Referral marketing is a strategy where businesses incentivize their existing customers to refer new customers to them. It is a cost-effective way to acquire new customers as it relies on the positive experiences of satisfied customers. However, to measure the success of a referral marketing program, it is essential to track certain metrics. In this article, we will discuss the metrics to track for referral marketing. Referral rate – Referral rate measures the percentage of new customers who were referred by existing customers. It is calculated by dividing the number of new customers who were referred by existing customers by the total number of new customers. A higher referral rate indicates the effectiveness of the referral marketing program. Conversion rate – Conversion rate measures the percentage of new customers who complete a desire action, such as making a purchase or signing up for a service.
Customer lifetime value (CLV) –
It is calculate by dividing the number of new customers who complete the desire action by the total number of new customers. A higher conversion rate indicates that the referral marketing program is driving quality traffic to the business. CLV measures the total amount of revenue a customer is expect to generate over their lifetime. It is calculate by China Business Email List multiplying the average value of a sale by the average number of purchases per customer per year by the average customer lifespan. Referral marketing can increase CLV as refer customers tend to be more loyal and make more purchases. Cost per acquisition (CPA) – CPA measures the cost of acquiring a new customer. It is calculate by dividing the total cost of the referral marketing program by the number of new customers acquire.
Net promoter score (NPS) –
NPS measures the willingness of customers to recommend a business to others. It is calculate by subtracting the percentage of detractors (customers who would not recommend the business) from the percentage of promoters (customers who would recommend the business). A higher NPS indicates that customers are satisfie with the business AZB Directory and are more likely to refer others. Referral source – Referral source measures which channels are generating the most referrals. It is important to track this metric to optimize the referral marketing program and allocate resources to the most effective channels. In conclusion, tracking the metrics mention above is crucial to the success of a referral marketing program. These metrics help businesses understand the effectiveness.