What is referral rate?

What exactly is a referral rate?

Let’s talk about referral rate, if you don’t know what that is, it’s the volume of referred purchases as a percentage of your total purchase. So 1 percent referral rate is equivalent to 1 in 100 purchases come from your referral program. It happens when an ambassador shared the referral link on places she wants such as through PM, email, social media platforms, and a friend uses that link as they purchase. When calculating the benchmark figures in the industry, we realized that referral rates more usually than not reach a stable rate after 6 months. This results in industry benchmarks that represent the average referral rates our users have achieved after using their referral program for almost six months.

Global Average Referral rate of around 2.3 percent

This is when you can reasonably assume that your success retailers has been using the referral program for more than 6 months and is getting 1 from every sales through referrals. This is one of the rule of thumb that should be considered for established businesses that think about getting started on using a referral program. If you already have the ideal product that would fit your target audience, customers who are happy, and a stream of customers that’s steady and comes from your acquisition channel then you can expect your sales to really increase a minimum of 2 percent.

Of all the industries electronics and gadgets have the highest referral rate at 3.4 percent Compared to the other industries, it’s very clear that gadgets and electronics are the products who have referral programs that really performs well and increases more sales compared to other categories in the industry. Studies were made about this and it has shown that a gadget referral program gets more than 60 percent more in sales from referrals compared to the other referral products with different products. This could be related to the nature of technology communities, they are more close-knit and are more filled with early adopters who are willing to try out the new things because an influencer or friend has recommended it.

Some outliers referral rate is much higher, as high as 7.5 percent

Just like BikiniBOD, they are getting a referral rate of 7.5 percent which equivalents to more than 7 out of 100 sales that come from their referral program.

3 Ways You Can Raise Your Referral Rate

So now that you know more about the basics of referral rate, do you know how you can raise it? The performance of your referral is the consequence of your conversion rates in every step of your referral funnel. But don’t worry because you can optimize it.

Referral program is there to teach the people to make it more easy and motivating for customers to actually refer your business, this is to embed in their minds and to program them into sending the referrals during the best time. There are 3 tools in the system:

  • Referral cards
  • Referral for a worthy cause
  • Referral newsletter

1. Referral cards

The right time for you to ask your customers for referrals is when they love your company the most. This is a simple process that you can apply to every customer you’ll get. When you customers sign up, you get to show them what you offer, and that will help your customers realize what their goals are, this is when you ask them for help. It would seem like they are reciprocating since you helped them find their goal. This is the time when you should not be tentative about asking for referrals because the people would want to help you because you just helped them out. Every business whether you are offering services or products would have this type of point of best opportunity when your customer would be very happy they found your website. So, keep in mind that when the client is new, there’s 3 things you would want to accomplish before they leave your site.

1st is to re-confirm their decision by thanking them for doing business with you, this would make them feel good and at ease that they are making business with you.

2nd you would want to give them a sense of what they could expect would happen next.

3rd you would want to take advantage of the positive frame of mind so you can ask them for referrals by giving them a way to share their referrals to you in an easy way. There are different ways to do this, they could either give you their email adds or you could give them self-mailer referral cards, and others. These type of ways would be easy for them and since time is precious, this isn’t also time consuming. Some fill up cards would also be easy because it would allow them to share all the other information they could give so you could make your invitation more personalized and for them, they could choose the most convenient information to give. But of course, what’s in it for them? You have to always make sure that you answer that question.  

2. Worthy Referrals

Rewards has always been a part of referral programs because it answers the questions of customers “what’s in it for them?”. There are a lot of different ways to do this, some send out small gifts, give discounts, or something equivalent. But whatever you decide to give as an incentive should be clear. Some people use other ways which seem to be effective too such as attaching the referral to a donation or an important local charity work, so the message goes something like “when you refer your friend and they purchase something from us, 30 % of that sales goes to *the name of the charity*.” This is very effective because they are helping you, helping their friend find what they need, and they are also helping the charity.

3. Referral newsletter

This third tool is a mailed referral newsletter that you should be sending out every month to those who have a high chance of referring. You could even post it in your blog and benefit from SEO value as well. This should be short, interesting, and show them what’s in it for them. This newsletter could also include top referrers, basically recognition to make them feel appreciated, welcome the new referrers, for other activities and to show whatever is new.

This is basically three important steps to take to make sure that you increase your referral rate. But, if you can’t produce customers who are genuinely happy, then this won’t work. Prospects would become your new customers, and they would eventually become your ambassadors. How motivated they are in referring your business would depend on how well your services are to them and how appreciated they feel for their efforts. The goal here is that you gain customers who aren’t just happy with your products or services but is really amazed by it. You need to make sure they turn into fans of your business. One of the keys to a successful referral program is a raving fan because they turn into the best salesperson and the most motivated one as well. When they design and implement a system, they are creating a network that’s invaluable and would feed your customers. This takes time for the network to grow by developing a system that would cultivate the referrals and create leverage that’s massive enough to grow your business even more. Also, when you are referring, take note that being pushy isn’t attractive.


Business fundamentals are important, referral rates are important but also take note that it isn’t everything. Referral rates also isn’t always a good sign because it could mean that your other acquisition channels aren’t mature yet.  But these are all the basics you need to know about referral rate. We hope that this has helped you understand it much better. 

8 Response to "What is referral rate?"

  1. Comment From Martina Cahucom

    Now I understand it better.

  2. Comment From Kelvin Matthews

    Best way it was explained.

  3. Comment From Hannah Brooke

    Two Thumbs Up! You should make more stuff.

  4. Comment From Orion Memphrey

    Really nice how you make it educational but keep it simple and interesting.

  5. Comment From Hailey Markson

    Now I know. Was always wondering about its importance.

  6. Comment From Johan Smith

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  7. Comment From Kelly Tumala

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  8. Comment From Ginger Davis

    Oh interesting! I should definitely give it more importance.

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