Looking to track referrals? You’ve come to the right place. When it comes to measuring the success of your marketing campaigns, tracking referrals is a must. Referral tracking can be a bit of a challenge, but with the right tools and methods in place, it can be a breeze.
In this guide (or watch the video), we’ll cover:
- What is referral tracking?
- Why is it important to track referrals?
- What are 2 methods of tracking referrals?
- How do you implement referral tracking?
- Free referral tracking Spreadsheet template
- Best referral tracking software
What Is Referral Tracking?
Referral tracking is the process of monitoring and gathering data on every touch point throughout the referral journey:
- How many leads are referred
- Participation rates, e.g. sharing their unique referral link with their friend
- The number of friends or referrals that take the required conversion action, e.g. make a purchase on your ecommerce site, book a consultation with your business, download an app, etc.
Tracking the referral process helps you measure the effectiveness of your referral program and understand how you can optimize it. The best referral programs are data-driven which helps power strategic decision-making.
Why Is It Important to Track Referrals?
Referral tracking is an excellent way to spot what works and what doesn’t. It puts the power of your referral program back in your hands based on data analysis.
1. Measure Customer Satisfaction
Your referral program can be used directly to gauge your customer satisfaction because of one natural phenomenon: only satisfied customers will refer your product or service to their friends and family. Referral tracking helps you identify dissatisfaction and whether you need to implement necessary improvement initiatives before customers abandon the brand.
2. Measure Conversion Rates
By tracking your referrals, you have an understanding of your users’ referral rates and the statuses of their referrals in the sales funnel. For example, you can analyze the rate at which your users share your brand, remain in the initial stage, or later move on to the next stage and become customers. Based on the information you’ve gathered in tracking the referrals, you can investigate how to bump up the percentage in each step of your sales funnel according to your conversion goals by tweaking your referral system e.g. adjusting the incentives, referral qualification criteria, etc.
3. Detect Referral Fraud
Referral fraud happens when a customer intentionally receives referral benefits through dishonest or wrongful means. Even the best referral programs out there can still experience fraudulent activities such as,
- Self-referrals occur when the program users create fake accounts to refer themselves rather than a genuine network of friends and family
- Duplicated referrals happen when a participant attempts to refer the same person. This usually involves re-registering for the same program or redeeming the same coupon code
- Account cycling involves continuous account deletion and creation in an attempt to take advantage of new customer promotions
- Broadcasting referrals rather than sharing their referral link with their own network, for example users share it on discounting sites or forums
Referral fraud can be expensive on your revenue and profit. It can also inaccurately inflate your attribution reporting.
4. Pinpoint Changes In Sales
Referral data allows you to analyze different aspects of your sales journeys. You can understand which types of interactions contribute the most to your referral conversion goals. If a significant increase in overall sales is caused by referral sales, it signifies that you should invest more in referral marketing.
5. Monitor Sharing Rates
The main purpose of setting up a referral program is to have users share your brand with their friends and family. Therefore, sharing rate is an important metric you should measure in your referral funnel.
Here's the formula to calculate the sharing rate for your program:
Sharing behavior will be different between different users and you can analyze the sharing channels preferred by your users. For example, if they prefer to share their referral link on social media or send their referral code via email. You should allow users to share in any way they prefer and provide them with multiple options to increase sharing. The referral data you track will help you gauge the strength of your incentive and accurately tell you if you need to tailor your referral program.
6. Reveal Super Referrers
Tracking referrals helps you identify your top brand ambassadors. You can tailor your engagement actions based on this data for the different groups of users.
- Your top users are your primary revenue drivers with whom you should continue to build closer relationships and reward them for the great job they’re doing
- Engage the less active users by giving them more reasons to share your brand, e.g. limited-time gift cards, tiered rewards, etc.
7. Monitor Participation Rate
The success of your referral program relies on user participation. That means if only a small number of people are interested in joining your program, you won’t get the desired outcome of growing your business through referrals. A low participation rate indicates that you either don’t have an active enough customer base, the promotion of your referral program needs to be improved, or your incentives might not be attractive enough.
8. Referral Payouts
When program users successfully complete your required conversion event, referral tracking is necessary to reward accordingly.
9. Analyze Revenue Impact
Referral tracking gives you the ability to measure the impact and revenue from the referral activities through metrics such as referral traffic to your website, the total number of referral signups and referral purchases, the ratio of referral revenue growth, and customer acquisition costs.
10. Feed Business Intelligence
Referral data can be used to uncover trends, guide the development of marketing campaigns, and optimize your marketing budget. For example, if you find gamified-based referrals work particularly well for your business, you could introduce a point-based system for referring and completing other actions.
What Are Two Methods of Tracking Referrals?
Referral management and tracking can be done either manually using spreadsheets or automated via cloud-based referral software. We compared below the benefits and challenges between the two approaches, and the reasons you should strive for the best option for your niche.
Manual Referral Tracking System
Pros:
- Encourages face-to-face interaction. Using physical coupons, flyers, or appointment cards and expecting referrals to present them at checkout or pursue an appointment in person, provides an opportunity for you to engage with your referrals face-to-face.
- Fraud prevention. Tends to be fairly secure because referrals have to interact with you in person and you can verify their legitimacy.
- Niche industries. Some businesses benefit from a manual process as it comes across as more genuine. This is especially true if your deal size is very large or you only work with a small number of customers.
