Referral marketing is a powerful strategy that relies on word-of-mouth and recommendations from satisfied customers to acquire new customers. It is not always easy to measure the effectiveness of an organization’s specific referral program. However, there are some referral program statistics that can serve as benchmarks and a starting point to understand the impact of referral marketing. You may be asking: Do referral programs work? Well, here are some referral statistics that will shed some light on the answer.
Trust and Recommendations:
- According to Nielsen, 92% of consumers trust recommendations from friends and family over all other forms of advertising. In addition, 91% of customers would refer if asked.
- Customers acquired through referrals have a 37% higher retention rate, as reported by Deloitte.
- The New York Times found that 65% of new business comes from referrals.
- From HubSpot, small businesses get 60% of their business through referrals.
- The American Marketing Association states that referral leads convert 30% better than leads from other channels.
- People referred by a friend are four times more likely to buy.
- Transaction states that referrals have the highest conversion rates of any customer acquisition channel – 3.74%
- Referral marketing is often cost-effective. The Wharton School of Business found that the cost of acquiring a new customer through referral marketing is often lower than through traditional advertising.
Customer Lifetime Value:
- Customers acquired through referrals tend to have a 16% higher lifetime value, according to a study by the Journal of Marketing.
Social Media Influence:
- Social media has amplified the impact of referrals. According to HubSpot, 71% of consumers are more likely to make a purchase based on social media referrals.
Advocacy and Loyalty:
- Influitive reports that companies with referral programs experience a 69% faster close time on sales deals, and they have a 10% higher customer lifetime value.
- Truelist reports that referred customers are 18% more loyal and are 37% more likely to stay as customers than any other lead source.
Referral Program Usage:
- A study by the American Marketing Association found that 64% of marketers believe word-of-mouth marketing, including referrals, is the most effective form of marketing.
- According to ThinkImpact, only 3 out of 10 B2B businesses have a formalized referral program. If you don’t have one that works and is easy to implement, check this out.
- According to HR Technologist, employee referral programs yield the highest quality candidates, with a 55% faster time-to-hire and a 32% lower cost-per-hire.
Online Reviews and Trust:
- BrightLocal’s Local Consumer Review Survey revealed that 85% of consumers trust online reviews as much as personal recommendations, making online referrals and reviews a significant part of referral marketing.
- In the B2B sector, referral marketing is also highly effective. Invesp reports that 84% of B2B decision-makers start the buying process with a referral.
- With the growth of mobile usage, referral marketing has adapted. According to a study by 3Cinteractive, 64% of smartphone users prefer to receive mobile referrals.
Referral Program Incentives:
- According to multiple sources, referral programs with incentives have a 300% higher conversion rate than those without incentives.
- A study by McKinsey found that marketing-induced consumer-to-consumer word-of-mouth generates more than twice the sales of paid advertising.
These statistics highlight the significant impact and potential of referral marketing in acquiring new customers, improving customer loyalty, and driving business growth. Implementing a well-designed referral program can be a valuable strategy for businesses in various industries.
ReferMe IQ™ is passionate about helping organizations build high-growth referral-based businesses with their ”state of the art” automated referral platform. Peter S. Velardi is an accomplished senior executive and entrepreneur who has impacted thousands of individuals and organizations to build a fast-growing referral-based business.
If you’d like to learn more about any of the topics discussed, please click here.
Post author: Peter S. Velardi