When you invest in a marketing campaign, it’s essential to be able to measure how well it is performing relative to other programs within your marketing plan.
You must first identify how you will measure success with your referral program, whether it’s the percent of total revenue, cost per acquisition, return on spend, number of new customers acquired or another metric. It is also a good idea to calculate your overall ROI for your referral platform and for individual campaigns to inform your referral marketing strategy and prioritize the efforts that have the most impact. Knowing which metrics to watch is also key to understanding your referral funnel so you can make adjustments on the fly.
However you choose to measure success, maximize the value of your referral platform through reporting and analytics and monitor these six key metrics in the platform to help you identify areas to improve to help you reach your overall goals.
Metrics about advocates tell you how much traction your referral program is getting with your existing customer base. Here are three key advocate metrics to watch.
1. Campaign Impressions
The number of campaign impressions you have is a measure of the overall exposure of your referral program. See how many people are viewing your referral program and where they see it Use this data to determine which referral CTAs need to be more prominently displayed and where there are gaps in your campaign presence.
2. Share Rate
Perhaps the most important advocate metric, this number tells you what percentages of advocates who saw your referral program to the action to share. . A low share rate might indicate that the advocate reward isn’t compelling enough, whereas a highshare rate lets you know what’s working well. Use this data to determine if your advocate reward should be adjusted to be more enticing to the advocate. This is also an opportunity leverage A/B testing to optimize your referral program.
In addition to the overall share rate, it is also a good idea to drill down and look at share rate by channel. For example, nail care brand Olive & June analyzed its referral funnel and recognized that referred friends converted best off of a referral email. Based on this information, the company is focusing its efforts on trying to encourage advocates to share via email and thus optimize its share ratel.
3. Top Performing Advocates
This is a way to identify which customers are generating the most referrals. Consider giving these top Advocates special incentives to keep them engaged. You can identify people whom you want to turn into brand ambassadors based on their referral activity.
Online craft retailer Heartfelt Creations honed in on this metric to identify individuals who were actively promoting its brand. Rather than issuing individual coupons for each conversion, which can start to have a diminishing return for the advocate, Heartfelt Creations offered a cash payout through our partner Tremendous to increase repeat referral behavior.
Advocate metrics are just one part of the referral marketing funnel. You must also look at friend metrics to fully optimize your strategy. Here are two important friend metrics to measure.
1. Click Rate
After an advocate shares an offer with others, what percentage of people click on it? This metric can tell you how well your incentives are working and whether an offer is good enough to compel a referred friend to click. The click rate is also a good indicator of whether thecalls to action in your messaging are effective. Use A/B testing to try different offer language and see what works best.
2. Conversion Rate
The conversion rate tells you the percentage of friends make a purchase after they click on the offer they receive from advocates. You can use this metric to compare paid marketing channels—like Tonal’s referral program, which saw a 500 percent conversion rate increase over paid channels—and to hone your offers and determine which incentives are most compelling for referred friends to make their first purchase.
Dig down into the share channels to find out where conversion rates are highest. Custom furniture brand Burrow did this and discovered that its conversion rate via email sharing was strongest. Based on this, Burrow added multiple email address fields to the sharing widget to visually encourage email sharing with more friends.
Testing different destination URLs (where the friend would be directed after clicking on a referral link) also provides an opportunity to improve your conversion rate. Rather than sending referred friends to your site’s homepage, think about where the customer experience would be best for them. For example, Burrow drives friends to a specific page that displays the friend’s offer, which has already proven as successful conversion events, rather than displaying the offer on the homepage. Burrow also uses images from the page in the share email to create a seamless product sharing experience.
Additional Opportunities Outside the Friendbuy Dashboard
Your referral platform is a powerful tool, but it’s not the only place where you can gather and analyze metrics about your referral program. Our sixth metric to watch is lifetime value.
A referred friend has a higher lifetime value (LTV) than a standard customer as a result of how they were introduced to your brand.
Referred friends are more likely to stick around longer because a friend that they trust referred them.
Increasing the LTV of your customers is one way to boost the bottom line without making a significant investment. Keep an eye on this metric to assess customer loyalty.
The Right Metrics Make All the Difference
Use metrics to look at the back end of the funnel and identify the areas where you are performing well. Use that information to identify opportunities to improve the front end of the funnel. Whether you discover that your email channel generates the highest conversion rate or that advocates are most inclined to share via social media, you can use this data to refine your strategy.
To learn more about how to optimize your referral program, read Referral Marketing: The Essential Guide.