Referral marketing is a powerful tool. It can shape the way that current and future customers feel about your brand. It can rejuvenate your marketing to grow your business. It can deepen customer engagement.

Does that sound too good to be true? We wouldn’t blame you for thinking so. After all, many companies push their solutions and their platforms in a way that aggrandizes their ideas.

But referral marketing is backed up by more than just our idea of how good it is. Across the world of businesses and strategy, people turn to referral marketing because it’s a legitimate tool that actually helps people reach their business goals — and here are 15 statistics that prove just that.

6 Stats That Prove The Power of Referrals

Referral marketing is an avenue for building trust with new customers of all ages. It makes people more likely to consider purchasing from your brand, and builds an instant connection between you and your new customers. Let’s go over some of the statistics that prove just how powerful referral marketing is.

A Nielsen survey on trust and advertising returned some pretty telling numbers when asking what forms of advertising respondents trusted. Referral marketing scored the highest across every single demographic, out-doing editorial content, all forms of ads, and brand sponsorship:

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But that’s not all. Referral marketing isn’t just the most trusted. It’s becoming a must-have for both B2C and B2B to have a “seal of approval” from others to survive on the market:

  • 28% of millennials say they won’t try a product if their friends don’t approve of it.
  • Word of mouth is the primary factor behind 20-50% of purchasing decisions.
  • Business to business companies with referrals have a 70% higher conversion rate, and they report a 69% faster close time on sales.

Referral programs combine that seal of approval with the one-two punch of a reward.

Not only that, but those who are referred create a positive feedback loop and consistently draw even more customers to your referral program. So the magic of all that social approval just keeps getting passed on:

Customers who are referred to your brand are up to 5x more likely to use your referral program than customers who weren’t.

The numbers here don’t lie: referral marketing isn’t snake oil. It is a powerful tool to add to your marketing arsenal. In a world where consumers are more and more bombarded by ads, brand placement and branded content, word of mouth is a way for consumers to break through that noise.

Which do you trust more: an autoplay video on your Twitter feed, or your best friend tweeting that they love and recommend a product? As consumers become warier of and fatigued by ads, referral marketing continues to shine.

Referral marketing is an avenue for building trust with new customers of all ages.

6 Stats That Show The Value of Referral Programs

Although referral marketing clearly draws people in, it would be worthless if those leads didn’t lead to new people actually engaging with your product and brand. In other words, you want to spend your ad money in a way that actually generates more sales.

It’s a simple concept — the basics of advertising — and referral marketing hits it right on the head. Again and again, the stats show that customers who come in through referral are more likely to purchase, and have higher LTV and engagement:

  • When referred by a friend, people are 4x more likely to make a purchase.
  • Referred customers’ LTV is 16% higher when compared to non-referred customers.
  • Customers acquired through referrals have a 37% higher retention rate and 81% of consumers are more likely to engage with brands that have reward programs.
  • Referred customers have an 18% lower churn than customers acquired by other means.
  • You can expect at least 16% more in profits from referred customers.

These numbers really drive home the value that referral programs bring to your company. Customers are indeed more likely to become loyal to your brand and spend money on your product when referred. Part of this is because referrals take advantage of strong social bonds, and can help consumers cut down on their options.

Another important factor is that the leads you generate through referrals tend to be well-qualified. That is, most of the people who are referred to your product will be interested in it — no referrer wants to act like that guy who spammed everyone with FarmVille requests in 2009!

3 Stats that Prove CTAs Start A Positive Feedback Loop

Part of the beauty of referrals is that they form a positive feedback loop. If you can get people to refer, the people they bring in are more likely to refer themselves — and, of course, more likely to spend. The spark for this loop is the CTA that nudges customers into setting referral magic into motion.

That means that figuring out how to get people to refer in the first place is the kickstarter to lifting your entire program off the ground. One of the most important factors in getting people to refer is where you place the referral CTA.

  • 83% of customers are willing to refer after a positive shopping experience, yet only 29% do.
  • Customers are 4x more likely to share when the sharing CTA is integrated into their journey, not on a hidden landing page somewhere on your website.
  • When a CTA appears on your post-purchase page, customers are 16x more likely to share.

When you’re setting your CTA up, make sure it’s visible and easy to use. When you see what referral marketing can do, it can be tempting to throw on all the bells and whistles in order to get people into your program and converting at high rates. But don’t think you need to build some sort of behemoth referral machine to make it happen.

A simple link to tweet or “email a referral code” button at the end of the user journey is more than enough to get you started nudging users to make the leap.

Make it happen

If you don’t have a referral marketing program, it’s never been easier to get into the game. Whether you build your own from scratch or use a service to help you, you can be up and running with referral marketing sooner than you think. Now more than ever, it’s an important tool to have in your arsenal.

Turning your customers into brand advocates is a smart business move no matter which way you cut it.