Video: What metrics do I track in my referral program?
Another problem with measuring the effectiveness of your customer referral program is knowing which metrics to track. In this section we go over the five key metrics and what they mean for your program.
Hi, welcome to another session on customer referral programs. Today, we’re going to talk about, specifically, what metrics are actually measured in a customer referral program, and what they mean. It’s a common question we answer – What metrics do I track in my referral program? To start with, in most things in web marketing, we have a funnel, and this funnel is going to go from everyone, to not everyone, we’re going to go from the easiest part of your customer referral program, down to the ultimate goal.
5 Main Metrics – Participation Rate
There are 5 main metrics that you’re going to want to pay attention to, the first one is your participation rate. It’s not rocket science, your participation rate is your average number of monthly users that are taking part in your referral program, this isn’t necessarily the number of referrals they’re sending, this is just they had in fact sent a referral, they’ve copied a link, they’ve done something to start in the referral program, so these customers are participating customers, and this is not going to be all your customers, but the ones you have a chance of pushing down your funnel towards your final goal.
Referral Rate Definition
Once we look at participation rate, we’re going to look at referral rate. This is actually how many referrals that are being made, you could have 1 participant making 40 referrals, or you could have 5 participants only make 1 referral, but the referral rate is important to track because we know how many messages are being sent out, and it’s clear that if no one is making referrals, we won’t be able to achieve our other goals.
The next metric you want to look at is Impression, and this is an interesting one, if your goal for the referral program is to raise brand awareness, this is really the end of your funnel, you just want to get impressions on your referrals. Now, if your goal isn’t brand awareness, it’s important to still track this because brand awareness is valuable to all of us, the idea that people are looking at your product, they’re starting to consider your product potentially, you’re top of mind for when they have need for a product, those are all going to be valuable things, even if they’re not top of your goals. It is important when measuring impressions to think outside of just clicks, if we did have someone click on it, obviously we’re going to count that as an impression, but is that a way to track things like facebook, twitter, where we have a passive audience, and these are some challenges you’ll have to work through, but the idea is trying to understand how many people saw your brand and your business because of this referral program.
Response Rate Definition
Next, we’ve got response rate, if you’re looking at growing your trial user base, this is probably where you want to go. The response rate isn’t going to be people who saw the referral, but people who clicked on the referral and actually acted on that referral to at least a trial signup, maybe an email address, not to the point of a conversion, but something more than just clicking on your link that was sent out or whatever it was that your customer was using to refer. If you’re looking at growing your trial user base, or your customer base that’s in the free mode, response rate is where your funnel is probably going to end.
If you’re looking at improving your number of paying customers, to drive your revenue, we’re going to go all the way down to your conversion rate, so the number of conversions that were made based upon all the participants, making all those referrals, with all those impressions and all those free signups. This conversion rate here is probably going to be measured in dollars, but could be measured in new paying customers, depending on how you look at it in your up sale process in the future.
Just to recap that, when you’re looking at measuring your customer referral program, there are 5 key metrics, Participation, Referral, Impression, Response, and Conversion, that you’re probably going to want to track, and depending what your end goal is, you’re going be working to optimize a different number in that funnel. We hope that answers your question about what metrics do I track in my referral program. That wraps up our session on what metrics to track and what they mean for your customer referral program.