Affiliate marketing refers to an advertising model where advertisers pay a commission to third-party publishers and content providers for traffic or sales generated by the publishers. This relationship is facilitated by brokers known as affiliate networks (Oliver Christopher Gomez, 2018). In simple terms, affiliate marketing means selling another person’s or company’s products and services. It’s like a referral service. You set up a website or blog and join affiliate programs that are relevant to your audience. You can connect to these programs through affiliate networks that provide you with a link that you include on your site. When someone clicks the link and purchases the product or service you’re marketing, you receive a percentage of the sale proceeds as a commission (Rebecca Lake, 2018).
Meanwhile, referral marketing, sometimes also known as word-of-mouth marketing, is just people purchasing products based on someone else's opinion or influence. It's a powerful marketing channel because people trust the opinions of other people in their lives and people they respect, whether that be family, friends, social media influencers or big stars (Richard Lazazzera, n.d.).
A Nielsen consumer report showed that the most trusted form of advertising is a friend’s recommendation, with 83% trusting the source for buying decisions. The report also found that people are 4X more likely to buy when referred by a friend. In addition, a Radius global marketing study showed that millennials ranked word of mouth as the #1 influencer in their purchasing decisions (SaaSquatch, 2016).
Affiliate marketing has a similar structure to referral marketing as they both use incentives to drive new customer revenue (SaaSquatch, 2016).
The key difference is that affiliate marketing focuses on third-party brand advocates to send customers to your business for a flat fee. Where referral marketing is focused on rewarding current customers to invite their friends to try your product/service (SaaSquatch, 2016).
The Difference Between Affiliate Marketing and Referral Marketing
1. Motivation
In affiliate marketing, the advocate does not know their referred customer personally, and the primary reason for referring your brand is financial motivation (Amity Kapadia, 2015).
In contrast, a referral marketing advocate recommends your brand to a colleague, friend or family member. The motivation is based more on a strong relationship between the advocate and the potential customer. The motivation in referral marketing is altruistic. That being said, offering referral rewards helps drive to referrals and shouldn’t be discounted (Amity Kapadia, 2015).
2. Marketing Channels
An affiliate program will focus on website owners and large influencers, making it more of a partnership than a relationship (Amity Kapadia, 2015). Examples of advocates including bloggers, reviewers, publishers and digital promotion businesses (Neil Parker, 2017).
Compared to referral programs, affiliate programs are often more easily shared. It’s as simple as including a link towards a product, service, or piece of content, or displaying as banner. The better the content quality, the easier for readers to trust in which lead to higher potential for link clicking (Megan Mosley, 2018).
Compared to referral programs, affiliate programs are often more easily shared. It’s as simple as including a link towards a product, service, or piece of content, or displaying as banner. The better the content quality, the easier for readers to trust in which lead to higher potential for link clicking (Megan Mosley, 2018).
A referral program focuses more heavily on customer engagement. It is building a strong relationship with your customer base to the point where they feel your brand is good enough to share with a colleague or friend. Due to the prior existing trust-based relationship, referred customers are of higher quality, meaning they’re more inclined to engage with your brand and make a purchase (Amity Kapadia, 2015).
3. Level of Relationship
In affiliate marketing, there is no relationship between the two people. The goal of an affiliate marketer is to get as many successful referrals as he or she can. The person clicking on the affiliate link does not necessarily know the affiliate personally but has some trust in their recommendation (Megan Mosley, 2018). Due to no previous relationship, hence lower conversion rate (Robin Khokhar, 2018).
Referral marketing, on the other hand, works for people who have an existing relationship such as friends and family (Megan Mosley, 2018). Referral marketing focuses mostly on client engagement. It entails establishing a strong relationship with your clients to a level where they are comfortable that the item you are selling is worth sharing with their relatives, friends or workmates (Robin Khokhar, 2018). The trust between the two individuals is what leads to the successful referral occurring (Megan Mosley, 2018).
4. Types of Rewards
Affiliate programs are most likely to give out cash incentives. Cash incentives are commonly a percentage of each sale (Megan Mosley, 2018).
In contrast, incentives for a referral program are usually in the form of discounts, coupons, or products. Normally, users can send a referral code to their friends via email, or through social media posts (Megan Mosley, 2018).
5. Coverage
As an affiliate network has a pool of publishers who can promote a lots of brands on their website, therefore affiliate marketing can reach a wider audience that referral marketing might not normally reach. The scope for finding a new audience is huge (4 Key Differences, n.d.).
Meanwhile, there is usually a limit to the amount of people an individual can reach with referral marketing, because they are only telling people they know and their associates (4 Key Differences, n.d.).
