- Cap the reward below your blended acquisition cost.
- Make the share step as short as possible.
- Measure K-factor monthly.
Set the reward from your numbers
If your blended acquisition cost is $120 and payback is 8 months, a $30 reward for the referrer and a $20 discount for the friend costs $50 per referred customer. That is well below $120, so the program improves unit economics.
Design the flow
Put the share prompt right after a good moment, such as a completed purchase or a solved problem. Provide a prefilled message and a unique link. Every extra field cuts sharing.
Prevent abuse
Pay the reward after the referred customer completes a first purchase and the return window ends. Limit rewards per account and flag repeated devices or payment methods.
Measure the loop
Track invites per user, invite conversion and reward cost. Multiply the first two to get K. Review monthly and stop changes that lower conversion.
Will referrals compound or fizzle?
Questions about Growth Loops and Referrals
Should rewards be cash or credit?
Credit works well for ecommerce because it brings the referrer back to buy again.
How soon should I launch one?
Launch after customers show satisfaction, for example repeat purchases or high reviews.
Do referral programs work for services?
Yes, especially with a clear introduction process and a modest thank-you gift.
Key terms
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