The Hidden Cost of Paid Acquisition
In the early days of a business, paid ads (PPC) are often the primary growth engine. However, as you scale, ad auctions become more competitive, and your Customer Acquisition Cost (CAC) inevitably rises.
A Referral Program acts as a counter-weight. By incentivizing your existing users to bring in friends, you bypass ad auctions entirely. The cost is controlled (you set the reward), and the trust factor is built-in.
Lower Blended CAC
Even if you keep spending on ads, a healthy referral layer reduces your average cost to acquire a customer across the entire business.
Higher Quality Leads
Data shows referred customers have a 16% higher LTV and 37% higher retention rate than those acquired via cold traffic.
The Viral Loop
Unlike ads which stop working when you stop paying, referral loops can compound. One happy customer brings two, who bring four.
How to Use This Calculator
Use the inputs to simulate a head-to-head comparison between your current paid acquisition efforts and a potential referral program.
1. Paid Metrics
Enter your current Ad Spend and the number of customers that spend generates. This establishes your baseline CAC.
2. Referral Program Costs
Define your reward structure. "Referrer Reward" is what you pay the existing user. "Referee Reward" is the discount you give the new user. Platform fees cover software like Referello.
3. Volume Comparison
Adjust the referral volume slider to see how many referrals you need to match the profitability of your paid channel.