A new customer arriving because an existing one recommended you.
Example
An ops manager telling a peer at another firm.
Important
Referral rate is a strong PMF signal — people do not risk their reputation on a product they merely tolerate.
Related terms
Viral coefficient (k) — The average number of new users each existing user brings in.
Product-market fit (PMF) — The point at which you have built something a specific group of people genuinely want, evidenced by their behaviour rather than their compliments.
Growth loop — A cycle where the output of using the product feeds back into acquiring more users.
Lessons that explain it
Retention, referral and growth loops — A funnel needs constant refilling. A loop reinvests its own output. The difference decides whether growth compounds. (12 min)
What product-market fit actually is — Not a score and not a moment. Retention, unprompted return and how hard people fight to keep using it. (12 min)