Can I afford my referral reward?
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What each reward costs you. Either can be zero for a one-sided scheme.
Display only. Your figures are read in the currency you pick — nothing is converted and no exchange rate is applied.
Your average order value and gross margin.
What is left of a sale after the cost of the goods.
Optional. Orders you expect after the first, on average. 1.5 is fine.
Enter both rewards (either can be zero), your average order value and gross margin. Expected repeat orders are optional.
- Referrer reward and friend rewardNeeded
- Average order valueNeeded
- Gross marginNeeded
- Repeat orders you expect from a new customerOptional
To set the referral cost beside what ads pay for a customer, work out your CAC. For a repeat-order figure grounded in your own customers, try the CLV calculator.
No benchmark is used. The currency is a label only and nothing is converted. Nothing you type is sent anywhere.
Give, get, and when a referred customer pays you back
A referral reward is what you pay to turn a customer recommendation into a new customer, so a give 20, get 20 scheme costs 40 dollars per referred buyer, and on an 85 dollar first order at a 45 percent margin that leaves the first sale 1.75 dollars short, repaid by the second order.
No benchmark is used; every figure is built from your rewards, order value and margin. To compare the result with paid acquisition, see the CAC calculator.
A give-get scheme has two prices and one source of money to pay them: the gross profit the new customer brings in.
- Referrer reward
- What the existing customer receives when their friend buys: credit, a code, cash or a product. Enter what it costs you, which for a product is its cost price rather than its shelf price.
- Friend reward
- What the new customer gets on their first order. If it is a percentage, enter what it comes to on a typical first basket. Either side can be zero for a one-sided scheme.
- Cost per referred customer
- Both rewards together. It is an acquisition cost like any other, and it can be set beside what you pay per customer through ads.
- First-order margin after rewards
- The gross profit on the friend’s first basket once both rewards are paid. Positive means the scheme is paid for on day one; negative means it waits for a repeat purchase.
- Break-even orders
- How many orders from the new customer it takes for their gross profit to cover the rewards. Below one, the first order does it. Above one, you are relying on them coming back.
- Expected repeat orders
- Optional. How many more orders you expect a referred customer to place after the first. Use what your existing customers actually do, not a hope, and the calculator tells you whether the scheme pays back within it.
Nudgesmart is available on the Shopify App Store. Browse the template library or see what it costs.
Six referral schemes and their payback
Illustrative schemes in US dollars, not taken from any store. The calculator above and this table run the same function.
| Scheme | Rewards cost | First order after rewards | Break-even | Verdict |
|---|---|---|---|---|
| Candle shop, give 10 get 10 | $20.00 | $22.16 | 0.5 orders | Paid for by the first order |
| Activewear, give 20 get 20, two repeat orders | $40.00 | -$1.75 | 1.1 orders | Pays back by order 2 |
| Supplements, give 15 get 25, four repeat orders | $40.00 | -$11.20 | 1.4 orders | Pays back by order 2 |
| Phone accessories, give 10 get 15, no repeat figure | $25.00 | -$11.00 | 1.8 orders | Needs 1.8 orders to pay back |
| Furniture, give 50 get 50 | $100.00 | $26.00 | 0.8 orders | Paid for by the first order |
| Snack box, friend only gets 15, one repeat order | $15.00 | -$9.00 | 2.5 orders | Does not pay back on these inputs |
Things a referral cost sheet leaves out
Some referred buyers were coming anyway
A friend who already had your store bookmarked may use the link simply because it saves money. Those orders carry the full reward cost for a customer you did not need to buy.
Self-referral and code sharing
Rewards attract shoppers who refer themselves with a second email address or post codes on coupon sites. Cap rewards per customer and require a first-time buyer before counting on the cost shown here.
Referred customers are not an average
People who arrive on a friend’s recommendation often behave differently from your usual first-timers. Using your average order value and repeat rate is a starting estimate until you can measure the referred group on its own.
Timing of the referrer payout matters
Paying the referrer only after the friend’s order clears the return window protects you against refunds. Paying instantly means some rewards go out for orders that come back.
Software and fees are extra
A referral app, payment fees on the discounted order and any shipping you absorb all come on top of the rewards. Add them to the reward cost if you want a fuller figure.
Referral reward questions
How much should I give for a customer referral?
Less than the gross profit the new customer will bring you, and ideally less than their first order earns. Enter the two rewards, your average order value and margin above and the calculator shows whether the first order covers them or how many orders it takes.
What does give 10, get 10 cost me?
Twenty in rewards for each new customer, paid out of the gross profit on their orders. On a 62 dollar first order at a 68 percent margin that is covered with 22.16 dollars to spare, as the first worked example shows.
Is a referral cheaper than paid ads?
Compare the cost per referred customer here with what you pay per new customer through ads. The referral figure is known in advance, but it only counts when a friend buys, so check it against the first-order margin before assuming it is cheaper.
Should the friend or the referrer get the bigger reward?
The friend reward is what persuades a stranger to buy, and the referrer reward is what persuades a customer to share. This page costs them together; which split works better is something to test on your own customers.
What if the reward is a percentage off?
Enter what that percentage comes to on a typical first basket. Fifteen percent off a 60 dollar order is a 9 dollar friend reward.
Do I need to sign up to use this?
No. The numbers stay in the page and nothing about your store is sent anywhere.
Referrals multiply the customers you have. They do not create the first ones.
Nudgesmart turns more first-time visitors into buyers and subscribers, with 13 campaign types to choose from, so there are more customers to recommend you.
