Referral Marketing vs Affiliate Marketing: Where Is the Difference?

Affiliate marketing vs Referral marketing

Last updated - November 2, 2021

Digital marketing experts have developed various tools and strategies to assist website promotion across the web. Affiliate and referral programs are extremely profitable for businesses of any level. They work by a similar principle and thus get often confused with each other, even though they have significant differences. 

In our extensive guide, we highlight the benefits of each digital marketing strategy and compare affiliate and referral programs. Read on to find out which fits your business goals best.

Understanding Referral Marketing

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What is Referral Marketing

If you have at least a dozen loyal customers that enjoy using your product or service, you can encourage them to promote it to a wider audience. In the terminology of digital marketing, this strategy is called referral marketing.

The principle of any referral program is not tricky: you reward your customers for sharing a link or a special code with other people. This reward can be in the form of a discount, cashback, free products, upgrades, etc. But to make your deal successful, you have to be sure that your product is flawless. Then, it will be much easier to encourage people to raise your brand awareness across a wider audience.

Digital marketing is all about interacting with users’ consciousness. Referral partner programs are harmless, simple, and extremely productive at the same time. Let us see why it is so and what you can get from referral marketing.

The Benefits of Referral Partner Programs

Many experts use referral marketing in their practice and conclude that it is a powerful approach. The reason for that is quite obvious: people tend to trust recommendations from acquaintances, close friends, colleagues, and relatives more than any kind of ad. If you succeed with your referral program, that is what you will get in the result:

  • Expand your customer base: for that, most people submit quality guest posts, and you can make your loyal visitors generate interest and trust among their fellows;
  • Improve relationships with existing clients by rewarding them for a small favor;
  • Boost brand awareness and trust at once, as your new visitors will have a higher confidence level as they decide to become your customers;
  • Referral programs are cost-effective, as the lion’s share of your success depends more on communication and product quality rather than marketing investments.

If you choose to implement the right referral programs in your digital marketing strategy, it will be a great contribution to your website and business growth. But if you still hesitate, we have got another option for you.

Understanding Affiliate Marketing

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What is Affiliate Marketing

Affiliate marketing is synonymous with partnership marketing. It is another strategy to reach out to a wider audience, but in this case, you engage other bloggers or website owners and not your customers.

Your affiliate spreads your link in his or her webspace and gets commission for every act of interaction of other people with this link. This reward for the affiliate varies based on your business: set sum per click or sale, a percentage from the sale, etc.

The success of your affiliate program depends fully on your business partner, so it is crucial for you to choose the right one. The impression about your brand is also the responsibility of the people you entrust your brand to. To attract bloggers that will assist you and not harm your reputation, you can turn to an expert outreach service. If the service is experienced enough, its professional team will find the right affiliate based on its quality standards.

The Benefits of Affiliate Programs

If you succeed in choosing the right affiliate, he or she can transform your business. You can benefit from a range of aspects that are crucial for your business growth. Here is what you will get in case of a fruitful affiliate program:

  • Increase targeted traffic even more: if you contact other businesses and bloggers to share your content or a link to your page, you will reach out to their whole audience;
  • Boost your website visibility: among all off-page SEO tactics, building backlinks is one of the most valuable ones. With affiliate marketing, you can get relevant traffic from various sources and get quality backlinks at the same time (check the page for more link building techniques);
  • Establish fruitful business partnerships with your affiliates by interacting with their websites and presenting your products or services to them.

With such significant positive effects, affiliate marketing is a popular digital marketing strategy that can suit almost every business, if done wisely. As you may have noticed, at some points, affiliate and referral programs differ drastically. So, let us compare these strategies more deeply.

Affiliate VS Referral: Similarities & Differences 

Affiliate and referral programs have a couple of fundamental things in common – that is why they get confused so often even by some expert marketers. Both affiliate and referral marketing point towards expanding your brand awareness and driving fresh and quality traffic to your website. They both require intermediaries to perform promotion and work by the principle of rewarding your partner. And as a nice bonus, they are both relatively cheap and can fit any budget. So where lies the difference then?

Program Participants (Intermediaries)

Referral Marketing: People who promote your brand are primarily your own customers. You can motivate them with the outstanding quality of your product, so they want to share their experience with close people.

Affiliate Marketing: Your mediators are professional bloggers, marketers, writers, business owners, and everyone who has their audience. Brand promotion is often a part of their main occupation, and they have expert skills and knowledge concerning this task.

