More and more people are embarking on referral programs. A question that comes up from time to time among people working in the digital marketing arena is how well do referral programs really work. To approach this begins by reviewing the different sponsorship rates by industry.

What are the benchmark rates?

 

 

Let’s start by giving the meaning of the sponsorship rate. A referral rate is the volume of referred purchases as a% of your total purchases. So a referral rate of 1% means that one in 100 purchases from your store is made through your referral program.
To calculate industry benchmarks, we took the trouble to study thousands of data points, label each of our users in one of the 6 largest industries, and analyzed each industry. From there, we learned that the benchmark rates tend to reach a stable rate after about 6 months. The resulting industry benchmarks represent the average referral rates of users who have run referral programs for 6 months.

1. A global average benchmark rate of around 2.3%

This means that you can reasonably assume that everything has been successful in using an industry for 6 months or more about 1 in 50 sales via referrals. This should be a useful rule of thumb for a published business that is considering getting into referral marketing.
However, if you already have a product-to-market fit, satisfied customers, and a steady stream of customers from your existing acquisition channels, you can expect your sales to increase by around 2% at a minimum.

2. Gadgets and Electronics have the highest benchmark rate of any industry at 3.4%

Obviously, gadgets and electronics have benchmark programs that perform a full percentage point better than any other industry.
If that doesn’t sound impressive, pay attention to this: The average gadget referral program generates 60% more referral sales than the average referral program. This is usually done because of the nature of technology communities. They are very united and full of early adopters who are willing to try something new because a friend or influencer recommended them.

3. Not shown – some outliers have much higher benchmarks, up to 7.5%

 

During a last check with a company, we learned that they got a 7.5% recommendation rate, that is, they made more than 7 sales out of 100 thanks to their referral program.

Warnings to be taken into account:

  • Survivor bias is inevitable. For the purposes of this study, we only included retailers who have at least 6 months of data with us. While 2% is actually a conservative estimate, we cannot guarantee that everyone who signs up for a referral program will get a 2% referral rate. If your sales volume is too low, or your business just isn’t getting a lot of customers, you might not get a lot of referrals at all.
  • High referral rates aren’t everything. A high referral rate is usually nice to have, but it doesn’t have to be a good sign. Indeed, it can also mean that your other customer acquisition channels are not mature enough.