Referral marketing programs incentivize current customers to promote your business amongst their friends and family. This often involves rewarding customers with freebies, discounts, and cash if their friend uses the referral code to make their first purchase, and studies show that it’s guaranteed to produce top results.

Nielsen reports that 92% of consumers believed suggestions from their family and friends rather than ads. A 10% increase in word-of-mouth even led to a sales increase between 0.2 to 1.5%.

So yeah, a referral program is an effective way to generate leads and grow your customer base.

Why run a referral program?

Referral programs are an effective way to complement your current marketing strategy. Instead of encouraging users to keep spending, brands can promote an alternative way to get products and services for free in exchange for a successful referral.

Now that we have a clear understanding of referral marketing and its benefits, how do you measure the success of a referral program? In this article, we’ll discuss how you can optimize your conversion funnels.

Metrics you need to know

Just like any marketing plan, you’ll need to monitor referral program metrics to gauge your success.

Basically, there are four metrics that you’ll need to consider:

  1. Participation rate – the number of people who sign up to become advocates in your referral program.
  2. Share rate – the number of referral links your advocates shared  (these are the personalized links that you provide to advocates to share with their friends)
  3. Referral link clickthroughs – the % of referral links shared which led to clicks to your online store and brought more people to your site.
  4. Referral conversions – the value of referral sales you get, which will help you get a sense of the Cost Per Acquisition (CPA) of your referral program.

We came up with a graphic that will help you understand how these metrics coexist.


Let’s go through the specifics of how these numbers work, and the various touchpoints that you’ll need to optimize in order to get the maximum bang for your buck.

Optimize your Participation Rate

The first step is to get brand advocates to join your referral program.


To get started, you need to create a landing page or email whose sole purpose is to enable customers to sign-up. Ideally, these pages must have pictures, images and a CTA that will convey the gist of your referral program.

For example, Beretta’s referral email shows off their products in plain sight. To make it as compelling as possible, they highlight their “Refer your friends, get $20 off!” incentives in bold. It's followed by an explanation of the rewards that the brand advocate and their friends can expect.


An effective CTA (call to action) can attract your customers’ attention. In Beretta’s case, the referral CTAs are prominently displayed through a large red box in the footer, with the words “Get Invite Link” in white text.

Optimize your Sharing Rate

The next step is to optimize your sharing rate.

Remember people are only going to share your referral program if the incentives are worth it.  After all, they spend time and effort to sell your product to their friends.

That said, you need to have compelling rewards like discounts and cash to make it worth people’s time.  You don’t need to offer a big reward but a simple 25% discount is enough to get some customers moving.


A study found that 39% of consumers believe that rewards such as discounts, money and freebies can boost their chances of making a referral. Similarly, the referred friend must also receive an incentive to motivate them to make their first purchase.

Dollar Shave Club’s referral program lets brand advocates earn free months from their subscription plan once they successfully refer a friend. This tempting deal encourages more customers to promote the brand to their network.

You can also experiment with different reward types and amounts to find out the most cost-effective incentive for your business.

A good tip for optimizing your referral email is to enable users to share their unique referral link in an instant. In Dollar Shave Club’s email, they immediately provide the referral link that brand advocates can send to friends and family.

There’s also an option to share the unique link through Facebook, Twitter or email. The quick and no-hassle process encourages more customers to spread the world.

Optimize your Clickthrough Rate

The next step is to optimize your click through rate.


While a good reward seems to be the key for more referrals, you can also improve your referral rates by choosing a default sharing message. A compelling copy for your brand advocates’ tweets and social media posts ensure that more people will pay attention to your program.  

Likewise, your brand advocates may not have time and effort to produce a great copy. So, having a default message speeds up the process and ensures that they’ll share your program with their friends.

For example, Acme Toys’ referral program includes reasons why the brand advocate loves the brand, as well as the referral link. If a viewer wants to learn more about the brand, they can click the mention to reach the brand’s profile.


Another tip is to use effective visuals in Twitter or Facebook cards. Sometimes we’re drawn into a post upon seeing a compelling image. Images also make your ads more traffic and encourage users to stop scrolling on their posts.

In fact, tweets with images are 34% more likely to get retweeted that tweets without it. Posts with photos also get 179% more engagements than other posts.

For example, Topbox’s referral message includes an image featuring the variety of products included in their subscription box. Beauty enthusiasts’ curiosity is triggered simply by viewing the ad.

Sum Up

Optimizing your conversion funnel involves understanding the metrics and optimizing your participation rate, sharing rate and click through rate. This involves improving the copy and design of your landing pages and emails. Once optimized in your customer lifecycle, this leads to more successful referrals, more brand advocates and more referred customers—increasing your businesses’ profits.

About the author:

Monique Danao is a writer for ReferralCandy and CandyBar.