Cons:
- Not scalable. Businesses need to explain every step of the referral process clearly to each of their program users.
- Tracking. You must manually track the referrals throughout their journey. Such as when did the referral take place? Who is the referrer? What action has the referral taken thus far in your referral funnel? Have rewards to the referrer been triggered?
- Inefficient. A paper or spreadsheet-based referral tracking system means slower processes, more administrative resources, and a higher risk of inefficiencies.
- Referral delays or errors. Can sometimes cause unnecessary delays or errors when updating the referral data.
Software Referral Tracking System
Pros:
- Easy tracking. Helps you track which social channels or referral sources are most effective at generating referrals.
- Easy sharing. Makes it easier for people to share your referral program. Such a system can provide people with many easy ways to share referral links on social media, email, or messaging platforms.
- Gamification. Add game-like elements to your referral program in order to make it more fun and keep users motivated to continue “playing”. It has been proven among referral programs to improve customer retention and conversion rates.
- Scalable. Allows you to scale quickly with key triggers. For example, you can set up your referral system so that it sends out emails to both the referrer and the referral, at the time the referral is made.
- Integrates with your marketing stack. Sync all new data with your marketing stack or CRM and reduces the likelihood of human error or duplication. Or set up to automatically send a reward to referrers.
Cons:
- Price. A software program that helps you manage and track referrals will have a subscription fee. If your referral partners are unable to generate enough referrals, you may not be able to cover the cost of the software.
- Learning curve. With any new piece of technology, there is a learning curve and some people on your team may be resistant to change.
How Do You Implement Referral Tracking?
The most successful campaigns have outlined their referral tracking system to measure each step of their process. The diagram below shows an example of how a typical referral program works. It gives you a clear picture of how your referrers participate in the campaign and how you can begin to track referrals.
Referral program software will automate all of these steps such as participant enrollment and approvals, sales and CRM integrations, email marketing and reward management to run behind the scenes to give your program users a seamless experience.
Some businesses run a complex referral system with multiple data points and incentive tiers. While others set up simpler programs that offer the same incentives for a specific action, e.g. sign up.
1. Capture New users
Referral tracking automation allows you to provide the option to ensure that all your website visitors, organic and referred, are given an opportunity to participate in your referral program. It helps create a seamless, native and organic user experience right on your website.
There are a few ways you can set up the signup/lead capture automation,
- After a form is submitted: you can automatically add the users into the referral program when they completed a form and hit the ‘Submit’ button
- After performing a required action: this is useful when you would like to track successful referrals only when they’ve made a purchase on your website, scheduled an appointment with you, etc
- After opting into an email list: you can automatically sign your new email contacts up to your referral program when they opt in to your mailing list
Here is an example of a dedicated refer-a-friend landing page within Bikmo’s cycle insurance dashboard. All people have to do is click the ‘Sign up’ button on the ReferralHero Widget embedded on the page to opt in to join the referral program and be immediately shown the share screen with their own unique referral link, social share links, rewards that they can win, etc.
2. Continue Communication With The users
Email automations is an effective way to communicate with your program users because it makes sending timely, personalized and relevant emails a breeze.
ReferralHero’s automated emails, aka triggered emails or behavior-driven emails, are scheduled to automatically send in direct response to your users’ specific actions made. The example below is a Welcome email Bikmo sends to the organic users when they are added to the program. This email is used to foster engagement, thank them for signing up and remind them to share their referral link.
There are many types of referral-related automated emails you can set up to send the right message to the right people at the right time.
- Referral Welcome email: sent to users who have been referred when they are added to your program
- Referral email: sent to the referrer when they refer a friend
- First Referral email: sent to the participant when they refer their first friend
- Follow-up email: sent a chosen amount of time after a participant joins your program
- Activation email: sent to those who have not referred anybody a chosen amount of time
- Milestone email: sent when a participant refers a specific number of people
- Reminder email: sent to those who haven’t referred a friend in a while
- Reward email: sent when a participant has won a reward
3. Manage Rewards
You’ve chosen the right referral incentives, one-sided, two-sided or milestone rewards, for your referral program that your users will be motivated to make the effort to be the spokesperson for your brand. Automations allow you to deliver real-time reward fulfillment or cash payouts to your users based on your own criteria, e.g. number of referrals, revenue or points-based thresholds through integration with zapier or webhooks.
4. Fraud Detection
Making sure people don’t cheat is extremely important for any referral programs as it exposes you to potential financial loss. Most referral software comes with a fraud prevention system that can auto-detect fraudulent behaviors such as,
- Anti-fraud algorithm that cross checks each participant
- Primary and secondary verification methods ensure that only real people are signing up for your referral program
- ReCaptcha makes sure that no bot accounts are added to your program
- Blacklist checker helps to test if the participant’s domain or IP is listed on anti-spam database
Here you can see users that have been flagged as high risk on the ReferralHero dashboard.
Free Referral Tracking Spreadsheet Template
If you’re ready for a plug-and-play software that will track your referral program for you, ReferralHero is the answer for you. However, if you want to manually build, manage, and track your own, we created a free referral tracking template that you can easily customize.
Download Our Free Referral Tracking Spreadsheet
Don't forget you can either have referrers use the spreadsheet signup form to refer, or you can manually enter the referral data into the spreadsheet.
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