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We've been talking about the dos and don'ts of referral marketing in the past couple of articles. And as most marketers/founders know, attribution is an extremely important part of running a business. Without knowing where your traffic is coming from or who those people are, you could easily be marketing to someone who would never be a customer. And that's not where you'd want to spend your resources on!
With referral marketing, referral tracking is a way of quantifying the impact your referrals have on the business. It's not just a simple metric or number; it's also a way to understand how well your referral marketing is working and what tactics are most effective at converting brand loyalists into advocates and getting them to refer more. That means that with some solid analytics on your referral tracking efforts, you can improve them over time, resulting in better referral rates and referral sales!
Follow us through this article to learn more about referral tracking.
Why track referrals?
Referral tracking is essential to gain valuable insights into your referral process and identify areas where improvements can be made. It simply involves collecting data at every stage of the referral process, which can then be analyzed for maximum efficiency. Here are the various touchpoints:
1. Monitor customer satisfaction levels
Monitoring your referral program can provide clearer insight into whether customers are satisfied with your product or service.
If you are getting referral sales, and people are sharing about your brand or product via word-of-mouth, it’s an indication that they are satisfied with your brand, product, or service.
On the other hand, if your referral rates and sales are not performing at the industry average, it could be a sign of an underlying operational or product issue that needs to be addressed.
2. Accurately track attribution
Attribution can be a huge headache for ecommerce brands. Let's say you’ve seen a dramatic increase in sales recently. But you don’t know what’s causing it. Could it be the new product you launched? What about the digital marketing campaign that you pulled off not too long ago?
You might have an inkling that it’s the newly launched referral program, but you have no way to prove that assumption. A proper referral tracking system can solve that issue for you. And if the spike in sales does indeed come from your referral program, a referral tracking system will also let you know who your best advocates are. This gives you opportunities to further segment your customers and show appreciation to brand loyalists.
Essentially, you’ll need to double down on the channels that work best for your brand and tracking makes it much easier for that final judgment.
3. Monitor conversion rates
Knowing your referral conversion rates can be valuable for several reasons.
First, it can help you understand the effectiveness of your referral program and identify areas for improvement. For example, if your referral conversion rate is low, you may need to make changes to your referral reward to make it more appealing to customers. Or maybe it’s because you aren’t making your referral program visible enough.
Based on the conversion data, you can determine if you need to tweak things around and do more A/B testing to increase overall customer engagement.
Additionally, knowing your referral conversion rate can help you measure the success of your referral program and compare it to other marketing efforts. This can help you determine which efforts are most effective at driving new customers to your business.
4. Prevent referral fraud
With any referral program, the last thing you’d want to encounter is referral fraud.
Referral fraud comes in various forms:
- Self-referrals
- Duplicated referrals
- Sharing on coupon sites
- Return abuse
Self-referrals happen when customers would refer themselves to get both a discount for a new purchase and a reward for referring someone. And duplicated referrals just mean referring the same person twice.
Sharing on coupon sites happens when instead of sharing their referral link and code with their friends, some would post them on coupon sites, discount sites, or forums.
Return abuse refers to when customers get their friends to use their referral link and code. But once they receive the reward for “referring”, their friends would return the product and request a refund.
If your brand is offering cash payouts as a referral incentive, it’s even more important to have a proper tracking system in place. Users can easily take advantage of your rewards otherwise.
5. Identify your best referral assets
If you're not already A/B testing your referral program, you might want to start. And being able to effectively track this entire process definitely helps. Why so?
Studying the referral data obtained can help you tailor your future messaging, visuals and referral incentives for greater customer appeal. Establishing an effective referral program is key to success as it encourages more people to engage and provides more opportunities for referrals. To put it simply, the more people that register for your referral program, the higher the chance of more referrals and a succesful referral program!
How do you track referrals effectively?
Implementing referral tracking can be a straightforward process, but it does require some planning and preparation. The first step is to determine the best method of tracking referrals for your business.
1. Use unique referral codes or links
A common way to track referrals is to provide customers with a unique referral code or link that they can use to refer others to your business. When a referred customer uses the code or link to make a purchase, you can easily trace it back to the original advocate.
This referral code/link functions as a unique identifier that relates a referral to a specific advocate, which allows you to track it and collect the necessary information.
For example, you can see how many times the referral code has been used, by who, and for which purchases.
This can give you a very good overview of how active your advocates are and how well word-of-mouth marketing is working for you. It helps you decide how much effort to put into word-of-mouth marketing.
(+) Easy to track
(+) Saves time and money
(-) You have zero control over who signs up
2. Use cookies
Cookies are text files with data used to track, personalize, and save information about users’ sessions. They allow ecommerce sites to track visits from users, including the pages and products they view, to suggest similar products they may also be interested in. Some may even track their exit pages to retarget these users.
Referral tracking with cookies can be done by placing a unique cookie for each customer who visits your website. This cookie can be used to identify the customer if they return to your site in the future, as well as to track any referrals they make.
Let's say that a customer visits your website and you place a cookie on their computer. They then refer a friend to your site, and their friend clicks on the referral link. When their friend visits your site, the cookie on their computer will be checked to see if it matches the cookie of the referring customer. If it does, it will be recorded that the referred customer was referred by the original customer.
(+) Provides valuable customer insights
(+) Accurate in tracking referrals
(-) Requires more technical knowledge
3. Use referral tracking software
There are many different types of referral tracking software, like ReferralCandy, available that can help you automate the process of tracking referrals. This software can be integrated with your existing systems and can provide valuable insights into the effectiveness of your referral program.
