Estimate referral program unit economics
Check whether both sides of a referral reward fit your margins.
The scenario
A customer referral yields $45 in first-order contribution before rewards. Referrer and friend each receive $15.
Contribution after rewards is $15 before program operating cost. If the same buyer would have purchased anyway, the reward can reduce profit without creating a sale.
Apply it to your own work
Write eligibility and fraud rules, forecast both rewards and program costs, and track referred buyers by cohort.
What to watch for
Discounts and store credits may have different economic costs. Model redemption and compare with a reasonable no-program baseline.
Model the cost after rewards settle
Enter contribution before rewards, expected friend and referrer redemption, processing, and operating costs. If both $15 rewards are used on a $45 contribution order, $15 remains before program expenses.
Compare referred orders with an appropriate estimate of orders that would have happened anyway. Keep an eye on reversal or refund timing so rewards already paid do not disappear from the economics when orders are canceled.
Try a related tool
Estimate what you can pay to acquire an order while reserving a desired contribution. Use consistent per-order inputs.
