5 Differences to Note Between Affiliate Marketing & Referral Marketing

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There are many marketing methods out there, and it can be difficult to figure out which is most suited to your business. One of the ways to ensure you pick the correct one is to know the differences between them.

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In this article, we will be looking at affiliate and referral marketing strategies. More specifically, we will be looking at the differences between them.

Yes, they are two different things! Before delving into these differences, let’s find out what each means.

Both referral and affiliate marketing strategies are customer acquisition strategies.

Referral marketing involves your customers promoting your business or brand. This can happen organically without you needing to do anything.

For example, someone found a face cream that magically erases all wrinkles. They will likely tell their entire network of family and friends about this game-changer without being asked.

However, you can give your consumers a little push in the form of rewards to encourage them to share the positive experiences they’ve had with your business with their network.

If you know that you get a high volume of excellent reviews from your customers, for instance, the referral strategy may be the one to go for. This is an example of how the way your customers respond to your brand can inform your business decisions, or in this case, how consumer reviews can impact the strategies you use to grow your customer base.

You can take these reviews as a sign that your customers are happy with your business and, with a little encouragement, could promote your brand significantly.

Affiliate marketing, on the other hand, is all about getting affiliate marketers to promote your brand or business on their platform. This usually will not happen organically, and affiliate partners expect money in return for their services. This type of marketing is very popular; in fact, 94% of publishers use several affiliate networks at a time!

Some of the differences between the two are already apparent from the descriptions of these two strategies. You’ll find these and more outlined below.

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1. Who is involved?

 As we have already seen, the people involved in the two strategies are different.

Referral marketing typically involves first-party partners, in other words, the consumers of your service or product.

These consumers will only promote if they feel your service or product is worth it. Here, the value of building a stellar customer experience cannot be underestimated. The better the experience you offer your consumers is, the more likely they are to refer you.

On the other hand, affiliate marketing uses third-party partners. These can involve social media influences and bloggers. Also, unlike your customers, affiliate marketers may not have used your product. Finding affiliate programs can help you discover the right affiliate partners to promote your brand and help you acquire more customers.

2. Target audience

Since referral marketing is about your consumers spreading the word about your brand, their target audience is limited to their network of family, friends, and colleagues.

In contrast, affiliate marketers have usually spent time and effort building an audience that extends past personal networks. This means that their recommendations reach a larger and more diverse audience in comparison to the referral marketing strategy.

3. Marketing channel

Referral marketing is typically done via word of mouth. A friend comes over for lunch, and before tucking into your salad (or burger, if you’re anything like me), you excitedly tell them about this amazing duvet set you bought that makes you feel as though you are sleeping on a cloud. That is how simple word-of-mouth marketing can be.

In contrast, affiliate marketers have a platform to share their content. This can be a social media account, a blog, etc. Taking the U.S. as an example, content and blogs generate almost 40% of affiliate publisher commissions.

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4. Rewards

Businesses like to encourage their customers to promote their brands with the promise of rewards. These tend to be non-cash incentives, such as complementary products or services, discounts, and points. Who doesn’t like a cheeky discount?

Letting your users know about these incentives isn’t difficult either – it can be as simple as a well-placed reward scheme on your brand website.

With affiliate marketing, however, third-party partners expect payment in return for their service, as it is a business for them. This payment is usually in the form of a commission.

Finding them is one thing, but unlike with first-party partners, you need to be able to communicate easily and regularly with affiliate marketers in order to develop a positive and valuable relationship with them.

There are tools that can help with this, however. For example, an affiliate marketing API can help keep up with affiliate marketers in a hassle-free way.

Since a third-party partner is very likely to be in another city (or country!) and will not physically be there to attend meetings, cloud communications supported by a robust platform are also a great way to keep in touch with them and ensure your marketing needs are met.

5. Value of resulting customers

The referral strategy involves users talking with those around them about their experience with your brand or products. There’s a lot of trust involved in this interaction since it takes place between people with an established relationship. This can lead the customers from this exchange to have more trust in the brand, which can convert into higher customer lifetime value.

With affiliate marketing, though, the marketers take great pains to grow an audience. The level of trust between them and their audience is often lower than that between a consumer and their network, resulting in lower customer lifetime value than when the referral strategy is used.

Takeaway 

Though this list is not exhaustive, it covered some of the main ways referral and affiliate marketing differ. Now that you are in the know, you can decide which would suit your business the most and which tools you can am yourself with to help you make the most of your chosen marketing strategy.

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