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Earlier this year, we started a research project to understand ReferralCandy’s merchants better. We wanted to create primary research about the effectiveness of referral programs, to provide you with better insights on how to run your referral program.
Here’s how we did it;
- We anonymized all data about merchants, referrers, and transactions, so there’s no identifying or personal data.
- We looked at the number of referrals each referrer made, and the type of rewards of each program.
- We also identified how referral links were clicked.
Below, we share five discoveries we found from our research, and offer insights and recommendations on how to use them to improve your referral program.
- Discovery 1 - Most referrers will only make 1 successful referral
- Discovery 2 - Almost half of all referrals are made by Pro-Referrers
- Discovery 3 - Super-Referrers prefer cash rewards
- Discovery 4 - Facebook is the biggest source for effective referral link sharing
- Discovery 5 - More people are sharing referral links through messaging apps
First, we looked at referrers. We wanted to understand the types of referrers, and the type of rewards that motivated more referrals. Here's what we found:
Discovery 1 - Most referrers will only make 1 successful referral
- 80% of referrers completed 1 successful referral.
- 10% of referrers completed 2 referrals.
- 7% of referrers completed 3 or 4 referrals.
- 3% of referrers completed 5 or more referrals (Pro-Referrers).
It’s important to understand that this does not mean that all your customers will complete one referral. Instead, of your customers who do complete a referral, 80% of them will only make one successful referral.
This may appear to be an obvious finding, but now we have confirmation: most referrers will only complete one successful referral.
This may be because most referral programs pay out the reward after each successful referral. We recommend this because making it easy to earn a reward helps to motivate your customers to refer a friend.
There are exceptions. Both Ledger and Riff Raff & Co run referral programs with amazing rewards, that only payout rewards after 4 and 5 successful referrals respectively.
If you want to encourage your customers to refer more than one friend, you can experiment with offering a bigger reward that’s only paid out after two or more successful referrals.
Do your best to promote your referral program and recruit more customers into your referral programs. A majority of customers who join and participate in a referral program are likely to refer at least one new customer.
Discovery 2 - Almost half of all referrals are made by Pro-Referrers
- 56% of all referrals were made by referrers with 1-3 referrals.
- 44% of all referrals were made by Pro-Referrers, referrers with 5 or more successful referrals.
There is tremendous value in identifying your Pro-Referrers. Even though they represent only 3% of all referrers, they can be responsible for a huge number of referrals.
Delving deeper into the data, we also saw another class of referrers—Super-Referrers, referrers with over 500 successful referrals. 11% of all referrals were made by Super-Referrers.
Keep track of your top referrers using a dashboard, and be sure to check in case they are committing referral fraud.
You can consider recruiting these Pro- and Super-Referrers to further promote your referral program, like DTC brand Lively, who feature them as brand ambassadors on their website:
Lively recruited loyal customers as brand ambassadors to launch their referral program
Once a customer completes 10 successful referrals, you could reach out to them to propose an affiliate partnership, as they have demonstrated an ability to drive sales.
For example, MiaoMiao runs both a customer referral program and a “Global Ambassador” affiliate program.
Discovery 3 - Super-Referrers prefer cash rewards
- We looked at each referrer and grouped them by the number of successful referrals they had completed - 5+ (more than 5 referrals), 10+ (more than 10 referrals), and so on.
- Then we examined the type of reward they received - whether it was a store coupon (discount on the next purchase), cash rewards (whether a fixed cash amount or a percentage of purchase), or custom rewards.
- We plotted the percentage of store coupons and cash rewards against the number of successful referrals.
Super-Referrers (who have completed over 500 successful referrals) are more likely to belong to referral programs with cash rewards (44%) than store coupons or custom rewards.
We should be careful and say that this does not mean that offering cash rewards will help you produce a super-referrer. We don’t have the data to prove this causal link.
What we can say is that if you offer cash rewards, you are more likely to have Super-Referrers.
This makes sense, too. A customer is likely to be motivated to make more referrals if the incentive is more valuable. People are more likely to value 500 cash rewards (even if they are small) over than 500 store coupons because the cash can be used beyond the store.
We know that increasing referral incentives can motivate more customers into putting extra effort into making referrals.
We’ve also seen from the Love Yourself case study that increasing referral rewards can improve referral rates.
Consider adjusting your referral incentives to get more out of your referral programs.
After looking at referrers and what motivates them, we turned to the channels for sharing referral links. We wanted to answer the question: what channels are most effective for referral programs?
Discovery 4 - Facebook is the biggest source for effective referral link sharing
ReferralCandy offers several ways for customers to share their referral links, for example, social sharing buttons, a button to share via email, and an option to copy URLs.
We looked at the clicks on all referral links, and 17% of all clicks came from Facebook shares.
- Whatsapp: 11% of all clicks
- Messenger: 9% of all clicks
- Email: 5% of all clicks
- Telegram: 3% of all clicks
- Twitter: 3.0% of all clicks
52% of clicks could not be tracked.
Facebook is still a popular platform for sharing referral links. This is true if you consider the Metaverse: Facebook posts as well as WhatsApp and Messenger chats.
Customize the default text and images for email and social sharing. Your customers are likely to use the default sharing text, and helping them with copywriting their sharing messages will improve your referral results.
Discovery 5 - More people are sharing referral links through messaging apps
- We grouped the referral link clicks into three categories:
- 1-to-1: Clicks through messaging apps (WhatsApp, Telegram, Messenger) and email.
- 1-to-Many: Clicks through social platforms like Facebook and Twitter.
- Other: Clicks through the referral links we could not track.
- We then plotted the proportion of each category over different periods, from 2018 to today.
It looks like referrers prefer to send 1-to-1 messages, via email and messaging apps, compared to broadcasting 1-to-many on social media platforms like Facebook and Twitter.
This makes sense, as referrals are a kind of personal recommendation.
The proportion of clicks through 1-to-1 channels have increased from 23% in 2018-2019 to 29% from 2020 to today.
This may mean that more people are sharing referral links through messaging apps and that more people are clicking on referral links through messaging apps.
Note that while we classify this as 1-to-1, it’s also possible that the referral links are being shared in group chats or emails to mailing lists or multiple groups.
The caveat is that the proportion we cannot track has also increased over time.
Spend more time crafting your default share messages, especially for messaging apps, and share via email.
One trick is to reach out to your Pro-Referrers and Super-Referrers (see Insight 2) and ask how they share their referrals. You can incorporate these into your default share, or through your referral reminder emails.
Conclusion: What we’ve learned from analyzing 3,000 referral programs
There are still plenty of insights to find, but we hope to make the ReferralCandy Report a recurring, annual research project.
What we’ve found this year are patterns of behavior;
- Most referrers only complete 1 referral, but there are Super-Referrers with over 500+ referrals
- Super-Referrers are more prevalent in referral programs with cash incentives
- More and more, customers prefer messaging apps, but Facebook shares are still prominent
We hope our insights and recommendations can help you improve the results of your referral program.
To get a better understanding of referrers and customers, check out:
- 30 Shopify Referral Programs - to understand the referral incentives across different industry
- How to Choose Referral Incentives - to understand the types of referral incentives across cash, coupon, and custom
- How to Promote Your Referral Program - to see the tactics other ecommerce brands use to promote their referral programs.