Word-of-Mouth and Referral Marketing Blog

Referral Program Metrics and Benchmarks: What Is A Good Referral Rate?

At ReferralCandy, we’ve been running referral programs for thousands of ecommerce stores for over half a decade now, and we’ve made our retailers almost $50,000,000 in referral sales.

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.

First of all, what are referral rates?

Your referral rate is the volume of referred purchases as a % of your total purchases.

Formula for referral rate: no. of referred purchases ÷ no. of total purchases

So a 1% referral rate means that 1 in 100 purchases at your store happen through your referral program.

An Advocate shares a referral link (typically via social media, email or IM). Their friend clicks on that referral link, and goes on to make a purchase at your store.

 

referral-rate-chart-referralcandy

To calculate the industry benchmark figures, we studied thousands of data points, tagged each of our users to one of the 6 largest industries, and analysed 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:

referral-rates-by-industry

1. The global average referral rate is about 2.3%.

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. Gadgets and electronics generally have the highest referral rate of all industries, at 3.4%.

It’s a clear outlier compared to the other industries – gadgets and electronics 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 gadget referral program gets 60% 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% is actually a conservative estimate, we can’t guarantee that everyone who signs up for a referral program will get a 2% 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 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. How do you optimize that? Check out our blogpost on how to improve referral rates.

Visakan Veerasamy

Visa is ReferralCandy's Blog Editor. He also co-founded Statement.sg, a fashion ecommerce label selling witty t-shirts. He's been thrice named a Top Writer on Quora. He hopes to enjoy a glass of whiskey onboard a commercial space flight someday.

Add comment

Signup for ReferralCandy