On top of the perks of being able to see everything at a glance with an insightful dashboard, you get to properly identify where your referral traffic is coming from—which platforms your advocates work best with.
It’s also much easier to take action once you have the big data at your fingertips. You’d know exactly which incentives are working best for your advocates and make those changes immediately.
(+) Referral tracking is faster and easier through automation
(+) More accurate data
(-) Can be pricey for smaller businesses
Use a referral tracking spreadsheet template
If referral tracking software isn’t a viable option at this time for your business, keeping track of your referrals on Google Sheets or Excel can be a great alternative.
Spreadsheets are easily customizable which means you can decide on what you want to track and how you want to track it. Plenty of third-party apps are available for you to integrate for an improved tracking process.
The downside is that if you require slightly more elaborate analytics, it’s on you to figure out how that’ll work.
Fret not, we have your bases covered! Read to the bottom for our free referral tracking template.
(+) A cost-effective way to track referrals
(+) Flexible with customization
(-) Manual and tedious
(-) Requires some technical knowledge of building a spreadsheet
4. Use Google Analytics
You may be wondering how Google Analytics can be used for referral tracking.
Here’s how you can find your referral report:
Acquisition > Overview > All Traffic > Referrals.
On that page, you’ll be able to see the number of users coming onto your site as a referral and identify your referral source.
This gives you a relatively good overview of how much traffic your referral marketing channel is bringing in, and which referrers are your brand loyalists. It also provides additional data that helps you to identify which advocates you should pay more attention to so that you can replicate that process with others.
(+) Relatively accurate referral tracking
(-) Requires pre-existing knowledge of Google Analytics
5. Use UTM Parameters
They're essentially unique short text codes that you add to URLs (or links) to help you track the performance of a campaign—in this case, your referral program.
https://www.referralcandy.com/resource?
utm_source=referralcandy&
utm_medium=blog&
utm_campaign=referral_tracking_template&
utm_id=resource-page
If we take a look at this example above, the UTM parameter comes after the question mark in bold. And it's easily and automatically generated with this campaign URL builder tool. This means that you can manually generate unique links for each and every one of your advocates. The only thing left is to make sure you're consistently tracking this on a sheet so you don't miss out on any unique links!
(+) A free and relatively simple method
(-) Requires pre-existing knowledge of Google Analytics
(-) Takes up a lot of time to manually input all the fields
How to use our free referral tracking template
Our referral tracking template comes with a referral tracking sheet as well as a dashboard and insights sheet for a better overview of your existing referral campaign.
There are 4 sheets on the referral tracking template.
- Quick start guide
- Dashboard & Insights
- Referral Tracking Sheet
- Setup and Calculation
Before you fill in the Referral Tracking Sheet, you will be required to fill in some necessary information on the details of your referral program. Click on the Setup & Calculation Page to edit your reward types so that they reflect in the Referral Tracking Sheet.
Once that is done, you can start filling in the following fields on your Referral Tracking Sheet.
- Referral purchase date
- Referred friend’s name
- Referred friend’s email
- Referred purchase amount
- Minimum spend reached for reward eligibility (Yes/No)
- Friend Offer Code
- Referral Link
- Advocate Name
- Advocate Email
- Reward sent (Yes/No)
- Reward details
After you’ve filled in the Referral Tracking Sheet, you can head over to the Dashboard and Insights page to learn more about how well your referral program is working.
The dashboard shows the following:
- Total number of referrals (all-time)
- Total amount of referral sales (all-time)
- Average referral sales in a month (all-time average)
- Top 5 advocates (all-time)
- A graph of the number of referrals per month (selected year)
- A graph of the amount of referral sales per month (selected year)
You can filter through the graphs by inputting the specific year between 2022 and 2050.
The insights are an indication of whether your referral program is hitting the expectations of your referral marketing strategy.
A low number of referrals could mean that your referral incentives are not enticing enough for people to want to share about them. Or that you aren’t promoting your referral campaign enough and not many people know about it.
If you’re seeing a decent number of referrals but low referral sales, you might be setting the bar too low for your referral eligibility requirements. Eg, if you set the minimum spend for a referred friend too low, it results in an even smaller amount of sales from referrals.
Understanding who your top advocates are could also help you to better target people that are more likely to refer your brand and products. You could take the Top 5 Advocates derived from this template and analyze if the geographical location is a factor, or if their demographics are similar.
Referral tracking is the key to a successful referral campaign
At the end of the day, referral tracking is an important way to measure the success of your referral program. By tracking referrals, you can identify your best advocates, determine which channels are generating the most referrals, and see which offers are motivating people to refer your brand.
Accurately tracking referrals provides a number of benefits for businesses of all sizes. These benefits include:
- Increased visibility into the performance of your referral marketing efforts
- Improved understanding of which referral sources are most effective
- Better ability to optimize your referral marketing strategy for maximum impact
- Increased ability to track the progress of your referral marketing efforts over time
Our Referral Tracking Template is meant to be a stepping stone for you to get started on properly evaluating your referral campaigns. However, there are important factors to consider as well. Things like referral fraud are extremely difficult to identify through manual tracking sheets and that’s why referral tracking software can be a better option once you have more traffic on your referral campaigns.
Click here to get the free Referral Tracking Template.
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Cheryl is a full-time Content Manager at ReferralCandy by day and a "Learnaholic" (aka always learning something new) by night. She loves learning new languages, storytelling, and creating experiences that are functional and visually compelling. She's also always lurking on Twitter so drop by and say hi!
