Referral programs are an excellent tool for bringing more visitors to your store. However, simply increasing traffic doesn’t guarantee more sales. In business, the focus should be on quality rather than quantity. When your existing customers refer high-quality traffic, you have a better chance of converting these new visitors into paying customers. The goal is to attract the right kind of traffic that is more likely to make a purchase.
Improving your referral traffic conversion rate requires a deep understanding of how the referral process works and what elements contribute to a successful referral. We’ll walk you through each stage of the referral funnel and share 4 actionable stages to help you start turning your referral traffic into actual purchases.
The 4 stages of the referral funnel
Before you can start improving your referral conversion rate, you need to understand how the referral process works.
- Send
Most people understand a referral as simply sharing a link, but that’s just the beginning. Stage 1 of a successful referral program involves a current customer deciding to share a referral link with their friends and family. The key to getting this process started is to offer your existing customers a compelling incentive to share the referral.
Whether shared on social media, through email, or via text, the act of sending a unique referral code is the starting point of the referral funnel. For instance, Happy Pops uses a pop-up referral panel where customers can generate their unique referral code. They can then share it with a single click via Facebook, Twitter, or email, or they can copy and paste the link into a personalized text message.
By making it easy and rewarding for customers to share, you can effectively initiate the referral process and bring in new high-quality traffic.
- Click
When a new customer receives a referral URL, they have the choice to engage with it or ignore it. If they decide to click on the link and visit your store, the referral process moves into Stage 2.
This click signifies a new customer’s initial interaction with your site and is counted as referral traffic. However, the true value of this visitor is determined by what they do after arriving at your site. Therefore, it’s crucial to direct this traffic to a landing page that immediately captures their interest and engages them effectively.
An engaging landing page should be visually appealing, easy to navigate, and clearly communicate your value proposition. It should feature compelling content, such as special offers or testimonials, to encourage further exploration and, ultimately, a purchase. By optimizing this first point of contact, you increase the likelihood of converting referral traffic into loyal customers.
- Accept
A referral is considered “accepted” when the referred customer submits their email address to generate their referral coupon code.
While an accepted referral indicates that the customer is contemplating a purchase, it’s not yet a guaranteed sale. To complete the process and achieve a referral purchase, the customer needs to finalize their transaction. To make this step more convenient, you can follow the example of Happy Pops by sending an email with the referral discount code directly to the customer’s inbox.
This email serves as a reminder and provides easy access to the discount, encouraging the customer to proceed with their purchase. By streamlining this final phase, you can increase the likelihood of converting accepted referrals into completed sales.
- Use
In this final stage, the referred customer uses their referral code to complete a purchase, officially becoming a paying customer at your store. This action is tracked as a completed referral, contributing to the growth of your referral traffic conversion rate and referral revenue. At this point, the original customer who sent the referral also receives their reward.
By successfully converting a referred visitor into a paying customer, both parties—your existing customer and the new customer—benefit from the referral program. This not only enhances customer satisfaction but also encourages more referrals, creating a cycle of growth and increased sales for your store.
How to diagnose a weak referral program
Understanding how the referral process works allows you to target specific areas that aren’t performing well. Successful referral programs are able to move new customers through every stage of this funnel and are typically assessed with two specific metrics:
- Referral traffic–people who click on your referral links.
- Completed referrals–people using your referral codes.
Referral traffic gives you valuable insights into how often new customers encounter and perceive your referral offer. It also indicates how frequently customers are sharing their referral links with individuals who have a genuine interest in your brand. It’s crucial for referred customers to be motivated to visit your store, as this initial interest is reflected in the send and click stages at the top of the referral funnel.
Completed referrals, however, have the most significant impact at the bottom of the funnel by increasing your referral-driven revenue. A rise in completed referrals suggests that your program, products, and rewards are appealing to new customers, encouraging them to accept and use the referral codes shared by your existing customers.
By analyzing these metrics, you can quickly assess the health of your referral program. For instance, if your site receives 500 referral traffic visits but only results in one completed referral, it’s evident that there’s a problem. This indicates a need to restructure your program to convert more referral traffic into actual purchases.
Fortunately, improving your referral program doesn’t have to be daunting. Based on the metrics we discussed, your program might be struggling with one or two key issues:
- People are not clicking your referral links.
- People are not redeeming referrals with the codes.
As a result, it makes sense that targeting these areas is the perfect way to improve how customers move through your program’s referral funnel.
