How to Set Up a Referral Program for Your SaaS

How to set up a referral program for a subscription product comes down to 7 steps: (1) set a reward budget, (2) design the reward, (3) write the eligibility and fraud rules, (4) wire tracking to your billing system, (5) place the invitation, (6) test a full purchase, and (7) review results at day 60.

A referral program pays your own customers for introducing new ones. Outside promoters belong in an affiliate program, covered in how to create an affiliate program.

What a referred customer is worth

Researchers at Goethe University Frankfurt and the Wharton School compared customers a German bank won through its referral program with a random sample from other channels, across almost 10,000 accounts and 33 months.

Referred customers had a 25% higher contribution margin, churned 18% more slowly and had a 16% higher 6-year lifetime value.

In the authors' summary, the bank paid €25 per referral against a €40 lifetime-value gap, a return of roughly 60% ((40 minus 25) divided by 25). It is one company in one industry, so step 7 measures your own numbers.

How to set up a referral program, step by step

Step 1: Set a goal and a reward budget

Pick one number to move: referred customers who pay each month. My rule of thumb caps the reward at half of your paid customer acquisition cost (CAC), which keeps referrals your cheapest channel.

A $49 monthly plan at an 80% gross margin earns $39.20 of gross profit a month.

To find your paid CAC, divide last quarter's ad and sales spend by the new paying customers it produced: $24,000 and 100 customers gives $240.

A ceiling that takes more than about 6 months of gross profit to recover bets on the customer staying that long, so check your churn first.

Step 2: Design the reward

A one-sided program rewards only the referrer. A two-sided program also gives the friend a discount on the first purchase, free months or extra trial days, which hands the referrer an offer to pass along.

A recurring percentage stops costing you when the customer leaves: a friend who cancels after 3 months costs $29.40 at 20% (3 times $9.80), while the flat $50 is already spent.

Cash or credit

Cash suits referrers who are businesses or creators, and it adds payout work: a $100 default minimum, a hold period and W-9 or W-8 forms (see how to pay affiliates).

Credit suits product-led tools and needs no payout run, but a month credited to a paying customer gives up the full $49, while usage credits cost only what they cost to serve.

TrackRev delivers credit into your own backend (Supabase, Postgres, MongoDB, Airtable or a webhook).

Step 3: Write the eligibility and fraud rules

• Decide who can refer: any signed-in user, or paying customers only. A TrackRev credit program sets separate amounts for free and paid referrers, such as 50 credits and 200.
• Define a new customer as one with no account, trial or payment on record. In the Stripe Dashboard, limit the friend's promotion code to first-time orders (first_time_transaction), which also blocks anyone who canceled a trial, and add max_redemptions and expires_at. TrackRev doesn't create that discount: set the code program-wide under Tracking, or per referrer in the Partners table's Ref. code column.
• Pay after the friend's first successful payment. TrackRev takes a refunded or disputed charge's commission back out and revokes a credit on a refund. Set the hold to your refund window, so 30-day refunds get a 30-day hold.
• Decide how much one referrer can earn. On the 20% recurring design, 50 customers pay a referrer $5,880 (50 times $117.60), which is either a bug or the partner you want.
• Block self-referral. TrackRev's credit programs run 3 checks (browser marker, device fingerprint, same IP on a different device) and revoke a grant with a recorded reason. Cash programs rely on the hold, refund reversal and marking a commission void or fraud.

Preventing self-referral fraud covers the cash side. The Federal Trade Commission's endorsement guidance says a rewarded endorser's connection to the brand should be disclosed clearly, so tell referrers to say they earn a reward.

Its CAN-SPAM guide says a seller offering coupons or discounts for forwarding a message may be responsible for compliance, with penalties up to $53,088 per email, so invitation emails need your postal address and an unsubscribe link.

Step 4: Set up tracking

• Install the pixel on your marketing site and in the app, then connect Stripe, Polar, Lemon Squeezy or Paddle. Stripe takes a read-only key, pulls 30 days of charges on the first sync, then syncs hourly, or within seconds with the webhook scope.
• Set the Stripe Checkout Session's client_reference_id to the visitor ID cookie. TrackRev falls back to the customer's email, and custom billing needs the report-purchase call with a secret key. Stripe Checkout attribution tracking shows the code.
• Create the program (Affiliate program, then New campaign) with the values below and a destination URL on your own domain.

Step 5: Place the invitation and write the launch emails

Ask right after a customer gets value, such as a first good result or a renewal.

TrackRev's dashboard embed gives you a refer-a-friend page inside the app with the user's link, rewards and 7 to 90 days of clicks, signups, purchases and conversion rate, and its widget adds a share card for busy pages.

Both take a publishable key and the signed-in user's ID, email and plan tier.

1<script async src="https://app.trackrev.io/embed.js"2  data-key="pk_live_xxxxxxxx"3  data-user-id="user_123"4  data-user-email="jane@acme.com"5  data-user-tier="paid"6  data-mount="#refer-earn"></script>

TrackRev doesn't send your campaign email, so launch messages go out through your own tool, with a link in the receipt email too. On a credit program, the credit.earned and credit.delivered webhooks can trigger the last row.

Step 6: Test the whole path before you announce it

TrackRev accepts a restricted key starting with rk_test_, so Stripe test mode works. Commission tracking needs a paid plan, so test the money path on one.

Step 7: Measure results and review at day 60

Count the referred customers who paid. Day 60 is long enough to see a monthly plan's second invoice.

TrackRev's Customers page lists each referred customer with orders and commission. In the example, $58.80 against the $120 ceiling leaves $61.20 of room, so the reward has headroom.

If participation is low, move the page or change the timing before you touch the reward. Weak click to paid conversion points at the friend's offer or your landing page.

If referred customers churn faster than other channels, the reward may be attracting reward hunters, since the bank's referred customers churned 18% more slowly.

Where TrackRev fits

TrackRev's Affiliate Program runs referral and affiliate programs on one data model, with cash or credit rewards, two-sided friend rewards, the widget and dashboard embed, and refund reversal. Referral campaigns covers the setup.

The Free plan has 50 links and 1,000 tracked events a month, with revenue hidden.

Every paid plan includes the affiliate program: Starter is $39 a month ($351 billed yearly) for 1 workspace and $10K of commission tracked a month, Growth is $99 for unlimited workspaces and $100K, and Scale is $199 with priority support (pricing).

Payouts are a PayPal or Wise CSV export that you mark paid, and TrackRev leaves the emails and the friend's discount code to you. Pick a dedicated referral platform if you want those handled for you.