Word of mouth marketing through referral programs is one of the most cost-effective ways to gain new customers and drive sales. However, many businesses struggle to realize its full potential when using referral programs developed in-house because of manual processes and technological roadblocks.
Your referral software should make referral marketing easier for you, not more difficult. The baseline for referral marketing is increasing sales. But the benefits of referral programs should also include:
- Saving your team time
- Helping you reach existing customers and new leads across multiple digital platforms
- Protecting against unqualified referrals
- Creating a more customized experience for consumers
These four capabilities can act as benchmarks to help you evaluate whether your current (or future) program is a true asset bringing value to your organization.
1. It Should Save Your Marketing Team Time
Referral marketing software that automates program execution and data management can reduce the time spent on managing a referral program by up to 90%. This increase in efficiency mentally frees you up to focus more on generating the most strategic, creative content you can instead of rushing to just get something out the digital door.
Source: The Total Economic Impact™ of Extole, a commissioned study conducted by Forrester Consulting on behalf of Extole, August 2021
Also, without automation, you may find yourself conducting your consumer data management in multiple spreadsheets. Not only is this process time-consuming, but it’s often inaccurate—IBM found that “88% of all spreadsheets contain at least one error.”
For referral marketing, these errors can translate to a poor customer experience and lost revenue. For example, you might miss out on giving an advocate their referral program benefits, or you might send them an email with their name misspelled. With comprehensive access to clean data in advanced referral software, you decrease the chances of these mistakes happening, and you quickly track, analyze, and optimize your referral programs.
2. Offers Options for Cross-Platform Consumer Engagement
Effective referral marketing software allows you to make the most of your creative campaigns by supporting a variety of referral initiatives across digital platforms, whether that’s through email, web, or social media. This central hub helps ensure that your brand messaging is cohesive, and you can easily cast a wider net to attract new consumers and build your lead database.
Managing each platform’s referral initiatives individually wastes time. It’s also harder to compare campaign performance since you have to manually compile performance analytics from each channel. This ability to create omnichannel campaigns and track data in one comprehensive location gives you the insights you need to inform future marketing strategies.
Source: Extole
Additionally, advanced referral software typically has a variety of messaging templates you can customize to meet different goals, which helps you create more innovative content that captures attention. For instance, TravelZoo UK used its advanced referral software to host a sweepstake centered on the reciprocity principle that led to a 51% increase in advocates.

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3. Prevents Unqualified Redemptions
Approximately 1% of referrals are unqualified, and companies can easily lose thousands from these fraudulent self-referrals or bots redeeming offers that individuals aren’t actually eligible for. One of the benefits of referral programs supported by advanced technology is built-in fraud prevention capabilities that ensure that you don’t lose money unnecessarily.
When your referral software doesn’t have these safeguards in place, the best defense you have against unqualified redemptions is manual review by team members. Not only is this time-consuming and frustrating for your team, but there’s also a significant chance that fraudsters will slip through. It’s just not feasible for a few employees to detect unqualified redemptions with the accuracy of technology—especially if you have a program with hundreds or thousands of members.
If you can’t catch unqualified redemptions, your data integrity will decrease. This can skew campaign performance results and lead to less effective marketing decisions because you’re basing them on inaccurate information. For example, if there’s an uptick in fraudulent referrals, but you believe they’re qualified leads, you may waste unnecessary time and money trying to connect with them. You might also try to develop future campaigns based on that “success,” but that won’t actually translate to high-quality leads.
Advanced referral software can save your team this headache with the capability to block at least 80% of unqualified referrals. The better the prevention methods you have in place, the more money you can save and put right back into your marketing spend.
4. Lets You Create Personalized Customer Experiences
As we previously noted, a standout among referral program benefits is the convenient access to comprehensive, accurate consumer data in your software. When you’re confident in your referral program data, you can be confident in your ability to effectively segment audiences and connect with them through more relevant, customized communications.
Without personalized referral marketing messaging, you pay more to attract fewer customers. SmarterHQ’s “Privacy and Personalization” report found that 72% of consumers will only engage with personalized messaging, and McKinsey notes that “personalization can reduce acquisition costs by as much as 50%.”
To further boost your ability to personalize, the most effective referral software allows you to customize your sign-up forms with specific fields outside of just name and email. The more information you can collect about your consumers, the easier it is to provide them with an enhanced consumer experience. This is so valuable to consumers that 83% of them will share their personal information if it improves personalization.
For example, cosmetics company Julep used its referral software to create different tiers of custom experiences and rewards for loyal customers based on how active they were in the program. Electronic funds transfer provider Xoom also used its referral software to create the most relevant experience for its global consumers by ensuring quick access to different languages based on a consumer’s location.
Source: Extole
When you can connect with a consumer on a human level, you foster stronger customer loyalty, which, as Extole CEO Matt Roche notes, “isn’t just the willingness to spend, it’s the willingness to talk about your brand.” You can increase the likelihood of formal referrals and positive user-generated content about your brand by using personalization to affirm to consumers that you value them as individuals, not just numbers.
Learn More About Advanced Benefits of Referral Programs in Our New Forrester Consulting Study
Forrester’s Total Economic Impact™ Study on Extole, a commissioned study conducted on behalf of Extole, quantified the costs and benefits of our referral programs at four businesses across different industries. Some key results include:
- A 282% ROI over three years
- Time savings of 90% for marketing team members
- An 80% reduction in unqualified redemptions
- A 150% increase in average order value for referred customers
- A 75% year-over-year increase in converted leads
Download the study here and find out how our refer-a-friend programs can boost your bottom line and add objective value to your company.