We’ve talked before about what referral tracking is and why it’s important but, as always, there’s more to it than what we covered in that blog. As we covered in that blog, however, referral tracking is an integral part of the referral process. And when done properly, it gives you the ability to quickly and cleanly reconcile referrals, track referrer activity and behaviour and accurately measure the performance of your program, which allows you to optimize and maximize the benefits.
Now, there are two key ways that a referral is tracked. The first by entering a unique referral code at checkout. The second is when a friend visits your website or app by following a unique sharing URL.
But even if you know which is which, the question still remains: Which is the best option?
What is a referral code?
A referral code is a unique identifier — alphabetical, numerical or alphanumerical — that attributes a sale to a specific referrer, and allows you to attribute and reconcile a referral. It can be any combination of numbers and letters, perhaps in a memorable form like a word that is easy to remember, your name or even your email or phone number. We’ve all seen an influencer online somewhere tell their followers: “Go to store X and enter referral code Y to get 10% off.” That, very basically, is a referral code. These are fairly simple and don’t require as much tech setup to get off the ground compared to referral links, as they can be deployed similar to discount codes used with voucher sites or other promotions.
What is a referral link?
A referral link is a unique URL that is generated when a referrer registers to participate in the referral program that they can then share with their friends and family. Much like a referral code, the unique URL is essential in reconciling and tracking referrals and the link can be easy to remember by incorporating a memorable word or name, like company.com/refer/mikejones77. A referral link acts as a tracking ID that traces the actions of both referrer and their friend, typically with the help of a tracking cookie (more on that later). So when you click a shared link that sends you to a referral program, that’s a referral link.
Here’s something to remember: A referral link contains both the page (i.e. your referral program) and the referral code (i.e. referrers’ unique identifier), whereas the referral code is just the unique identifier.
So, which is better?
Using referral codes is a lighter-touch approach to hosting a referral program, as referral codes can be used similar to standard discount codes. In fact, they’re additionally useful when the incentive for the referred-in friend to shop is a store discount since they can immediately redeem it at checkout (but there’s an issue there, which we’ll touch on in just a second). However, in order to reconcile referrals and rewards to the referrer and their friend, it can require a lot of manual effort on your part as you’ll need to collect the codes, attribute them and then distribute rewards.
If your referral program is to be made available both online and in-store, then a referral code can make sense as a code is easier to use in-store than a link, and often tills have been set up to accept discount codes. But something to bear in mind for online referrals is that a referral link often includes a unique referral code that is automatically applied on the landing page. This can open up the risk of fraudulent self-referrals where the incentive is immediately made available by making the product or service cheaper to the person clicking the link. Without robust anti-fraud measures, referral codes can be easily abused and you’ll find yourself paying out rewards for illegitimate referrals that don’t bring you new customers.
Another issue to consider is whether your referral codes are unique and only capable of being used one time. Otherwise, you could find that the referred-in customer can buy several times at the introductory discounted price. Even worse, the code could be made available on a bargain hunter’s website open to the general public.
At the other end, referral links are often used with enterprise referral software platforms. While they might require a little of your dev team’s time to set up, they have several advantages compared to referral codes. First of all, a referral link is instantly shareable across just about any online channel, from WhatsApp, Facebook Messenger, email, SMS, Twitter and Facebook, often directly from a centralized referrer dashboard. And, by using links you remove the number of steps leading up to a purchase, essentially taking the referred-in friend directly to your store to transact without relying on them to remember to enter the code at the checkout, which can improve conversion rates. Referral links also allow for more in-depth analytics and tracking using tracking cookies to reconcile referrals quickly (often automatically) and trace the full referrer and referred-in friend journey from end-to-end. Referral links are also more easily used alongside anti-fraud measures through tracking user information like IP addresses, which makes self-referrals more difficult, ultimately making your program more secure and ensuring you’re only paying for legitimate referrals.
However, tracking with cookies is becoming increasingly complicated due to how Google and Apple are treating tracking cookies. In particular, Apple’s Intelligent Tracking Prevention (ITP), is making it harder to track using third-party cookies. That subject is too long to go into in this article, but if you would like to know how IPT can affect your referral program and the options you have to counter it, please feel free to get in touch.
The answer as to which is best for your referral program really comes down to the level of integration you’re comfortable with and the way in which your referral program is hosted. But, while it might be easier to use referral codes, the truth is that referral links are often the more effective, convenient and secure option.
Hopefully, this helped explain the difference between your referral codes and referral links and helped you understand which is the most suitable for your referral program. And, if you’re interested in learning more about referral programs or you’re interested in launching a program of your own, don’t hesitate to get in touch with one of our referral experts. We’d love to chat.