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How to Optimize Referral Programs with Better Referral Tracking and Distribution?
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How to Optimize Referral Programs with Better Referral Tracking and Distribution?

The one thing we all need from our marketing efforts is results. Each year the brand reports state that we spend more and more on marketing (2020 excluded), but it’s all in vain if spending more doesn’t come with getting more. For example, suppose you are running an e-commerce or any other business where you rely primarily on acquiring new customers. In that case, you may have already noticed that one of the most effective ways to do so is by word-of-mouth marketing. And the best way to encourage people to vouch for your company is to give them something in return – if they are pleased enough with your services, they will spread the word. That’s how referral programs work. 

On the Voucherify blog, we’ve already written about referral programs several times. You can read a bit about best practices or even learn everything there is to know about referral programs in this ultimate guide. Today I’ll be talking about the tracking part.

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Table of contents

  • Referral tracking software basics.
  • Why do you need referral tracking software?
  • Five ways to optimize your referral program.

What exactly is referral tracking software?

First, a quick reminder about referral programs – there are two types: one-way and two-way. In a single-sided referral program, only advocates get rewards – persuading new customers to come and spend their money in your shop is up to them. In such case, you need to provide a genuinely enticing reward for referrers, considering how much work remains on their end. In a double-sided referral program, you give rewards to both parties – so not only referrers get something extra, but also referees. Everyone’s happy! 

Most of the referral marketing platforms come with a built-in tracking feature, but it isn’t always available for customers (or it’s hidden behind the higher price).

Say you already have your referral program up and running – you even managed to acquire some new customers through referrals. So what more could you possibly need? The answer’s a proper tracking system. Here’s how it could help.

Why do you need referral tracking software?

Even if your referral program is well-thought and carefully prepared, it does not guarantee success. Tracking its results would tell you precisely how satisfied your customers are with your proposition. If the referral program is really that good, you’d see the growing number of referral program members. The referral tracking allows you to measure its effectiveness and see how referrals impact your business. So what can you do with referral tracking?

  • Measuring customer satisfaction – the more satisfied your customers are with your business, the more likely they will participate in your referral program. 
  • Testing new incentives, tiers, and ideas – while creating your first referral program, you have to make assumptions: choose incentives, create tiers, and decide whether the program should be one-sided or two-sided. With referral tracking software, you can check the effectiveness of your actions, implement changes and see how they affect your referral program effectiveness.
  • Determining referrals’ impact on sales – in most cases, a well-thought referral program helps businesses achieve more sales, but you need concrete data to be sure. Referral tracking software hands you all the numbers: how many referees joined, how much sales the program drove, and – maybe the most crucial – how many customers participated in the referral program. 
  • Customer participation rate – it’s elementary to know how many customers decided to join the program. If the results in this matter aren’t satisfactory, it’s a clear indication that you should adjust the program to your customers’ expectations.
  • Sharing rate – not every referral program member will actively spread the word about your business. Consider monitoring the sharing rate in real-time and using the information to optimize your referral program further with referral tracking.
  • Tier effectiveness – if you decide to run a multi-level referral program, it’s crucial to know if their thresholds are attractive for the referrers. Suppose people tend to drop out after achieving the first milestone (e.g., referring three customers). It may indicate that either reward from the second tier isn’t captivating enough or that you require too much effort from the referrers.

Say you’re using Voucherify as your customer referral program software. If so, you can track all those data without a separate referral tracking software – in fact, most of the information is available right after logging in and selecting your referral campaign:

Top 5 referrers analytics from Voucherify screenshot
Referral analytics in Voucherify screenshot

Five ways to optimize your referral program

Tracking and analyzing all the data mentioned above is crucial to optimize referral programs effectively. But to achieve expected results, you need to learn how to use acquired information. There are at least five ways to make your referral program much more effective:

  1. Make referring as easy as it gets.
  2. Make sure the distribution works smooth.
  3. Implement gamification in your referral program.
  4. Tweak rewards and tiers.
  5. Test continuously.

Make referring as easy as it gets

If you find your customer participation rate too low, it doesn’t necessarily have to mean that the program itself is poorly designed. Maybe people can’t find it! 

Make sure that customers have a chance to stumble upon your referral program. Then, where should you advertise it? It depends on which distribution channels are proven to be the most effective for your business. 

  • If your newsletter has a solid group of regular readers, writing one solely about the referral program is a no-brainer. 
  • If you’re running a SaaS company or an online shop, inform all the customers about the program inside their accounts – use internal notifications pop-ups or promote the program in a chatbot.
  • Add a top bar or a bottom bar on your website so that each time someone visits your homepage, they get a reminder about the referral program.
  • If your customers appreciate a more analog approach, you can include the leaflet about the referral program with the shipping of their products. It should encourage them to refer a friend (or friends) and make their return more likely if the reward for referring is the discount or gift card credits.
  • Create an infographic or a landing page (or both) describing the whole referral process. Make sure the story can be told in no more than a few sentences – referring should be a pleasurable experience (crowned with a satisfying reward), not an ordeal.

