How to Set up and Track Referrals For Your Business: 7 Steps to Follow.

The most successful referral marketing programs you see today have several different components.

These programs start with establishing realistic goals, a foundational strategy, executing the program, and having referral-tracking procedures to measure success.

So, before we jump into the weeds of how to track referrals for your business, we’re going to shed some light on what referral tracking is, the benefits of tracking referrals, and some frequently asked questions.

Let’s get to it.

What is Referral Tracking?

Referral tracking is a way to measure the effectiveness of your business's referral program.

Companies use referral tracking to understand better how many leads and customers are referred from friends, family, partners, affiliates, content creators, customers, and all other referral sources. 

Many businesses either track referrals through manual or automated processes via referral tracking software. We’ll get into this more later on in the article.

Image of referral tracking

Why is it Important to Track Referrals?

Like many other marketing and revenue-generating channels for your business, you want to have a tracking infrastructure to measure your programs' ROI. Regarding referral tracking, there are several reasons why it’s important to have a system in place, which we dive into below.

Here are 5 reasons why tracking referrals is important:

1. Keeping track of referral payouts.

Almost all referral programs have some form of incentive tied to their programs in the form of a payout – cash, points, rewards, and so on.

If you don’t have a way to track new customer referrals that come to your business through your customers, partners, or friends – how else will you be able to know who to pay?

Whether you track this manually or through referral tracking software, that doesn’t matter. What matters is that you’re tracking all your customer referrals and rewarding the referral partner accordingly.

2. Understanding your customers.

Typically when you have a referral program in place, it is first opened up to current customers. 

Most referral programs are built upon the demand from customers wanting a program, which indicates a passionate and loyal customer base for your product or service. 

But, on the flip side, if you open up a referral program and there is little to no traction… This may be an indicator that either:

  • You don’t have a passionate customer base or
  • You haven’t done a good enough job executing your new referral program or 
  • There isn’t enough incentive for your customers to refer their friends

3. Recognizing referral fraud.

Hopefully, referral fraud is an issue you never have to deal with when starting your referral program, but unfortunately, there are some bad actors out there.

Having proper referral tracking in place gives you a pulse on the quality of referral traffic, leads, and customers coming through your business. You can then analyze whether those referrals are fraudulent and take swift action on their referral and referral partner.

4. Analyzing revenue growth.

Image of referral partners revenue growth

When you invest time and resources into a specific marketing channel, you always want to know the return on investment for your business – especially if it’s directly impacting revenue growth.

That’s why, with referral programs, you should be tracking the revenue growth associated with the channel. 

With referral tracking, you can look at metrics such as the ones below and see how these compare with other marketing channels you have running too:

  • Traffic to your website
  • New referral partner sign-ups
  • New customers referred to your business
  • Revenue growth
  • Customer acquisition costs

5. Identifying the highest value referral partners.

Image of referral partners tracking

Lastly, when running a referral program for your business, it’s important to understand your top referral partners.

These referral partners will be the primary revenue drivers for the channel, so you should be building closer relationships with them.

7 Referral Tracking Methods You Can Steal.

Now that we've covered what referral tracking is and why it’s important to have it in place for your referral program, it’s time to dive into how you can track referrals.

Below we cover 7 methods you can use to track your referral program:

1. Using Google Analytics

image of google analytics referral traffic

Google Analytics is free software you can use to track referral website traffic and conversions that come through your website. This is a great free resource for your business, especially if you have a minimal budget to invest in other software applications. 

That said, if you don’t have the expertise in setting up Google Analytics or creating these referral reports (like the one below), we recommend hiring experts to help you get this set up correctly.

2. Collecting information via website forms

Another method you can use to track the referrals coming to your business is through your website forms.

Here is how you can track referrals through your website forms:

  1. Login to your website’s admin panel and your “contact us” page.
  2. Head over to the form editing.
  3. Add in another field called “did anyone refer to you?”
  4. Publish.

When you ask prospective customers if anyone referred them to your business, they can input this information into the form, relaying that back to you. You can then attribute this referral to the correct referral partner and credit them their reward.

3. Asking the customer.

One of the easiest ways to track customer referrals is by asking who recommended them! 

Whether you’re a brick-and-mortar business, contractor, real estate agent, or selling goods online, you can always find a way to ask the customer how they found your company. 

Remember to write down who referred them and be sure to send out a thank you message to that person (if you’re able to), and of course, if they’re a current referral partner, be sure to reward them!

4. Referral tracking software.

image of referral tracking software

If you want to make your life easier, especially if you have countless referrals coming to your business every month, you should consider using referral tracking software!

Referral tracking software helps you to organize your referral program, streamline the signup process, generate referral tracking links, initiate rewards, and so much more! Depending on what type of referral program you want to launch with your business, you can expect to pay anywhere from $30/month to $1,000/month for referral tracking software.

5. Coupon codes.

Another creative way to track referrals from your business is using coupon codes. Using coupon codes may not apply to all businesses, but for those who use these regularly (retail, ecommerce, etc.), you can easily track the referrals to the partner you gave the coupon code to.

Let’s dive into an example of how you can track the use of coupon codes.

Let’s say, for instance, you’re an apparel retailer with both a brick-and-mortar store and ecommerce website. You decide to give a coupon code to a local influencer in the community to share out with their audience for 20% off store-wide. 

Your potential customers can either redeem that coupon code in store or through your ecommerce website before making a final purchase. At the end of the month, you can add the total sales that came through that particular coupon code, and its impact on your sales targets that month!

6. UTM parameters.

Now, with this method, you should have some experience with web marketing and analytics. If you don’t, we recommend working with an experienced web analytics consultant to help get you set-up properly!

UTM parameters allow you to append a query string to the end of your website’s URL to track where traffic is coming from.

Let’s dive into another example.

Say you’re a local contractor with a website, and you’d like to partner up with another local plumber who has a website too. You’d like to have the plumber add you on their website under their “recommended contractors” page and link to your website.

When you give that plumber your website, you can add parameters to your URL to track users and leads coming from that plumber's website.

Example: www.nickscontracting.com/?utm_source=plumberswebsite&utm_medium=contractordirectory

7. Dedicated landing pages.

One last way in which you can track referrals coming to your business is through the use of custom landing pages. 

If you have a referral partner that would like to send you leads but want to be rewarded for the referrals that come through, create a custom landing page for them to share with their audience! When you give them a custom landing page only they can use, you can see the leads that come through precisely that page and account for the number of customers from that referral partner.

Frequently Asked Questions About Referral Tracking Programs.

What does referral tracking mean?

Referral tracking counts the number of referrals your customers and partners refer to your business in a given period. Through referral tracking, you can analyze who your top referral partners are, track revenue growth, and payout referral partners accordingly.

What is referral data?

Referral data is collecting data from traffic sources referred to your website. You can collect referral data through analytics platforms, CRM software, or website forms. Referral data is important to collect because it allows you to see where most of your customers are coming from, that way, you can double down in that area of growth.

Wrapping up the Steps to Referral Tracking. 

There are many ways you can track your referrals. No one solution is best for all because all companies are different.

It is essential to identify the best solution that fits your business processes and how your customers interact with it. We’d recommend going with a referral tracking system to streamline many of these processes, but start mapping out the referral flow and testing it out with a few customers before making any purchase decisions.

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