Set the reward from your margins, not from a competitor's
Three numbers you already know produce the maximum reward your economics can sustain — and a defensible split between referrer and friend. Free, in your browser.
Your economics
Fund the friend's side at least equally — it's the half of the offer your customer says out loud.
Repaid by a referred customer's margin in 4.0 months.
as a first-purchase discount or credit
as account credit or a gift card, on conversion
- This is the ceiling, not the recommendation. The best-documented program result — referred customers worth 16% more, retained longer — came from a reward of about €25. Bigger rewards buy more claims and less credibility.
- The research rule is high usefulness, low face value: a reward the referrer finds genuinely useful, small enough not to make the recommendation look bought.
- Pay in the cheapest currency that still delights: account credit costs you margin, not cash; product value costs marginal delivery; cash costs face value and signals loudest.
- You're spending 17% of a referred customer's lifetime margin on acquisition at this ceiling. Under 15% is comfortable; over 30% deserves a second look at the payback target.
What to give — credit, cash, gift cards, charity, and what B2B changes — is covered with sources on referral incentive ideas and double-sided rewards. Whether the resulting CAC beats your paid channels: referral vs paid CAC.
How much should a referral reward be?
Work it from your own economics, not a competitor's page: the reward budget is what a referred customer's monthly gross margin repays within your target payback window, capped so it never exceeds half of lifetime margin. The calculator above runs exactly that, then splits the result across both sides.
That produces a ceiling, not a recommendation. The best-documented referral program in the academic literature paid roughly €25 per successful referral and still built a measurably more valuable customer base — generosity is not the lever most people think it is.
Why split the reward toward the friend?
Because the friend's side is the sentence your customer actually says out loud — 'you get 20% off' spends social capital far more comfortably than 'I get $50 if you sign up'. Fund the friend's side at least equally; the referrer's half legitimises the ask rather than driving it.
Why cap the reward at half of lifetime margin?
Because an aggressive payback target can quietly outrun a short-lived customer's total worth. If customers stay ten months, a six-month payback budget looks fine and still spends most of what the customer will ever contribute. The cap keeps the recommendation honest when lifetime is the binding constraint.
Is this referral reward calculator free?
Yes — free, no signup, computed in your browser.
Should the reward be cash, credit or a gift card?
Pay in the cheapest currency that still delights: account credit costs margin rather than cash, product value costs marginal delivery, and cash costs face value and signals loudest. The full menu — including what changes in B2B, where the referrer rarely pays the invoice — is on the incentive ideas page below.
Should I set the reward at the calculator's maximum?
Almost never. The maximum is what your economics can survive; the right reward is usually well beneath it — useful enough to legitimise the ask, small enough that the recommendation doesn't look bought.
Reward rules are half the program
ReferralFlo enforces qualifying events, holds rewards through refund windows, splits two-sided payouts and handles the edge cases this calculator can only warn you about.