Make sure the distribution works smoothly

Even if your referral program software works wonders and has everything you need to create single- or double-sided programs, it’s always good to spend some time planning codes distribution. But the communication has to run smoothly on two levels: between your company and referral program members (referrers) and between referrers and referees – though you’re only responsible for the first part.

While searching for the best CRM, ensure it is integrated with your referral program software – integration guarantees seamless cooperation and access to tailored solutions. Here’s an example: our promotion engine – Voucherify – is integrates with Braze

It’s a perfect match since Voucherify allows users to create all sorts of marketing campaigns (vouchers, gift cards, loyalty programs, and referrals), but with few messaging options. On the other hand, Braze offers plenty of ways to send referral codes to your customers, starting with email (obviously), push notifications, in-app messaging, and banners.

But what does it mean in terms of your referral program effectiveness? With Voucherify and Braze working together in the background, you may automatically notify each referral program member about novelties, such as new products, happy hours, or promotions. In this duet, Voucherify is responsible for generating and sending out the referral codes to Braze, while Braze passes them immediately (or according to schedule) to referrers.

The powers of Voucherify and Braze combined make them the best refer a friend software out there with personalized campaigns, highly customizable validation rules, tailored distribution, and superfast time to market.

Read Mike’s article to see exactly how you can boost Voucherify effectiveness with Braze’s distribution features.

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Implement gamification in your referral program

People love playing games, and they get seriously engaged if there’s a prize to win. So why don’t you try and turn your referral program into a game-like experience?

Of course, gamifying the referral program belongs to the easier said than done category – creating a well-performing game out of your refer a friend program requires an outstanding idea and even better implementation. 

Theoretically, gamification comes with all the arguments to encourage more people to participate in your referral program actively. There are tons of internet studies showing how gamification makes everything X times better, but before you start jumping for joy, know that it will require plenty of work. Well, not if you have a referral marketing software with a basis for gamification. 

In a way, Voucherify has already implemented gamification features, such as a point system, which you can use in both referral and loyalty programs. Achieving a certain amount of points will grant referrers access to higher referral tiers, with better rewards. It’s up to you how you’d like to present the point system to your advocates. Here’s an idea – a progress bar with indicated milestones:

Example of referral program gamification

Progress bars can show how many referrals a user needs to achieve a higher tier and at which point they’ll get rewards. And since we’re talking about them…

Tweak rewards and tiers

One of the essential things in referral programs is rewards. If you want to rely on acquiring customers via referrals, you need to provide attractive rewards to referrers and referees. But what does “attractive” mean in this case? Unfortunately, there’s no one-size-fits-all answer to this question (unless – maybe – cash). There are, however, plenty of rewards that are versatile enough to use in all kinds of businesses.

Discount coupons and gift card credits are a great way to reward both referrers and referred customers, especially if your long-term goal is to acquire loyal customers (speaking of which – referral programs could be a perfect gateway to loyalty programs).

SaaS customers will always welcome a subscription extension as a reward – primarily if they use it daily. Extending the service for another month is also a great way to encourage customers to stay longer with your company.

Another idea worth mentioning is rewarding referral program members with your products or services. Getting something for free (actually in exchange for referring) would make them think better of your company and could be essential in building a relationship with customers.

As for the tiers – multi-level referral programs allow companies to create some kind of FOMO experience. You can let users take the less attractive reward for the first few referrals, but – if they are patient and determined enough – they may decide to save their points and exchange them for better prizes in the future. Leave them the choice and see how they respond!

Test continuously

Checking the reactions of referral program members is one of the most crucial elements of conducting the program. That’s why referral tracking is so important. Without the data it provides, you won’t be able to specifically tell if the changes you’ve made to the referral program have improved its effectiveness or quite the opposite. 

There’s no such thing as the perfect referral program – it may exceed your expectations (and I hope you’ll have it that way!), but it doesn’t mean there’s literally nothing to add (or subtract). There’s always some room for improvement. That’s why testing your program, adding new rewards, making changes to the point assigning system, and rebuilding tiers should happen every now and then. Be careful with all the testing, though. Launch changes for small groups of customers, if possible, to check their reactions. Or – even better – A/B test each modification.

Summary

Making your referral program better is a process and a long one. Prepare for rolling back some changes and think of the failures as necessary steps to a well-organized and effective referral platform, satisfying for your company and all participants.

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