Many people who are learning digital marketing still get confused between affiliate marketing and referral marketing. Worse, some people think that it is the same. While it runs on the same concept of getting other people to promote your business, there are still some differences that you need to know. In this article, you’ll learn 10 of the main differences between the two.
1. The One Who Advertises the Website
The advertiser for affiliate marketing is usually more specialized than that of referral marketing.
Referral programs usually accept any advertiser. This can be a website customer or visitor. As long as he has his network of family and friends, then he can invite people. This factor makes him qualified to become a referrer in a typical referral program.
The advertiser for an affiliate program is different. Usually, it is someone who has some experience promoting products online. This person is called an affiliate, and he acts as a business partner to the website. His role is to promote the website to as many people as possible and is not limited to just his family and friends.
2. The Person That Should Sign Up As a result of the promotion
Referral programs have a different target market from an affiliate program. While referral programs look for people in the referrer’s inner circle, affiliate programs don’t care. You can see it in referral program examples. Referral programs are useful because they operate based on trust. The inherent belief in the personal relationships that referrers have with their referrals makes the system so effective. For affiliate programs, this is a different matter. It is about reaching as wide of an audience as possible. It doesn’t matter if this market is related to the marketer or not. What matters is he buys the product. After all, a commission can only be granted if a sale is made.
3. What Qualifies for a Reward
As mentioned, referral and affiliate programs have different rewarding systems. While referral programs reward signups or shares, affiliate programs only reward sales. Affiliates have to work harder, not only inviting people to visit a page. They should also convince them to buy the product that they are promoting. In this area, access to a reward is easier in referral programs. They don’t even require their referrers to make a sale. But this may lead to the merchant only getting vanity metrics like traffic and subscribers but end up not getting any deal. If your goal is to sell, having an affiliate program may be better.
4. Depth of Relationship
There is also a difference in the level of relationship between the marketer and the lead. In a referral program, the marketer is the referrer, and the lead is the referral. Their relationship is often close. They can be friends or family members. In affiliate programs, it is different. The marketer here is the affiliate, and the lead is the buyer. The lead may not have a deep relationship with the marketer. But he bought it as a result of the promotion.
5. How the Program is Promoted
Another thing that is worth noting is how the program is promoted. Referral programs are often promoted through word-of-mouth. It happens when the referrer talks to his family and friends about specific products and services. Since they have a close relationship with each other, it is easy to get the referral’s attention and get them to sign up. Affiliate marketing is different. Aside from using software, like this one from OSI Affiliate, they need to employ other promotion methods to get buyers. As mentioned, affiliates have to go another mile to get new leads. They need more than signups. They need more sales.
6. Reward
Another difference that is worth noting is the reward. In referral programs, the bonus is often more varied. You have tons of options. You can give away a discount code, a demo of your service, or others. But affiliate marketing is different. You don’t have the option of having varied types of rewards. You are only stuck with one – cash or a percentage of the sale. And this is not even up for discussion. Even if you come up with unique ways to reward your affiliates, once you move away from the cash-type reward, you will stop having an affiliate program and have a referral program instead.
7. Effect on Influencer Marketing
Out of the two, it seems that referral marketing has a better impact on influencer marketing. Affiliate programs are usually built into eCommerce websites that seek to increase their sales through other people’s promotions. But this is not good for inviting influencers to promote you. Influencers will not promote you if you will only pay them once they make a sale. They are far more attracted to systems that grant rewards for signups and traffic.
It is not uncommon for stylists to want to pull out pieces from collections that turn out to be great hits to style their celebrity. While this can prove to be a great form of influencer marketing for the brand involved, it can also prove to be a dire mistake the brand’s designer will regret.
8. Effect on Social Proof
Both can have an impact on social proof. But it seems that referral marketing is also better in this area. While both allow other people to talk about your brands and services, which can positively affect social proof, referral marketing still fares better. Why is that? It is because of the intention. Affiliate promotions are often intended to make a sale while referral promotions are done for traffic.
9. Customer Lifetime Value
Who do you think will most likely stay with a brand longer? Someone who is referred by a friend or someone who saw a product promoted by a marketer? The answer is the first one. People who have been invited by their loved ones tend to convert better because they trust each other. So they tend to have longer customer lifetime value. So if your goal is to get more customers who will buy from you again and again, it may be best to promote it with referral marketing.
10. After-Sales Relationship Between Marketer and Lead
Another thing that is worth noting is the relationship between the marketer and the lead. In referral marketing, there is already an existing relationship between the two. And it is not just a shallow relationship. They are usually close to each other. Because of this, the relationship will continue even after the promotion or the sale.
But it’s different for affiliates and their buyers. Usually, the relationship ends once they buy. They don’t even contact the affiliate afterward. They only read their review for guidance, and the relationship ends there.
I hope this article helps you to clarify the difference between referral marketing and affiliate marketing. Once you do, you’ll be able to use this to promote your business.
