear on the same line when a referral program gets reported internally.
Divides by referred revenue
Successful referrals multiplied by revenue per referred customer, set against total cost, to produce a real ROI percentage, not a vague sense that referrals are 'basically free.'
And prices it against your paid CAC
Cost per referred customer, benchmarked directly against blended CAC: the comparison that actually tells you whether to fund the program harder or fix it before scaling.
Questions about this calculation
First-order value gives the conservative, immediately defensible number. Full LTV gives the real long-run return, and referred customers frequently retain better than paid-acquired ones, so if you have reliable LTV data, use it; the conservative view will understate the program.
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