Once you have created a referral program, your job is not done but only just started. To maintain the conversion rate at a decent level and to keep profiting from customer referrals, you need to take care of the referral rate. You can answer several questions about your program’s performance by analyzing this metric.
What is the referral rate and how to keep it at the right level? What is the average referral rate and how to increase yours?
Although these things are challenging, they are not impossible tasks. We have your back by providing some tips.
In this article, you will learn how to manage this aspect of a referral marketing program.
In this topic, we will discuss the issue of referral rates and best practices to maintain them at a high level.
Play it again, Sam: what is a referral program?
A referral program can help increase your brand awareness, as long as it is designed well and with a dose of creativity. This marketing channel can bring many new users and increase the visibility of your company.
But before we get to creating one we should step back and address the main issue of referral marketing. This way, it will be easier to understand the key metrics concerning online referral marketing and how to keep them at decent levels.
Such programs work as follows: your current customers share a referral link with their friends or family. One of these referees clicks on the links and makes a purchase through it with a discount. This is how your website gains referral leads.
All in all, referral sales help you remain in the minds of your clients as a valuable source of savings, and thanks to this they may make repeat purchases.
According to this report, the average rate of converting referral leads into customers is 13%. Compared to other marketing types – email (8.41%), influencer (2.55%), or affiliate (0.5%-1%) – referrals score highly.
In other words, customer referral programs work. It is also important to add that they bring customers regardless of whether you operate on the B2B or B2C markets.
A very important issue here is the quantity and quality of referrals. Both aspects depend on your referral methods, but let’s explain what they mean.
- Quality referrals are based on mutual understandings – you can perceive a lead as high-quality if they maintain a connection with your brand, are able to acquire more clients, and are willing to do business with your company.
- The quantity of referrals is easy to explain – it is just the number of people who recommend you to others who become your potential customers.
Referral decisions are not very long processes, but you can make them even shorter thanks to offering good incentives.
For example, if you provide tempting rewards to your active customers then they will work harder.
Also, if you offer them to potential customers too then they will click on links with even more enthusiasm.
What is the referral rate?
There are many referral marketing statistics that present referral marketing as a very successful and cost-effective strategy.
Thus, how to check if your customer referral programs are effective?
How to measure the referral rate?
There is a formula for calculating the referral rate, which is the number of referred purchases divided by the total number of purchases. You can switch purchases to subscriptions or sign-ups, etc. The formula is as follows:
Referral marketing stats say that the perfect referral rate is 2.3% which means that about 2 in 100 purchases are made via a referral URL. Even though this may not sound like much, it is not so easy to achieve.
In other words, if you want to check your program’s referral rate then you should grab a calculator and go for it. It would be good if you reach a score of about 2%.
But that’s easier to say than do. That’s why it is time to discuss how to increase the success of your customer referral programs.
So how to track a referral program performance?
You can create a referral program and follow its performance with the help of the right software. With EarlyParrot creating a program will take you minutes and the tool will assist you at each step. You can integrate it with your website in a flash.
If you can not find the provider that you use, contact us and we will find a solution.
With our tool, you can customize the whole of each campaign, every client-facing page, email, and even link.
Furthermore, there’s no EarlyParrot branding to potentially confuse the user as to whose campaign it is.
Feel free to try it out!
For a complete understanding of rates in a referral customer referral program, there is one more issue to cover – the desired actions of referees. This concerns whether or not a client meets the referral requirements, such as signing up, subscribing to a newsletter, or making a purchase via a referral link.
Now that we’ve covered the basics, it is time to focus on numbers and the rates themselves.
Best practices to improve your referral rate
Staying at the forefront of your customers’ minds is not easy.
Additionally, gaining quality leads and maintaining high referral rates can be challenging too.
However, there is no need to worry. Thanks to the tips below you will be able to boost your referral rate like never before.
Tip #1. Spread the word
Yes, making a buzz about your business is one of the program’s main tasks. But to keep the number of referrals high, you should take care of your program awareness.
First, invite ALL of your customers, both current and past. With EarlyParrot you can do this right after you design your program.
Next, you can send an invitation to your whole customer base, which means everyone who has ever purchased from your site will receive an email. This will increase the volume of referrals and remind past clients about you.
Maybe they will feel encouraged by the incentives and decide to return along with a bunch of referred friends?
As you probably know, one referral leading to another is how the word spreads, not only about your brand but also about your referral campaigns.
Tip #2. Send a referral newsletter
You likely use emails as a part of your marketing strategy.
If so, this is a very good decision, since more than 70% of Millennials choose this channel as their preferred method of communication with brands.
If you deliver newsletters about upcoming releases or promotions, why not transfer this practice to referrals. It would be an excellent way to present the terms of your program, rewards, future updates.
And maybe the top referrer of the week or month?
For this person, a special reward should be to provide extra motivation for all of your customers to make some additional referrals.
To send such a referral newsletter you can use email marketing providers such as MailChimp or AWeber and check which works best by using EarlyParrot. You can track the performance of links straight from your account, allowing you to see everything clear as day.
It’s worth mentioning that EarlyParrot can be integrated with most of the popular email campaign providers, which makes creating referral newsletters and fully automating the process even easier with this tool.
Tip #3. Cross-promote
Make use of all the channels you have at your disposal.
For example, advertise your referral program on your website, social media profiles, and anywhere else that makes sense to you.
To ensure your program is a success, you need to communicate every detail. Your website should include all of the necessary information.
So create a separate page with the terms, incentives, and deadlines. Describe and explain the whole referral process.
Keep your dedicated subpage up-to-date once it is created. Remember to note changes if they occur.
Likewise, you should use social media to promote your program. Be consistent and mention it frequently.
Alternatively, you can offer some competitions only for referrers and offer prizes directly to the winners, thereby generating more referral leads.
Tip #4. Stay on top with reminders
It is necessary to maintain people’s interests, and you can accomplish this by sending reminders. Make use of social media platforms, emails, or even push notifications if your app offers them.
Also, you can even use SMS marketing to reach your audience. Remind your recipients about your program and encourage them to participate.
By doing so, they will feel motivated to share links.
Additionally, your brand will continue to stick in their minds for much longer so that whenever someone asks about a great company in your field, they will think of you first. Such recommendations may positively affect your high referral rate.
Tip #5. Be present offline
Referral marketing works online, but who says it can’t be promoted via offline channels? An expanded audience and a few additional referrals will result from such advertising.
Provide some offline promotions; distribute leaflets, stickers, and some digital out-of-home advertisements.
All in all, if you want to promote your program this way and encourage people to visit your website, you should take care of making your links shorter. This way, they will be easier to remember and paste into browsers.
Moreover, such promotion will be a great support to your brand awareness, since you will show up both in online and offline channels. This will make it hard for clients to forget about you, hence it is an excellent way to raise your referral rate.
Tip #6. Offer proper incentives
At least at the beginning, you should choose two-sided incentives instead of one-sided ones if you aim to increase your referral rate. This will likely be a more engaging way of motivating your customers. It increases the chances of referrals reappearing if you reward both the referrer and the referee. The former will be motivated to make further recommendations, while the latter will be more motivated to join the program and then make their referrals.
Increasing your referral rate requires an incentive system.
Boost your referral rate!
The success of your referral program depends on the referral rate you achieve and how many referral-driven actions your customers take. You will drive more sales and achieve higher conversion rates as more referrals lead to actions. That’s the main goal of business, isn’t it?
Hopefully, our tips have helped you understand what a referral rate is and how it works.
By following the guidelines above, you should be able to improve your program’s referral rate.
So the main takeaways are:
- remember what referrals are and how they work
- focus on communication across various channels – the more people know about your program, the greater the chances of successful referrals
- try to stay at the forefront of your customers’ minds – keep reminding them that your program is rewarding and it is worth being part of it
These aspects, along with the tips listed above, will help you build referral programs that help you earn more than ever before. Let’s hope for the best!