Referral programs are integral to improving customer loyalty and increasing lifetime value (LTV).
But setting up a referral scheme is only the first step to a successful program. To increase ROI, you need referral tracking.
Implementing referral tracking gives you a bird’s-eye overview of all brand advocates, friends, and their behavior.
It allows you to understand what makes high-performing campaigns so successful instead of relying on guesswork.
In this guide, we will discuss two ways to track referrals and the various advantages of using referral tracking software.
What is Referral Tracking?
Referral tracking is a manual or automated process that measures the performance of your referral program.
When you set up tracking, it collects data on how many customers join the program and become advocates. And what inspires them to invite their friends.
Referral tracking also gathers data on both existing customers and the customers they refer – from the moment they receive an invitation to when they make their first purchase.
By tracking referrals, you will create a foundation to glean more complex insights, such as measuring the LTV of advocates and referred customers, and the ROI of the entire program. These referral insights can inform future marketing spend and resource allocation – you might even decide to hire additional team members.
Additionally, the data allows you to analyze the performance of previous referral campaigns and optimize future ones to increase conversion rates.
How to Keep Track of Referrals
Businesses track referrals automatically (via a tracking software) or manually (via a spreadsheet).
1. Referral Tracking Software
Referral tracking software automatically collects all relevant campaign and customer data. Then, it presents the data in a dashboard for easy analysis.
Consider the following example using Extole’s customer engagement platform.
When a company implements a referral program via Extole, the platform will collect data about your customers and their behavior.
The tracked referral data is available in the company’s My Extole account. It includes:
- Profile data: Associated with a single customer, such as participation in referral programs and their relationship with other customers
- Event data: Tracks referral sharing, transactions, use of discount codes, etc.
In the “Audiences” section, the report displays the relationships between advocates and friends. As well as the number of advocates in each advocacy tier and their revenue contribution.
Extole’s referral tracking also calculates performance metrics such as participation and customer LTV.
Insights into share channels uncover which platform (email, SMS, social media) advocates use to share invites, which can help you further optimize future campaigns.
2. Referral Tracking Spreadsheet
A Google or Excel spreadsheet is a simple way to implement manual referral tracking. This solution is suitable for small businesses that are still testing this type of marketing.
(But investing in referral tracking software would be worthwhile for a larger-scale program.)
A simple referral tracking spreadsheet includes the advocate’s name, contact information, and unique referral code or link.
When their friends make a purchase using their code, manually update columns E and F with corresponding data.
How Will You Benefit from Referral Tracking Software?
Implementing any type of software in your organization costs time and money. So it’s important to have the right expectations about the benefits of referral tracking software.
1. Saving Time
Manually updating referral tracking spreadsheets takes valuable time away from the marketing team. Additionally, it is not a scalable solution.
According to a Forrester study, referral marketing software with built-in data management can decrease the time employees spend managing referrals by up to 90%.
At one organization Forrester interviewed, the marketing team freed up nearly one week per month by no longer manually running and tracking referral campaigns.
2. Controlling Quality
Effective referral tracking software takes the burden of ensuring that people are complying with programs terms and conditions away from your team.. It saves money by preventing unqualified redemptions. Plus, it allows you to trust campaign performance metrics since fraudsters are less likely to skew your numbers.
Extole helps its clients lower unqualified redemptions by 80%, including those made by bots, resulting in hundreds of thousands of dollars in savings.
3. A/B Testing
Easy data tracking enables A/B testing, allowing you to optimize future referral campaigns and increase ROI.
When fintech GO2bank developed its referral program, the company used Extole to run A/B testing on the advocate sharing experience. GO2Bank designed four Refer-a-Friend share experiences, each using different copy and images.
The results? By using the variation that performed best during A/B testing, GO2bank increased its share rate by 6%.
4. Personalization
As your referral program grows, so will the amount of first-party customer data collected via automated tracking, allowing you to personalize more customer interactions.
For example, you can segment audiences by their level of participation in the program, the products they are interested in, or how much revenue their friends have generated so far.
Based on these insights, the marketing team can craft more relevant offers and retain a more significant portion of your customer base.
Take insurance tech company Policygenius as an example. They upgraded their refer-a-friend program by tailoring their rewards to the type of policy purchased, allowing advocates to get a $50 or $100 reward. This resulted in 60% of referrals with a free account purchasing an insurance policy.
5. Discovering Top Advocates
Every referral program has its top advocates – customers who invite the most friends and generate the most revenue.
Tracking referral data makes it much easier to pinpoint your best advocates and understand what encourages them to invite their friends.
Delighting them with exclusive offers will encourage them to keep up the excellent work. Another way to make super advocates feel special is by creating customized referral links featuring their names. These links are also easier to remember, which increases sharing.
Start Tracking Referrals with Extole
Every scalable, high-performing referral program needs built-in tracking features.
Extole’s customer engagement platform includes analytics and reporting features that enable effortless referral tracking. Whether you launch a contest or a refer-a-friend program, the platform automatically collects all the data you need to measure campaign success and glean insights to optimize future strategies.
Over time, investing in data-backed referral programs will lower customer acquisition costs, allowing you to grow your business without breaking the bank.
To learn more about Extole’s referral tracking capabilities, sign up for a demo.
