How to measure the success of your Substack referral program

By Subloops · March 24, 2022

A referral program can be a great source of additional growth for a Substack writer looking to increase their following. However, as with any marketing activity it is an investment from which you expect to get a measurable return. Let’s have a look at how to calculate this return.

For us to measure the ROI of our referral program we need to know both the costs and the impact on revenue.

Let’s first have a look at the costs involved in running a Substack referral program.


An obvious one. In order to get your readers motivated to share and promote your Substack they need to see there’s something in it for them. Whatever the reward is it usually has an associated cost either in terms of money (eg. a T-shirt) or your time (eg. a private coaching session).

Referral program software

Manually keeping track of who referred whom and how many points someone has gathered in your program gets messy really fast. On top of that you need to communicate to the program participants how many points they have, manage the rewards and so on.

This is why tools like Subloops exist. To let you automate all the boring parts of running a referral program and let you focus on the big picture.

Software like this can be anywhere from $20 a month to thousands a month.

Time spent setting up & managing the program

Even if you are using a software tool for managing the referral program, which means most things are automated, you’ll still need to spend a bit of time on it.

Delivering rewards to people, optimizing the incentive structure and promoting the referral program to your audience are examples of tasks you’ll still spend some portion of your time on.

Now let’s have a look at how to measure the revenue side of things.

The following applies if you are monetizing your Substack using paid subscriptions. If your main source of revenue is sponsorships or shoutouts then you’ll need to calculate your revenue per customer in a different way which is not covered in this blog post.

The way to calculate the revenue impact also depends on whether you are rewarding referral program participants for bringing free or paid subscribers. Subloops allows you to do both.

Revenue from paid subscribers

This is fairly simple. We just need to figure out the LTV (life time value) of our paid subscribers. The formula for that:

Paid subscriber LTV = Average monthly revenue per paid subscriber * Average paid subscription duration

This shows us the total dollar value of one paid subscriber.

“Revenue” from free subscribers

Since a percentage of your free subscribers (usually between 5-10%) convert into paid subscribers we can assign a dollar value to the free subscribers as well. For this we need to know our free-to-paid conversion rate and the LTV of paid subscribers.

Free subscriber LTV = Paid subscriber LTV * Free-to-paid conversion rate

This figure becomes useful when we want to determine the value of the rewards to give for bringing free subscribers.

Now let’s calculate the ROI of an example referral program that rewards participants for bringing in free subscribers.

ROI when giving rewards for bringing free subscribers

Let’s say we’ve set up our referral program so that we give anyone who brings us 20 free subscribers a free t-shirt with our brand on it. And let’s say it costs us a total of $10 to print & ship it to anywhere in U.S.

Let’s also assume that:
1) Our free-to-paid conversion rate is 10%
2) Our monthly subscription costs $5
3) The average paid subscriber stays for 12 months

Then our LTV:

$5 * 12 = $60

Our free subscriber LTV:

$60 * 10% = $6

Our ROI:

( ($6 * 20) - $10) / $10 ) * 100% = 11x

This means we’re getting a 11x return for every dollar invested into the referral program!


Hopefully this post has given you some clarity on how to evaluate the effectiveness of your referral program. Once you’ve done these calculations it’s easy to compare your referral program to your other sources of new subscribers and see where to put the most of your energy!