The Referral Funnel is a framework for visualizing and understanding referral programs. There are two key audiences:
The member - the happy customer or affiliate sharing the business
The referral - the friend or new lead being referred to the business
Referral indicators allow you to analyze your program’s Referral Funnel and determine where to focus your optimization efforts.
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Overview
The Referral Funnel consists of two connected experiences (the member journey and the referral journey):
Member Journey
The member becomes “Aware” of the referral program through campaigns (new program launch, new sharer intro), brand experiences (check-out, website footers, in-app), and ongoing engagement (program notifications, discussions with sales/services reps)
The member then “Shares” prewritten messages (via share links, emails, SMS, social media, etc.) from the Member Portal, Embedded Share Widget, or Program Emails.
Referral Journey
The referral receives the “Shared Message” from the member and decides if they want to click
After clicking, the referral is “Reached” and directed to a webpage to learn about the business/offer for the first time and decide if they want to convert
The Referral Funnel is broken down into four stages:
Aware: Do people know your program exists?
Share: Are people telling others about your business?
Reach: Is what is being shared, clicking and resonating
Referrals: Are people converting after being referred?
Referral Indicators
Mapping referral indicators to the Referral Funnels allows you to understand your program’s performance and monitor changes and trends over time.
Use key indicators to analyze each section of the Referral Funnel via the Analytics Dashboard.
Aware Stage focuses on 1) adding and activating new members and 2) engaging existing members. Key dashboard indicators:
Members Added: number of new members added to the program
Members Activated: number of members that engaged with the program for the first time
Member Visits: number of member visits to the Member Portal
Share Stage focuses on getting members to share your business. Key dashboard indicators:
Share: Number of times members clicked a share method in the Member Portal or program emails
Reach Stage focuses on getting new referrals to click on the share message and visit your website/referral page. Key dashboard indicators:
Reach: How many (unique) people have heard about your program (includes both unconverted and converted referrals)
Referral Stage focuses on getting referrals to convert by completing the desired program action (i.e., new purchase, form submission, booking a call, etc.). Key dashboard indicators:
Referrals: Number of converted referrals added to your program
Common Problems
When analyzing the Referral Funnel, you’ll see 4 common problems:
Lack of Awareness (Member): people don’t know about your program
Uncompelling Offer (Member): people aren’t sharing despite being aware of your program
Not Clicking (Referral): referrals don’t click the shared message
Low Conversions (Referral): referrals aren’t converting
Lack of Awareness
If people don’t know about your referral program or if they have forgotten then they aren’t going to share. This is why lack of awareness is the most common problem when optimizing referral programs.
How do you identify if your program lacks awareness?
Low Members Added = no ongoing promotion (new people aren’t joining)
Low Member Visits = no ongoing engagement (not engaging new or existing members)
How to fix?
To improve program awareness, you need to increase promotion and engagement efforts for both new and existing members.
1) Run promotional and engagement campaigns
You should consistently promote and remind people of your referral program and ask them to share. Aim for 2-3 touch points for new members and quarterly outreach to existing members.
Here are a few types of campaigns to consider:
Program launch: initial campaign introducing your referral program
New sharer intro: campaign targeting potential new members
Seasonal:
Special reward campaigns tied to holidays or events.
Reminder campaigns to re-engage dormant sharers.
Engagement (existing members):
Personal outreach to your most active sharers.
Targeted campaigns for specific customer segments
Enable month summary email (program notification)
2) Add more access points to your program
Expand the number of places where users can learn about and join your referral program.
Consider these possible access points:
Email newsletters
Website (banners, footers, site navigation, CTA buttons, etc.)
Customer portal or behind a login (in-app)
Checkout pages
Mobile app
Account notifications
Transactional emails
Business cards, postcards, or other printed material
In-store signage
Email signatures
3) Train your sales and services reps to promote the program
Equip your team (sales reps, services reps, other employees) and external partners to recruit more members to share your referral program.
Provide clear guidelines and resources for your customer-facing teams.
Offer training sessions or materials to help promoters understand the program's benefits and how to share effectively.
Other tips:
See our promotion best practices for other recommendations on increasing awareness
Use the Program Link Builder to build One Click Access links to make it easy for people to access your program
Uncompelling Offer
Members must be excited about your program and offer to share your business. If you aren’t seeing many shares (even though people are aware of your program) then you likely have an uncompelling offer.
How do you identify an uncompelling offer?
High Member Visits AND Low Shares = members aren’t sharing despite being aware
High Members Added AND Low Members Activated = new members aren’t engaging
Another sign of an uncompelling offer is when you have low Shares, low Member Visits, and you’ve tried multiple awareness solutions.
How to fix?
To make your offer more compelling, you need to improve the messaging or change the rewards.
1) Improve your messaging
Messaging is how you get people to pay attention and take action. Great messaging (copywriting) pulls people in and makes them want to engage with your program.
