Model the revenue a referral programme generates net of the incentives paid on both sides.
Two-sided incentives are paid on both the referrer and the new customer, so the cost per acquisition is twice the per-side reward. That effective CAC is what should be compared against paid channels. Referral is usually the cheapest acquisition channel, but only once the double-sided incentive is counted properly against the orders it actually produced.
Referral Revenue
New customers = customers × referral rate × referral conversion rate
New customers = customers × referral rate × referral conversion rate Two-sided incentives are paid on both the referrer and the new customer, so the cost per acquisition is twice the per-side reward. That effective CAC is what should be compared against paid channels.
Referral is usually the cheapest acquisition channel, but only once the double-sided incentive is counted properly against the orders it actually produced.
This calculator takes 5 inputs: Existing customers, Share who refer someone, Share of referrals who convert, Average first order value, Incentive paid per side. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.