Refer-a-Friend, also known as Referral, programmes are a proven strategy for acquiring new customers through the advocacy and recommendations of existing ones. According to Nielsen, 92% of consumers trust recommendations from people they know over any other form of advertising. While this is encouraging, businesses need more than anecdotal evidence to assess the performance of their Referral Programmes. Tracking the right metrics ensures that your Referral Programme isn’t just running but thriving.

Here are five key metrics to measure the success of your Refer-a-Friend Programme:

1. Referral Enrolment Rate (RER)

Referral Enrolment Rate tells you what percentage of your customers are actively referring others to your business. This metric is crucial because it reflects the level of satisfaction and trust customers have in your brand. A high referral rate indicates that your customers are enthusiastic about your product or service and willing to share them with their friends.

Why it’s important: A higher RER suggests a strong word-of-mouth channel and customer loyalty. According to Harvard Business Review, referred customers are more valuable as they are 16% more likely to stay and 18% less likely to churn compared to non-referred customers.

Soreto benchmark: On average, Soreto Referral Enrolment Rates are between 8-10% for the hero placement on the Thank You Page of our clients’ websites.

2. Referral Conversion Rate

Getting referrals is one thing, but converting those referrals into actual paying customers is what ultimately drives revenue. This is where Referral Conversion Rate (RCR) comes in. It tracks the percentage of referrals that turn into customers.

Why it’s important: Conversion is key to success in any business funnel. According to a study by Extole, referred customers convert at a rate 30% higher than leads generated by other channels, meaning they have a much higher potential for ROI.

Soreto benchmark: We typically see 10-15% Conversion Rates from our Referral Campaigns.

3. Average Order Value (AOV) of Referred Customers

This metric measures the average amount spent by referred customers compared to non-referred ones. It’s not just about getting more customers through referrals but ensuring they contribute to your bottom line.

Why it’s important: Research shows that referred customers tend to spend more. A Deloitte study found that the average order value from referred customers is 13% higher than that of non-referred customers . Tracking AOV helps you understand the monetary value that referral programs bring in.

Soreto Benchmark: Our campaign AOVs range from 20% – 80% higher than our clients’ onsite AOVs.

4. Lifetime Value (LTV) of Referred Customers

Customer Lifetime Value (LTV) estimates how much revenue a customer will generate during their relationship with your brand. For referral programs, tracking the LTV of referred customers is crucial as they are often more loyal and stay with your company longer.

Why it’s important: Referred customers have a 25% higher retention rate than non-referred customers according to the Wharton School of Business. This makes them more valuable over time, leading to more sustained revenue.

Soreto Benchmark: Get in touch to see how our programmes can lift your existing customers’ LTV while acquiring high-value new customers.

5. Cost per Referral (CPR)

Cost Per Referral (CPR) measures how much it costs your business to acquire each new customer and the cost to reward your Referral Advocates to reach those new customers.

Why it’s important: Understanding the cost efficiency of your referral program is essential for measuring your ROI. A low CPR means your referral program is running efficiently. Research from Bain & Company suggests that acquiring customers through referrals can lower your customer acquisition cost by as much as 50%.

Soreto Benchmark: We see great ROIs for our Brands with an average of over 2,000% ROI.

Conclusion

By monitoring these five key metrics—Enrolment Rate, Referral Conversion Rate, Average Order Value, Lifetime Value, and Cost Per Referral —you can effectively evaluate the success of your referral program. These metrics provide a comprehensive view of how well your programme is functioning, from customer acquisition to long-term value. Ultimately, a well-tracked referral program can significantly boost both customer growth and revenue, offering a high return on investment for businesses willing to invest in this powerful marketing strategy.

By tracking these critical performance indicators, you can continually optimise your referral marketing efforts and ultimately scale a successful Refer-a-Friend programme.

Sources:

1. Nielsen (2020). Global Trust in Advertising Report.
2. Harvard Business Review. (2011). “How Valuable Is Word of Mouth?”.
3. Extole (2021). Referral Marketing Data Report.
4. Deloitte (2020). Consumer Behavior and Referrals Study.
5. Wharton School of Business. (2010). “The Financial Impact of Customer Referrals.”
6. Bain & Company (2017). Customer Acquisition Cost Analysis.
7. Journal of Marketing (2013). “Referral Programs and Customer Loyalty.”