Referral Program Calculator

Find the largest reward you can afford to pay per referred customer, based on what that customer is worth over their lifetime.

Your numbers

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Value of a referred customer

Average order value

Gross margin

Orders per customer per year

Average years a customer keeps buying

How much of that to spend

Share of lifetime profit you'll spend to acquire a customer

A common ceiling for any paid acquisition channel, referrals included.

Reward both the referrer and the new customer

Your result · updates as you type

Max reward, each side

$36.86

Based on a $246 lifetime profit per new customer and spending up to 30% of that to win them.

Lifetime profit per customer: $246
Total budget for this referral: $73.71
Split two ways: $36.86

This is the most you could afford, assuming referred customers behave like average customers. Referred customers often have higher retention than paid-ad customers, so a reward at or a little under this ceiling is usually a safe bet, not a guarantee.

Breakdown

Average order value: $65.00
Gross margin: 42%
Orders per year × years active: 3 × 3
Lifetime profit per customer: $245.70
Budget at 30% of that: $73.71
Reward per side (referrer + referee): $36.86

Working backwards from lifetime value

A referral reward is a form of customer acquisition cost. This starts from the referred customer's margin-based lifetime value, then applies the share of that value you're willing to spend to acquire them, the same ceiling you'd use for any paid channel.

Max total reward = (AOV × gross margin × orders/year × years active) × max CAC share

Example: the default numbers

AOV / gross margin: $65 / 42%
Orders per year × years active: 3 × 3
Share of lifetime profit to spend: 30%

Lifetime profit per referred customer is $245.70. At 30% of that, the total budget is $73.71. Split two ways (referrer and referee), that's $36.86 each.

Using this as a ceiling, not a target

This is the most you could afford, not what you should pay. Test smaller rewards first; referred customers often convert and retain better than average, so a reward below the ceiling can still work well.
One-sided vs. two-sided. A reward for the referrer only is simpler to run, but a reward for the new customer too (two-sided) usually converts referrals into actual purchases at a higher rate.
Popular referral apps for Shopify and WooCommerce, like ReferralCandy and Smile.io, let you set exactly this kind of dual reward once you know your ceiling.

Questions people ask

How much should I pay for a referral?

Base it on what a referred customer is worth over their lifetime, using their margin, not just the first order's profit. This calculator shows the ceiling; most stores pay somewhat below it to stay safely profitable.

Should the reward go to the referrer, the new customer, or both?

Two-sided rewards (something for both) generally convert referrals into completed purchases better than a reward for the referrer alone, though they're a little more complex to administer.

Do referred customers behave differently from other customers?

Often yes: referred customers frequently show higher retention than customers from paid ads, since they arrive with a friend's endorsement. That's a reason a reward near this ceiling is usually a safe bet, not a guarantee.

What if I don't know my customer's average lifespan?

Use the customer lifetime value calculator's churn-rate mode to estimate it from an annual churn rate instead.

Last reviewed 30 September 2026.