In this article
A question we often get from people in digital marketing is, "So, how well do referral programs perform, really?"
Let's start by going over the various referral rates according to industry.
(NOTE: If you would like to set up your own referral program, be sure to check out ReferralCandy. You can try it free for 30 days.)
First of all, what are referral rates?
Your referral rate is the volume of referred purchases as a % of your total purchases.
So a 1% referral rate means that 1 in 100 purchases at your store happens through your referral program.
An advocate shares a referral link (typically via social media, referral email, or IM). Their friend clicks on that referral link and goes on to make a purchase at your store.
To calculate the industry benchmark figures, we studied thousands of data points, tagged each of our users to one of the 11 largest industries, and analyzed each industry.
From there, we learned that referral rates tend to reach a stable rate after around 6 months.
The resulting industry benchmarks represent the average referral rates that our users achieved after running their referral programs for 6 months.
Here's what the full chart looks like:
To put things into perspective, here are some examples of product categories in each industry.
Apparel and fashion accessories: Clothing, accessories, shoes, etc.
Beauty and grooming: Skincare, makeup, hair care, etc.
Books and education: Book subscriptions, magazines, textbooks, etc.
Toys, gifts, stationery, and crafts: Art supplies, etc.
Food, beverage, and groceries: Pantry snacks, meal kits, etc.
Gadgets and electronics: Electronic devices, electric scooters, etc.
Health foods and supplements: Vitamins, etc.
Home, garden, and pets: Pet food, gardening sheds, etc.
Software and digital goods: SaaS products, etc.
Sporting, outdoor goods, and accessories: Camping gear, etc.
Vaporizers and tobacco products: Cigars, etc.
1. The global average referral rate is about 2.35%.
This means you can reasonably assume that any successful retailer that's been using ReferralCandy for 6 months or more is getting about 1 in every 50 sales via referrals.
This should be a useful rule of thumb for an established business thinking about getting started on referral marketing.
If you already have product-market fit, happy customers, and a steady stream of customers from your existing acquisition channels, you can expect to increase your sales by about 2% minimum.
2. Software and digital goods generally have the highest referral rate of all industries, at 4.75%.
It's a clear outlier compared to the other industries—software and digital goods have referral programs that perform a full percentage point better than all other industries!
If that doesn't seem impressive, look at it relatively: the average software and digital goods referral program get more referral sales than the average referral program.
This could likely be attributed to the nature of tech communities. They're close-knit and full of early adopters who're willing to try something new because a friend or influencer recommended it to them.
3. Not depicted—some outliers have much higher referral rates, going up to 7.5%!
When we last checked in with BikiniBOD, we learned that they were getting a referral rate of 7.5%—that is, they were getting over 7 in 100 sales through their referral program.
Caveats to consider:
Survivor bias is inevitable. For the purpose of this study, we only included retailers who have at least 6 months of data with us. While 2.35% is actually a conservative estimate, we can't guarantee that everyone who signs up for a referral program will get a 2.35% referral rate. If your sales volume is too low, or if your business simply isn't getting a lot of customers, you may not be getting many referrals at all. Business fundamentals are important.
High referral rates aren't everything. A high business referral rate is generally nice to have, but it isn't necessarily a great sign. It could also mean that your other customer acquisition channels aren't mature enough. As a business owner or marketer, you always want to diversify your customer acquisition channels so that you aren't overly reliant on any single channel.
How do you increase your referral rate? Referral performance is a consequence of the conversion rates of every step of your referral funnel. You may be wondering, how do you optimize that? How do you get your referral message right? Check out our blog posts on how to improve referral rates, referral program incentives, or the secrets of Airbnb's referral program success!
Here are a few other referral marketing-related articles that could help you boost your referral rates:
- 20 Referral Landing Page Examples for Your Inspiration
- The Ultimate Referral Widget Guide to Improve Referrals
- 4 Ecommerce Brands on Shopify With Strong WOM Marketing
- How to Choose the Right Referral Incentives For Your Referral Program (With 20+ Examples!)
- How Influencer Marketing Can Help Your Referral Programs