Relationships with Customers

Referral Marketing: The crux of referral marketing lies in close relationships between referrals and potential target customers. The referrals tell their honest opinion about your product or service to their relatives, friends, and peers, thus contributing to the level of trust of your target audience. This concept is crucial for a successful referral campaign, and you need to make the best expression possible for your referrals.

Affiliate Marketing: Affiliates reach out to a wider audience, so they do not apply a tailored approach for every target customer. They rather rely on their professional skills of promotion and audience attraction. 

Means of Compensation

Referral Marketing: Referrals have most likely tried out your services or bought your products and have a certain impression. Besides this personal motivation, they get a nice bonus in the form of discounts, cashback, free products, costless shipping, etc. 

Affiliate Marketing: Affiliates have nothing to do with your brand personally. Their motivation is based purely on the money they get from customers they attract. In some cases (for instance, when they perform excellently or work for you for a while), affiliates can additionally get a free product or service sample. 

Traffic Volumes

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Referral Marketing: The participants of a referral partner program will not bring you significant amounts of sales. Each client will come to you having a positive image and certain expectations, though.

Affiliate Marketing: As we have already mentioned, affiliates are often professional marketers and bloggers with a certain audience. If you find a relevant source, you may get a great inflow of quality traffic, which also can result in SEO improvements.

Link Placement

Referral Marketing: Referrals share a link to your website with their closest acquaintances, and do it by direct contact with a target receiver. So, they often post it on social media, in emails, or just send it privately.

Affiliate Marketing: Affiliates target as many people as they can, so they place links in open webspace. These may be websites, blog posts, ads, social media, forums, videos on YouTube, and other content types – whatever can ensure a huge and stable traffic inflow.

Bonus: Pros & Cons

Referral Marketing: One of the main advantages is that you have total control over the whole referral partner program. You can easily analyze, change, adjust, or complement this campaign, and thus you have responsibility on your shoulders. However, since this marketing strategy aims to communicate with your audience, it can be hard to conduct this program if you do not have enough customer base.

Affiliate Marketing: On the contrary, if you launch an affiliate program, you shift the responsibility for your brand reputation automatically for your affiliates. It may be risky if you do not have enough experience in choosing your business partners yet. However, it can be great for those who do not want to waste time on managing this aspect of their business. Additionally, if you are looking for fast results, you can get a lot of cheap leads with such a program. 

Which Strategy is Right for You?

Different digital marketing strategies require different preparation work and overall progress. It is crucial to decide whether you want to organize an affiliate or referral partner program, and then take the necessary steps to launch it. If you are still hesitating about your decision, use the following questions to analyze your goals.

What type of business do you have? Referral marketing works well for online stores, local services, gyms, and B2C businesses, while for such niches as consulting or coaching and B2B, affiliate programs would be more suitable.

Do you prioritize your brand reputation? It is always important to save your face for your customers. For referral marketing, however, your reputation is a foundation for a successful campaign, and you need to focus on it to encourage referrals to invite their peers.

Do you want to boost your sales or keep them long-term and stable? Affiliate programs allow you to stimulate the spike in sales, as they target huge and relevant audiences. If you are not hunting for numbers but want to establish long-term relationships with clients, you may want to choose a referral campaign.

Does your brand already have a customer base? While affiliate marketing can work well even for a zero customer base, referral practices require clients who have already tried and liked your products. That is why the latter can be more effective for businesses with some experience, and affiliate marketing will work at any stage.

Quality or quantity? Some businesses sell products and services that do not have high-quality standards. In this case, it is easier to work with affiliate marketing. But if you want to go referral, you need to take care of constant product improvement to meet your audience’s expectations.

After you finish this short questionnaire, you will definitely feel more confident about your intentions. However, you can also expand your promotion and try out both strategies. It is never too late to change your mind and turn to the path that will be more productive for your case.

Key Takeaways

We are hoping to have given you enough knowledge about the basics of referral and affiliate marketing. Now, it may be easier for you to choose one direction and invest in it to reach your business goals. Here is what you have learned:

  • Referral marketing is about rewarding your customers for sharing referral links and costs with other people;
  • in a referral program, you interact with your audience directly and strengthen relationships with it;
  • Affiliate marketing concentrates more on inter-business communication and implies paying commission to your affiliates for promoting your website or brand;
  • Affiliate and referral programs share basic purpose and face the same direction, but they are different in some decisive points;
  • to find out what will work for your brand, you need to analyze your business and its goals extensively.

After you select the kind of digital marketing program that suits you best you can deepen in this topic to learn it inside and out. Partnerships are exactly what every blogger or business owner needs to never stand still in your development. Whatever strategy you choose, put enough effort, time, and soul into it, and people around along with the business community will notice and appreciate it.

Further reading

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