Here are the key areas to update the member messaging:
Member Pages:
Program Landing Page
Member Portal
Email Campaigns
Program Launch
New Sharer Intro
Other Campaigns
2) Change the referral reward
The best rewards understand sharing psychology. For customer referral programs, the member is equally motivated by what they can give their referred friends (i.e., referrals) and what they get in return. The member feels good about helping their friend and gains social capital when sharing a good deal. As such, all customer referral programs should reward the new referral.
When changing the referral reward, consider:
Increase the reward value (i.e., larger initial discount)
Change the reward type (i.e., experiment with vouchers like free services/upgrades or discounts)
The referral reward is easy to change because the referred friend only sees the reward one time. Unlike the member reward, you don’t need to worry about prior communications or manage ongoing expectations.
3) Change the member reward
Rewards need to cut through the noise to grab the member’s attention. Everyone is busy, so getting members excited to share with their friends is critical.
When changing the member reward, consider:
Increase the reward value (i.e., larger amount)
Change the reward type:
Account perks such as free yoga class, free ride, additional storage, vouchers, free services, upgrades, add-ons, etc. are ideal for customer referral programs
Monetary rewards such gift cards (i.e. Amazon, Starbucks, etc.), donations, coupons, and cash (i.e., PayPal or bank transfers) can also work
Get creative with the reward structure to make the rewards more meaningful
Be careful when changing member rewards as this can set expectations for future rewards. We recommend running a seasonal (limited time) campaign first before updating the main program reward. That way if the reward change doesn’t meet expectations, you’re not locked in and can easily fall back to the original reward.
Not Clicking
Members are sharing but the shared message isn't resonating with referrals. Referred friends are seeing the messaging but not clicking to take action.
How do you identify if referrals aren’t clicking?
High Shares AND Low Reach = members sharing but referrals aren’t clicking
How to fix?
To get referrals to click, you need to improve the shared message or change the referral reward.
1) Improve your messaging
The share message is what members send their friends on social media, email, SMS, or when copying and pasting a link. It’s the first time a referral learns about your business so it needs to be compelling enough for them to take action.
Do they highlight the benefits of your business (why the referred friend should care)?
Do they mention the referral reward?
Are they written from the member’s point of view (i.e. would they say that to a friend)
Have you removed any marketing language?
2) Change the referral reward
The referral reward should capture the referred friend’s interest so they click and learn more. Make sure the reward is exciting and part of the shared messaging.
When changing the referral reward, consider:
Increase the reward value (i.e., larger initial discount)
Change the reward type (i.e., experiment with vouchers like free services/upgrades or discounts)
Low Conversions
Referrals need to be interested in your business beyond any rewards they get as part of your referral program. When referrals visit your referral page, they’re often learning about your business for the first time. The shared message got them interested. Now the referral page needs to convert them.
If referral conversions are low then your referral page (and website) aren’t interesting or relevant enough for them to take immediate action.
How do you identify low coversions?
High Reach AND Low Referrals Reach = referrals are seeing your business/offer but not taking action
How to fix?
To get referrals to convert, you need to improve the referral page message, reduce the complicity of the referral ask (i.e., make it easier to convert), or change the referral reward.
1) Improve your messaging
The referral message is what referrals see when they click on the shared message and are redirect to the referral page. The shared message got them interested, the referral page needs to get them to take action.
Give referred friends a compelling reason to become a lead or customer – make sure they understand what your company does and why it's relevant to them.
Does your referral page speak to the relevant audience?
Does it clearly explain the company and offer?
Is the call to action clear and relevant?
Is your journey (from referral message to friend landing page to action) smooth and compelling?
2) Reduce the complexity of the referral ask
Make it easy for referrals to say “yes.” Your call to action should be simple with minimal friction. You can always follow up with more information once you’ve captured the referrals contract details.
Don't ask them to purchase unless it’s an impulse buy
Reduce the number of fields you ask them to enter
3) Change the referral reward
The referral reward should motivate the referred friend to take action and convert.
When changing the referral reward, consider:
Increase the reward value (i.e., larger initial discount)
Change the reward type (i.e., experiment with vouchers like free services/upgrades or discounts)
Analysis Tips
Follow these 4 tips when analyzing the referral indicators:
Work backward (Referral -> Aware) to identify where to focus:
Are you getting enough "referrals" to meet your program goals?
Are you “reaching” enough people so they have the opportunity to convert?
Are members “sharing” your program?
Are “members visiting” their Member Portal?
Are you consistently “adding” new members AND are they “activating”?
Understand the reason behind any changes:
Compare data over time to see if normal fluctuation or cause for concern
Filter data by individual program for more granular details
Use external data + your own context to explain any changes
Don’t overcorrect (changes take time)
Make sure enough people see your changes to know if they are successful
Record when and what you change (easier to monitor results over time)
Share and Reach indicators are the best predictor of future performance
Monitor them closely and track how they change over time
When in doubt, add more promotion, improve your messaging, and make it easier to convert
