11 Surprising Statistics about Referrals And Why You Need a Referral Program

Referral marketing gets confused with so many things nowadays. So many people think of pyramid schemes when they hear that word. The reality is, referrals marketing is simply word-of-mouth, and it has been there since the first human transaction was ever made.

Truth is – when someone makes a purchase of a product or service and are happy with it they want to recommend it to their friends.

It’s as simple as that. If your business has a referral program in place then you are able to capture more of that word-of-mouth goodness and get more loyal customers. If you don’t already have a referral program, then you are simply losing money every year.

How much money are you losing by not having a referral program?

Check out these 11 surprising stats about referral marketing and find out.

Let’s dive in. 


1. Referral leads convert 30% better than leads generated from other marketing channels (R&G Technologies)


Referrals simply convert at a higher clip than any other acquisition channel out there. Have you heard the phrase “happy customers make happy customers”? If your customers like your product they will refer more people. If you put all of your efforts into getting more referrals and abandon all other forms of customer acquisition (don’t try it at home kids) your business will eventually grow by 30% more when you ramp up.

That’s perhaps the immediate result but what about across the lifetime of the relationship?

What’s the value there?


2.  Referred customers have a 16% higher lifetime value (Journal of Marketing)


Referral leads are not only easier to close but they help your business long-term. Think about it, if Sally referred Harry and he continues to refer more people (assuming you have a referral rewards program in place) a big chunk of your customers are going to know each other. In the event of a mistake, a shipping delay, or any type of mishap on your part your referrals will trust you and have more patience with your process because they know that their friends were happy with your business.


3. People are 4 times more likely to buy when referred by a friend. (Nielsen)


This is another mindblowing statistic. Every time you get a new referral lead the likelihood that they will buy is four times greater compared to a lead that was not referred to you. We’ve found that people that were referred through the ShareSomeFriends app were more likely to sign up and did so at a higher percentage than non-referred leads.

So if referral leads are so great, how come they are so hard to come by?


4. 83% of consumers are willing to refer after a positive experience—yet only 29% actually do.

Texas Tech University


This statistic is a good indicator of the current state of referral programs everywhere. Only 29% of consumers actually refer people. Why is that? We believe that most businesses lack good tools and processes to ask for and collect referrals. A lot of companies avoid directly asking for referrals and instead put their money into social media ads and PPC. While these are valid strategies, the use of a simple referral app can help them ask for referrals and provides an easy way to capture referral leads.


5. Offering a reward increases referral likelihood, but the size of the reward does not matter.

American Marketing Association


A big part of what we’ve done is offered a reward to every customer that refers their friends to the business. We were working for a student tour organization and met with the students to show them the ShareSomeFriends app and ask them for referrals. We gave each student a $5 Amazon gift card if they chose to refer people, and multiple cards for over 30 or 50 referrals. The friends were so happy with their experience on the tour and partially motivated by the reward, that they gave us 500-700 referrals.


6. 87% of frontlines sales reps, 82% of sales leaders, and 78% of marketers surveyed agree that referrals are the best leads your business can get.

Heinz Marketing


When I was working in a sales organization, referral leads were our greatest possession. If you would get a referral lead you had bragging rights for an entire week! There are a few reasons for that:

– referral leads close at a higher clip.
– referral leads have a better idea of your product or service.
– referral leads already have a good first impression before they talk to you.
– if you can’t reach the referral you could always reach out to the person that referred them and ask for a favor =).

The only thing you need to have in place is a referral program with a process of getting referral leads. Which brings us to the next incredible statistic.


7. Companies with formalized referral programs experience 86% more revenue growth over the past two years when compared to the rest.


Companies that have referral programs in place actually experience 86% more growth in 2 years. That’s like having your $100k company do $186k in revenue in 2 years without doing anything else other than starting a referral program.

And yet…


8. Only 30% of companies surveyed have a formalized referral program.


Not a lot of companies have referral programs. This is probably the most powerful and surprising referral statistic. It’s not that businesses don’t ask for referral enough, they don’t establish referral programs. Perhaps they think that they are lacking a dedicated team to do it, or the funds, or both.

Starting a referral program is actually very easy.

Here is what you would need to get one going:

1. The ShareSomeFriends app

2. A list of customers you would want to outreach to

3. A couple of emails and signs around the office or place of business

4. 10 minutes.

That’s all.


9. When referral tools are used, companies are 3x more likely to accelerate referral generation and conversion.

A lot of companies think that they need to have a robust team managing a referral program, or some magical formula to talk to clients, or maybe more dedicated customers. The reality is if you have a tool that you use for your referral program you will have 3 times the referral leads (and 3 times the conversions according to this statistic).


10. Yet only 22% have a tool in place to effectively scale their programs.


So we find that the adoption of referral tools is slow. There are numerous tools that are used on social media to get leads, but those are not full-fledged referral tools. When we started ShareSomeFriends we realized that many businesses don’t have referral programs set up. We also realized that many don’t have a tool to simply collect referral leads from their clients. Even if customers do refer someone, they don’t get a reward, or the referral is not registered in the system so the business has no way to track its referral rate. That’s when our app was born.


11. Every referring customers makes an average of 2.68 invites.

Referral SaaSquatch Data Science


That’s an incredible statistic. If you ask those happy customers you have to refer their friends to your business you will find that on average each person will bring 2. It really depends on the industry that you’re in. With ShareSomeFriends we find that our clients are getting 20 referrals from each client on average.

Wait, are we 10X better than the national average? 

Regardless, if you calculate your per customer acquisition cost and multiply by 2.68 that will be how much money you are losing if you don’t currently have a referral program.

We hope that this post has been helpful, what do you think? How hard would it be for you to create a referral program for your business?

Let us know in the comments.

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Cheers =)

Ben Kazinik is a marketing manager for ShareSomeFriends, a referral app and lead management platform. He enjoys hiking, cooking, soccer, and visiting his family around the world. Email me at – ben@sharesomefriends.com or connect on my LinkedIn.