We always hear how customer referral programs have grown in implementation as a result of their undeniable ability to generate quality leads that convert to new customers. But even though referral programs might appear to be wildly successful compared to your different lead generation programs, finding out how it compares to other successful customer referral programs is often more telling. This useful insight helps to understand where extra attention needs to be paid in order to optimize for success.
The eight benchmarks mentioned here comes from the new data report, The State of Business Customer Referral Programs. These benchmarks are a result of millions of customer referrals made in business customer referral programs run on Amplifinity’s referral software.
What is the average activity that can be expected from a customer referral program?
Activity is a very important metric to understand. Customer referral activity is the foundation of a successful referral program. This is what the first benchmark is focused on.
1. During the course of a year, it was discovered that 36% of customer enrolled were actively referring.
This means that 64% were inactive. Why were they inactive? A lot can depend on when a customer was enrolled. If they were enrolled in a previous year, made a referral, but where not successful they are often deterred from referring again.
To overcome this try having sales or customer success reach out and engage inactive advocates to train them on how to refer and the right type of person to refer in order to keep them engaged in the referral program.
How many referrals can a customer be expected to generate?
Once the percentage of active customers is discovered, how are those customer behaving?
2. On average:
- 61% of customers will make 1 referral
- 34% of customers will make 2-10 referrals
- 5% of customers will make 11+ referrals
To try an increase the number of referrals coming from customer advocates, provide a special offer or an increase in reward with each successful referral. Driving multiple referrals from a single advocate becomes even more important when looking at the next benchmark.
3. The data found that on average over a year period a customer produced 0.87 referral leads.
This means that if a customer referral program had 1,000 advocate they would produce 870 referral leads.
However, compare this to customers who previously referred a qualified referral lead.
4. These previously successful customers produced an average of 2.5 referral leads per year.
To drive more referral leads from previously successful customers, identify these customers and have sales reach out to thank them and encourage their productivity.
How many deals are generated from customer referrals?
Now getting to the main event – the conversion rate. The average referral lead to deal conversion rate from customer referral program run on the Amplifinity referral platform was 3x greater than the industry average of 3.64%, according to Salesforce’s Implisit.
5. The average conversion rate of referral leads that turned into customers from all programs was 13%.
While this conversion rate is spectacular, it becomes even more phenomenal when looking at customer referral programs that had sales involved.
6. Customer referral programs that had sales teams play a role in recruiting customers to become advocates as well as regularly asking for referrals had a 30% conversion rate.
This conversion rate has a 17 percentage point increase over the average. To help facilitate this try training sales on when and how to ask for referrals and break standard lead routing rules. This would allow the salesperson who ‘owns’ the customer to have their referral leads routed to them and incentivizes sales to form stronger relationships with customers to increase the quantity and quality of referrals.
How do the quality of referrals compare to the quantity?
So you now know that it is important to drive a higher quantity of referral leads. But the quantity of referral leads needs to be balanced with quality. For instance, a customer advocate could easily refer daily by sending a blast referral out to their social network. And while this could look great if you are just looking at quantity of referrals made, when aligned with the percentage that turned into deals you will be sorely disappointed.
7. In a year, the top 1% of customer advocates by volume of referrals, made 22% of overall referrals which only resulted in 1% of deals.
This falls extremely short of the average conversion of 13%, not to mention the 30% conversion of referrals when sales is involved.
But what about the top 10%?
8. The top 10% of customer advocates by volume of referrals, made 54% of referrals, which only resulted in 6% of deals.
Unfortunately, when an advocate just focuses on the quantity of referrals they often sacrifice quality. General social blast lose the one-to-one connection that make referrals so powerful.
Luckily there is a way to combat this. Try coaching enthusiastic customers on what makes a successful referral. They will appreciate the guidance and the reward that comes from referring more qualified leads.