Referral Rate is a metric used to measure the percentage of customers who refer new customers to a business. It is a measure of customer satisfaction and loyalty, and is used to evaluate the effectiveness of a business’s referral marketing efforts.
The formula for Referral Rate is:
Referral Rate = (Number of referrals / Number of customers) x 100
In this formula, “Number of referrals” refers to the number of new customers that were referred to the business by existing customers. “Number of customers” refers to the total number of customers that the business has.
For example, if a business has 100 customers and 25 of them refer new customers to the business, the referral rate would be 25/100 x 100 = 25%.
A high referral rate indicates that a business has a strong base of satisfied and loyal customers who are willing to recommend the business to others. On the other hand, a low referral rate may indicate that the business needs to improve its customer satisfaction and loyalty.
It’s important to note that referral rate is a relative metric and it may vary depending on the industry, products or services of the company, and the referral marketing strategy. Additionally, referral rate can be complemented by other metrics such as Net Promoter Score (NPS) which measures customers’ likelihood of recommending a company’s product or service to others, and customer lifetime value (CLV) which measures the total revenue a customer generates for the company over time.
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