How To Track Referrals: The Ultimate Guide w/ Free Template

November 9, 2022

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, 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, down 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.

Typical referral program flowchart.

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 off 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 participants 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 participants 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 participants 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:

Referral sharing rate formula.

Sharing behavior will be different between different participants and you can analyze the sharing channels preferred by your participants. For example, if they prefer to share their referral link on social media or send their referral code via email. You should allow participants 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 participants.

  • Your top participants 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 participants 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 participants successfully complete your required conversion event, referral tracking is necessary to rewarded 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:

  1. 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.
  2. Fraud prevention. Tends to be fairly secure because referrals have to interact with you in person and you can verify their legitimacy. 
  3. 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:

  1. Not scalable. Businesses need to explain every step of the referral process clearly to each of their program participants.
  2. 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?
  3. Inefficient. A paper or spreadsheet-based referral tracking system means slower processes, more administrative resources, and a higher risk of inefficiencies.
  4. Referral delays or errors. Can sometimes cause unnecessary delays or errors when updating the referral data.

Software Referral Tracking System

Pros:

  1. Easy tracking. Helps you track which social channels or referral sources are most effective at generating referrals.
  2. 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.
  3. Gamification. Add game-like elements to your referral program in order to make it more fun and keep participants motivated to continue “playing”. It has been proven among referral programs to improve customer retention and conversion rates.
  4. 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. 
  5. 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:

  1. 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 the software.
  2. 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.

Typical referral program flowchart.

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 participants 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 Participants

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 participants 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.

Bikmo Refer-a-friend signup page.

2. Continue Communication With The Participants

Email automations is an effective way to communicate with your program participants 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 participants’ specific actions made. The example below is a Welcome email Bikmo sends to the organic participants 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.

Bikmo referral welcome email.

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 participants 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 participants 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 participants based on your own criteria, e.g. number of referrals, revenue or points-based thresholds through integration with zapier or webhooks.

Automated gift card reward triggered with Zapier.

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 participants that have been flagged as high risk on the ReferralHero dashboard.

Flagged high risk referrers shown 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 the spreadsheet signup form to a referral, or you can manually enter their data into the spreadsheet.

November 9, 2022

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, 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, down 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.

Typical referral program flowchart.

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 off 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 participants 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 participants 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 participants 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:

Referral sharing rate formula.

Sharing behavior will be different between different participants and you can analyze the sharing channels preferred by your participants. For example, if they prefer to share their referral link on social media or send their referral code via email. You should allow participants 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 participants.

  • Your top participants 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 participants 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 participants successfully complete your required conversion event, referral tracking is necessary to rewarded 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:

  1. 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.
  2. Fraud prevention. Tends to be fairly secure because referrals have to interact with you in person and you can verify their legitimacy. 
  3. 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:

  1. Not scalable. Businesses need to explain every step of the referral process clearly to each of their program participants.
  2. 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?
  3. Inefficient. A paper or spreadsheet-based referral tracking system means slower processes, more administrative resources, and a higher risk of inefficiencies.
  4. Referral delays or errors. Can sometimes cause unnecessary delays or errors when updating the referral data.

Software Referral Tracking System

Pros:

  1. Easy tracking. Helps you track which social channels or referral sources are most effective at generating referrals.
  2. 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.
  3. Gamification. Add game-like elements to your referral program in order to make it more fun and keep participants motivated to continue “playing”. It has been proven among referral programs to improve customer retention and conversion rates.
  4. 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. 
  5. 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:

  1. 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 the software.
  2. 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.

Typical referral program flowchart.

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 participants 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 Participants

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 participants 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.

Bikmo Refer-a-friend signup page.

2. Continue Communication With The Participants

Email automations is an effective way to communicate with your program participants 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 participants’ specific actions made. The example below is a Welcome email Bikmo sends to the organic participants 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.

Bikmo referral welcome email.

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 participants 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 participants 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 participants based on your own criteria, e.g. number of referrals, revenue or points-based thresholds through integration with zapier or webhooks.

Automated gift card reward triggered with Zapier.

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 participants that have been flagged as high risk on the ReferralHero dashboard.

Flagged high risk referrers shown 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 the spreadsheet signup form to a referral, or you can manually enter their data into the spreadsheet.

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