Turns the invitations, conversion rate, reward and acquisition cost of a referral program into a K-factor, the reward cost per new customer and the most a reward can be before paid ads are cheaper, with every step shown. For founders and marketers deciding whether a referral reward makes financial sense.
How to use it
Enter your own figures. The result updates as you type, and nothing leaves your browser.
- Pick your currency and enter how many people an average customer invites.
- Enter the share of invitations that become customers, and the reward you pay for each one (0 for no reward).
- Enter what winning a customer costs you through paid channels (CAC). It is the ceiling the reward is compared with.
- Optionally enter your starting customers, then read the K-factor, the reward cost and the first-round projection, and check the findings.
How Reavlo tests this
The calculator uses the standard simple referral model, run in your browser. Every step is listed under Show the math.
- K-factor = invitations per customer × invitation conversion rate: the new customers one customer brings.
- Reward cost per new customer = the reward you enter, paid once for each referred customer who converts.
- Reward to CAC = reward ÷ CAC. Above 1 a referred customer costs more in rewards than a paid one.
- First-round new customers = starting customers × K-factor.
- First-round reward cost = first-round new customers × reward.
- Customers per starting customer = 1 ÷ (1 − K-factor), shown only when K-factor is below 1. It sums every round of referrals if the same rate held in each.
Amounts are in major units of the currency you pick (ISO 4217) and rounded to 2 decimals; ratios are rounded to 4 decimals. Rates are stored as 0 to 1 and shown as percentages.
Findings. Two rules run on the result.
- RKF-01, reward above CAC (warning). Each referral costs more than buying the same customer through paid channels. The line follows from the definition and is not a benchmark.
- RKF-02, K-factor below 1 (info). Referrals add customers on top of other channels but do not sustain growth alone. This is the usual case, not an error.
Reavlo shows no "good" K-factor and no typical conversion rate, because no source we could cite supports one.
Limits. The model assumes the same invitations and conversion in every round, which real programs rarely keep as the audience is used up. It ignores the cost of running the program, fraud, and the value of the referred customer after they join.
Questions
What is a K-factor?
The number of new customers each existing customer brings, here invitations sent multiplied by the share that convert. Above 1 each customer brings at least one more.
What reward should a referral program pay?
No more than a paid customer costs you, and ideally well below the profit a referred customer returns. This calculator marks the CAC ceiling and compares your reward with it.
Does a K-factor below 1 mean the program failed?
No. Most programs sit below 1. They still add customers at a lower cost than ads when the reward is under your CAC.
Where do I get the invitation and conversion numbers?
From your own program data: invitations sent and referred sign-ups over a period. Before launch, use an assumption and change it to see how the result moves.