Comparing partner programs: affiliate vs. referral

In the world of digital marketing, partnership programs are a mighty channel to grow your business, revenue, and brand awareness. 

2/3 of customers say recommendations affect their buying decisions. Additionally, millennials are 247% more likely to be influenced by blogs or social media than traditional advertising.

These partnerships can come in the form of affiliate programs or referral programs. While both types of programs offer program rewards to their partners, they operate differently and cater to different types of partners.

Let’s distinguish between two common partnership programs: affiliate and referral.

What is affiliate marketing?

Affiliate programs are partner programs where businesses offer their partners a commission for promoting their products or services. The commission is usually a percentage of the sale that the partner generates through their unique affiliate link. Affiliate programs are popular in the e-commerce industry, where partners include bloggers, influencers, and content creators. These individuals have a large following that trusts their opinions.

Running an affiliate program allows you to reward your affiliate partners for promoting or selling your product or service to their audience. Anyone can become your affiliate partner: customers, review websites - you name it. Affiliate marketing is performance-based.

More effort into promoting your product leads to more sales, which means more significant rewards. The rewards are usually monetary. Reward example: 20% commission for the first 24 months for every purchase made by affiliated customers.

How can you manage all of that? With Partnero, you can provide your affiliates with a partner portal. Here, they can track their performance, access marketing materials, and manage their payouts. 

Infographic explaining how affiliate programs work

What is referral marketing?

On the other hand, referral programs are partner programs where companies incentivize their customers to refer new customers to them. Referral programs offer program rewards such as discounts, free products, or cash rewards to customers who successfully refer new customers. 

Typically a customer will receive a referral link upon signing up or purchasing your product. Existing and new customers get a one-time reward by sharing the link and inviting their friends and family to try the product. The reward is usually non-monetary, such as credits or discounts. 

Reward example: A $20 credit for every new customer referred to the business.

Referral programs are popular in the software and service industry. Customers can refer friends or colleagues who will likely benefit from the product or service.

Even though your customers will usually have a smaller audience reach than an affiliate, the engagement and trust level are much higher - nothing beats a personal recommendation from a friend! Now, that is world-class word-of-mouth marketing.

Infographic explaining how referral marketing works

Partner program comparison

Here is a brief comparison of the common aspects of both affiliate and referral programs.

Visual comparison of the most common aspects of affiliate and referral programs

What is best for your business?

Both affiliate and referral programs can be compelling. Companies should consider these partner programs as revenue channels. Here are some questions to remember when deciding:

  • Business goals: are you focused on customer acquisition or customer loyalty and retention? Affiliate programs are great for acquisition because anyone can become an affiliate, increasing your reach. Referral programs are great for retention because a recommendation from someone we know is the most trusted form of advertising.

  • Maintenance capacity: how much time can you dedicate to working with your partners? Affiliate programs usually require more maintenance. From providing marketing materials and managing payouts to partner support. On the other hand, referral programs are primarily self-sustaining.

  • Compensation means: are you comfortable paying your partners money? Would you prefer non-monetary options?

  • Product or service appeal: is the product you’re selling more niche or geared towards a wider audience? Affiliate programs will work better with products that have a broader audience appeal. Referral programs usually work better for niche businesses

Affiliate and referral programs are effective partner programs that offer program rewards to their partners. While affiliate programs are ideal for companies that want to reach new audiences, referral programs are suitable for businesses that want to retain existing customers and attract new ones through word-of-mouth marketing. The choice between the two programs depends on the business's marketing goals, target audience, and product or service offerings.

Whether you pick one or decide to have both, Partnero makes running partnership programs a breeze. Explore Partnero’s features now!

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