14 Remarkable Referral Marketing Statistics for 2023
Referral marketing is a proven strategy to drive plenty of qualified leads. If used the right way, referral marketing can positively affect your bottom line. To help you understand its power and how it can impact your business growth and profit margins, I have gathered some remarkable referral marketing statistics and the latest trends to follow in 2020 to make the most of this internet marketing strategy.
So, are you ready to tap the power of referral marketing for your business success and get people raving about your brand?
Here we go…
Fascinating Facts About Referral Marketing (Editor’s Choice)
- 2.3% is the global average referral rate.
- 92% of the people trust recommendations.
- A company can boost its profits by 75% with a 5% increase in customer retention.
- Referral leads convert 30% better than other marketing channels.
- 61% of customers make 1 referral, while 34% make at least 2 to 10 referrals and 5% make more than 11 referrals, referral marketing statistics reveal.
- 28% of Millennials never buy a product if it is not referred by a friend.
- 20-50% of all the buying decisions are influenced by word of mouth.
- B2B customers average nearly 3x more revenues than ecommerce brands.
- The average small-sized business gets approximately 60% of its business from referral marketing campaigns.
Referral Marketing Statistics 2020
Referral marketing is a cost-effective way to spread the word about your brand through your existing customers. It is a win-win strategy for both sides.
Referral marketing programs have a certain type of incentive structure, where a customer (advocate) gets rewarded when they share a referral link of your business via email or social media and their friend then clicks on that link and becomes a paying customer.
Since the process is so convenient, the cost and risk associated with referrals is minimal. It works because people trust the opinions of actual customers/real people more than traditional advertising.
So, if you’re planning to use this strategy for the first time, you’re probably wondering:
What is a good referral rate?
1. 2.3% is the global average referral rate.
This shows that 1 in 50 sales happen through referral marketing. This is the average referral rate for established businesses with a consistent stream of customers. If you’re new to the industry, though, you may not be able to achieve this rate straight away. But if you continue to use referral marketing, you’ll get there eventually.
If this got you wondering about what percentage of referred customers take action, then I have this covered too in the next one. Take a look…
2. 92% of the people trust recommendations.
That’s a high percentage, which represents customers aged 18 to 34 across different industries. They seek recommendations from their family and friends before making a product purchase.
Let’s dig deeper to learn more about why are referrals important.
Referral-based Marketing Stats
3. Social media referrals influence 71% of the customers’ product purchases.
Wow! This is clearly indicative of the fact that people’s choices regarding products and services are directly influenced by recommendations made by others on social media channels.
But wait! There’s more that can help you determine the power and importance of referral marketing. Read the statistics shared below. You’ll be amazed even more…
4. 86% of Americans with a $100,000+ household income seek recommendations before making purchases.
It is yet another sign of people’s growing reliance on referrals. So, if you want to become a household name and boost your sales, then referral marketing is the way to go.
Now here are some crucial insights on the churn rate of referral marketing…
5. A company can boost its profits by 75% with a 5% increase in customer retention.
(Bain & Company)
And this is possible through referral marketing, which is a positive word of mouth strategy where customers refer the brand to other prospects. So, you not only retain current customers, but you also grow your customer base by attracting new customers. It’s a win-win all the way.
6. Referral leads convert 30% better than other marketing channels.
The conversion rate is considerably higher than tradition marketing strategies. Based on the referral marketing conversion rate, you can easily gauge the power of this strategy and how much people trust the recommendations made by existing customers about the referred products and services.
What Percentage of Customer Give Referrals?
Did you know that:
7. 61% of customers make 1 referral, while 34% make at least 2 to 10 referrals and 5% make more than 11 referrals.
Whoa! That’s impressive.
From the looks of it, a large number of customers make more than two referrals. So if you take advantage of this, you can get the best results. The best way to improve your referral rate is to focus on the customers that get you referrals and take note of what methods and incentives work. Read on to learn more about this.
8. According to referral marketing statistics, gift cards and checks are the most popular incentives for making referrals.
52% of the customers refer if the incentive is a gift card, and 29% do so if the incentive is a check. This is followed by 9.5% merchandise and bill credit. So, try to create attractive referral programs with such incentives that people actively refer your brand to their friends and family members.
9. 28% of Millennials never buy a product if it is not referred by a friend.
Since Millennials make up the majority of online buyers, it is extremely important for new business owners and established ones to understand their purchasing behavior and psyche. And this statistic provides valuable insight into how to attract Millennials and convert them into buyers.
Invest in direct referral marketing to grow sales.
10. 20-50% of all the buying decisions are influenced by word of mouth.
It’s highly effective because potential customers know that the product or service is being referred by customers based on past experience and interaction with the brand. This eliminates the risk that comes with trying a new product. As a result, new buyers are willing to try new products more confidently.
What Percentage of Sales Professionals Ask For Referrals?
Here’s a quick overview of B2B vs. B2C referral marketing…
11. B2B customers average nearly 3x more revenues than ecommerce brands.
This can be further elaborated with the following figures:
- B2B Software and Services —$558K
- Financial Services—$374K
- E-commerce and Retail—$155K
Read on to get learn about small business referral marketing stats and get some interesting insights…
12. The average small-sized business gets approximately 60% of its business from referral marketing campaigns.
So, even if you don’t have a big marketing budget, you can count on referral marketing to generate leads and improve your customer base.
13. 82% of the sales leaders, 87% of the frontline sales representatives, and 78% of marketers agree that referral marketing brings the best leads for the business.
This is because references are primed for a purchase. They are ready to buy because the brand if referred to them by a friend or a family member who they trust. Thus, referral marketing for attracting new customers is definitely effective. Apart from those attracting new customers, it also helps retain them.
14. The average value of a referred customer is at least 16% higher than that of a non-referred customer.
Additionally, if a referred customer buys from a brand once, they are likely to become a loyal customer, which helps build a trust-based and long-term relationship between the customer and the brand.
The bottom line is that a brand today is no longer perceived in the way marketers advertise it.
The perception is partially (if not fully) built from what consumers tell each other about it. So, keep in mind these mind-blowing referral marketing statistics and trends to create a powerful marketing plan that converts customers into brand ambassadors, referring your brand to more people.