Customer referral program – Key performance metrics

It is very important to understand the key performance metrics of any marketing campaign. These metrics are not obvious in the case of customer referral program. Lot of people mistake referral sales to be the sole performance metric of customer referral program. Instead branding and social reach are even more important metrics while running a successful customer referral program [more here]. Referral campaign is an important means to reach a wider target audience leveraging social circle of  loyal customers. It lets customers become the brand ambassador or sales force. In fact 92% of consumers trust peer recommendations vs only 40% trust Ads in search results, 36% ‒ online video ads, 36% ‒ Sponsored ads on social networking sites and 33% ‒ online banner ads. [source]

Below I have explained key measurable performance metrics of the customer referral program.

1.) Customer referral program Reach – Number of invites sent

Number of invites sent through the campaign is direct measure of the program performance. Our perception about the brand is directly proportional to number of times we notice it through various mediums. This is why lot of advertising budget is spent on print and electronic marketing. A 20X reach is a very good one for any successful customer referral program. The reach can be increased by making referral process as frictionless as possible and leveraging integration with social graph.

2. Brand Building / Product promotion

Customer referral program is an important means to promote new product launch and brand building. The campaign can be communicated to the customer through various channels including onsite widget, facebook application, twitter and Email newsletters. This form of customer engagement has a multiplier effect through customer friend invites. If set up right, the customer referral program would market itself  on its own. [how to promote campaign]

3. Referral Page visits

Number of people accepting the invites and visiting the site is another key performance measurement metric. Good content/offer would have a high invite acceptance rate. 1-5% click rate is usually considered normal. Higher click rate validates the good content.

4. Referral Sales

You can track the number of sales happening through the referral program via invitereferrals.com analytics or through google analytics. It is observed that a referred customer has a 16% higher lifetime value compared to customer acquired through other mediums. Many times customer may not purchase the product now but in future. Therefore sales may not show you the larger impact of the customer referral program (just like television advertisement).

We need to understand that reach and brand building are the 2 most important customer referral program performance metrics and not sales.