6. Conversion Rates
The conversion rates in the referral program are quite higher compared to the affiliate program. This is due to the fact that some level of trust that has already been established in the referral program. A person refers to his relative who has a strong belief in a service or product.
Read more:
1. What's Affiliate Marketing ?
2. Referral Marketing
3. Why Word of Mouth Marketing Is Important ?
In affiliate marketing, there is no relationship between the two people. The goal of an affiliate marketer is to get as many successful referrals as he or she can. The person clicking on the affiliate link does not necessarily know the affiliate personally but has some trust in their recommendation (Megan Mosley, 2018). Due to no previous relationship, hence lower conversion rate (Robin Khokhar, 2018).
Referral marketing, on the other hand, works for people who have an existing relationship such as friends and family (Megan Mosley, 2018). Referral marketing focuses mostly on client engagement. It entails establishing a strong relationship with your clients to a level where they are comfortable that the item you are selling is worth sharing with their relatives, friends or workmates (Robin Khokhar, 2018). The trust between the two individuals is what leads to the successful referral occurring (Megan Mosley, 2018).
Affiliate programs are most likely to give out cash incentives. Cash incentives are commonly a percentage of each sale (Megan Mosley, 2018).
In contrast, incentives for a referral program are usually in the form of discounts, coupons, or products. Normally, users can send a referral code to their friends via email, or through social media posts (Megan Mosley, 2018).
5. Coverage
As an affiliate network has a pool of publishers who can promote a lots of brands on their website, therefore affiliate marketing can reach a wider audience that referral marketing might not normally reach. The scope for finding a new audience is huge (4 Key Differences, n.d.).
Meanwhile, there is usually a limit to the amount of people an individual can reach with referral marketing, because they are only telling people they know and their associates (4 Key Differences, n.d.).
6. Conversion Rates
The conversion rates in the referral program are quite higher compared to the affiliate program. This is due to the fact that some level of trust that has already been established in the referral program. A person refers to his relative who has a strong belief in a service or product.
Read more:
1. What's Affiliate Marketing ?
2. Referral Marketing
3. Why Word of Mouth Marketing Is Important ?
Edited by: 浪子
Bibliography
Oliver Christopher Gomez. (2018). Marketing: How Affiliate Marketing Is Changing the Game. Retrieved from http://www.theedgemarkets.com/article/marketing-how-affiliate-marketing-changing-game
Rebecca Lake. (2018). Make Money With Affiliate Marketing. Retrieved from
https://www.investopedia.com/personal-finance/affiliate-marketing-can-you-really-make-money/
Richard Lazazzera. (n.d.). Referral Marketing 101: 7 Tactics to Launch Your Own Referral Campaign. Retrieved from https://www.shopify.com/blog/15679636-referral-marketing-101-7-tactics-to-launch-your-own-referral-campaign
Amity Kapadia. (2015). Affiliate Marketing vs. Referral Marketing: What’s the Difference? Retrieved from https://www.getambassador.com/blog/affiliate-vs-referral-marketing-whats-the-difference
https://www.investopedia.com/personal-finance/affiliate-marketing-can-you-really-make-money/
Richard Lazazzera. (n.d.). Referral Marketing 101: 7 Tactics to Launch Your Own Referral Campaign. Retrieved from https://www.shopify.com/blog/15679636-referral-marketing-101-7-tactics-to-launch-your-own-referral-campaign
Amity Kapadia. (2015). Affiliate Marketing vs. Referral Marketing: What’s the Difference? Retrieved from https://www.getambassador.com/blog/affiliate-vs-referral-marketing-whats-the-difference
SaaSquatch. (2016). Referral Marketing vs Affiliate Marketing – What’s the Difference? Retrieved from https://www.referralsaasquatch.com/referral-marketing-vs-affiliate-marketing/
Neil Parker. (2017). Affiliate vs Influencer vs Referral Programs. Retrieved from https://www.buyapowa.com/blog/affiliate-vs-influencer-vs-referral-programs/
Robin Khokhar. (2018). 3 Key Differences Between Affiliate and Referral Marketing. Retrieved from https://www.trickyenough.com/differences-between-affiliate-and-referral-marketing/
Neil Parker. (2017). Affiliate vs Influencer vs Referral Programs. Retrieved from https://www.buyapowa.com/blog/affiliate-vs-influencer-vs-referral-programs/
Robin Khokhar. (2018). 3 Key Differences Between Affiliate and Referral Marketing. Retrieved from https://www.trickyenough.com/differences-between-affiliate-and-referral-marketing/
The Difference Between Affiliate Marketing and Referral Marketing
Reviewed by 浪子
on
December 25, 2018
Rating:
Reviewed by 浪子
on
December 25, 2018
Rating:
