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What is a referral rate?

Referral rate is a metric used to measure the effectiveness of a referral program by providing the percentage of satisfied customers who actively refer a business's products or services to others. It represents the chunk of customers who become advocates and generate new leads through word-of-mouth marketing.

How to calculate a referral rate?

Referral rate is calculated by dividing the total number of clicks on referral links by the sum of those clicks' purchases. In other words, your referral rate is a representation of referral purchases as a percentage of your overall purchases.

How to calculate a referral rate


Let's say you have an e-commerce brand that launched a referral program. During the last month 5 referred individuals made a purchase with the total number of your purchases at that time being 100. To calculate the referral rate, use the following formula:

Referral Rate = (Successful Referrals / Total Referral Attempts)

Referral Rate = (5/100) = 5%

What is a good referral rate?

It's important to note that referral rates can vary depending on the context and industry. Ultimately, what constitutes a good referral rate depends on factors such as the nature of the business, the target audience, and the effectiveness of the referral program or marketing efforts.

However, the rule of the thumb says that a good referral rate is estimated at roughly 2.35%. If your referral rate is close to this number, you can breathe a sigh of relief knowing that your referral program is on the right track.

Referral program conversion rate versus referral rate

While they are related, referral rate and referral program conversion rate measure different aspects of the referral process. While a high referral rate indicates a strong ability to generate leads, a high referral conversion rate suggests that the referred leads have a higher propensity to convert into customers:

  1. Referral Rate: Referral rate expresses the number of referrals received during a specified time period as a percentage of your total purchases. This metric helps businesses understand the overall success of their referral program in terms of attracting new leads or customers through referrals.
  1. Referral Conversion Rate: Referral conversion rate measures the percentage of referred customers who actually take a desired action and become paying customers.  A high referral conversion rate indicates that the referrals are highly targeted and have a higher likelihood of converting.

How to calculate a referral conversion rate?

Both referral rate and referral conversion rate are crucial for assessing the performance of a referral program. Monitoring and optimizing both metrics can help brands maximize the impact and ROI of their referral programs. Below, you will find the formula used to measure your referral conversion rate:

How to calculate a referral conversion rate formula

Suppose in a month, you get 5000 referrals, and out of those, 500 customers make a purchase. In this case, your conversion rate would be 10%.

The referral conversion rate is important since it illustrates the quality and relevance of your recommendations. A high referral conversion rate indicates that satisfied consumers are recommending your products to other people who need what your brand offers.  This implies that you are meeting the expectations of referred customers. A poor referral conversion rate, on the other hand, can point to insufficient audience targeting, a lack of well-crafted incentives, or inadequate follow-up methods for your referrals.

How to increase referral rates with Voucherify?

There are several ways in which Voucherify can help you take your referral rate to the next level, including:

1. Implementing an omnichannel approach

Using an omnichannel referral program strategy makes it possible for your referral campaign to work smoothly across all customer touchpoints, increasing customer engagement and boosting your brand’s visibility.

2. Utilizing the best UX practices

Voucherify offers you a set of UX tools to take care of your referral program to provide a seamless user experience for your customers. From personalized referral code patterns, multiple sharing options, white-labeling features, to success & error messages and checkout view for referral codes, Voucherify offers you a myriad of  UX features to improve your customers’ referral experience.

3. Offering enticing rewards

With Voucherify, you can use customer segmentation features to provide personalized incentives tailored to your customers needs such as, for instance, vouchers, gift card credits, material rewards, loyalty points, free shipping, etc. Ultimately, well-matched referral rewards can help your brand open up the sesame door to customer loyalty.

4. Gamifying the referral program with tiers

Add flavor to your referral program by implementing gamification features. With Voucherify, you can build a multi-tiered referral program, where referrers are rewarded with various incentives, depending on the number of successful referrals.

5. Affiliate marketing optimization

Leveraging Voucherify, you can also incorporate affiliate marketing strategies to reach a new audiences. To do this, you can generate a unique code for each affiliate, and when his/her followers use the code to make a purchase, your affiliate receives referrals in return for which he can receive discounts, gift cards, or other benefits.

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