Referral Definition

Percentage of users that refer a new user to your product or service each month

A Referral happens when a user brings a new user to your product. If a user is happy to suggest your product to their friends, colleagues and peers then it is indicative of someone who is happy with your product.

Referrals are also great because they lower the cost of aquisition as you typically have less effort associated with sales and marketing to attract the new user - someone else has done that for you.

When tracking referrals, it is common to look at it as a percentage of the new users acquired that month:

$$ Referral = \frac{Referrals} { New users } \cdot 100 $$

The referral rate can be influenced by many aspects of your product and service. Specific pricing incentives can be put in place to encourage referrals, for example offering a reduced licence fee or other monetary reward for either party when referring a new user.

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