Affiliate Vs Referral Marketing Which Is Right for You

In the world digital marketing, monetization and reports provide key insights on how one should go about attracting customers. Marketers and business owners become obsessed with these numbers and often every marketing cent is scrutinized.

While it is crucial to know where your budget is best spent, and carefully selecting how your business can get the best bang for its buck, this way of thinking can often cut you off from potential opportunities via other channels. When you're too performance related you often neglect certain channels, the two that often get the cold shoulder are affiliate and referral marketing.

Even though both referral marketing and affiliate marketing can become powerful channels on their own and contribute to the success of most organizations.

So what exactly are these all about? Why are they being ignored? Let's take a closer look at how the two differ, and why you can't have one without the other.

What is the difference between affiliate and referral marketing?

Affiliate In affiliate marketing, the affiliate does not know the referred customer personally and the primary reason for referring your brand is due to the financial motivation. Referral The referer advocates your brand to friends, family, followers on social media, their blog, or website and provides a greater sense of authority and a stronger relationship between the advocate and potential customer, very similar to what social media influencers have become.

How affiliate and referral marketing work

Affiliate

1. Affiliate signs up for merchant affiliate program
2. Affiliate uses an affiliate link in their marketing campaigns to drive sales to the merchant or service provider
3. Merchant tracks affiliate links all the way to final purchase and then pays out agreed on compensation

Referral

1. Merchant identifies a list refers or referrer had a positive experience with merchant
2. Referer links to the merchant via their friend, family or business network advocating merchants goods or services
3. A merchant can track referral links, traffic and sales and if they would like to reward the referrer

Pros

Affiliate

1. Your success is tied to their success
2. Your product margins or cost per lead may increase but you can keep commissions steady
3. Reaching audiences you would not normally have reached

Referral

1. Referral can reduce your sales expenses and you can reward refers ad-hoc
2. Referral customers are usually deeper in the pipeline and convert faster
3. Referral links improve your sites SEO

Cons

Affiliate

1. Affiliates can drive plenty of non-qualified leads in the hope of driving sales and spam customers
2. Affiliates can attempt grey route marketing and your brand, product or service could be misrepresented
3. Affiliate payout and admin will incur its own costs and management system

Referral

1. Referral traffic does not provide steady growth and can be volatile since it is not rewarded based on performance
2. Sourcing the correct referrals and then reaching out to them is a time-consuming process
3. If referral source comes from social media it is hard to track or differentiate between the social traffic you're already getting

Which channel is right for you?

Consider the following about your business

• If your business has the margin to play with to sustain commissions
• If your marketing is a performance-based
• If your product is B2B or/and consumer-targeted
• If you do not have a large in-house marketing team

If one or more apply to you, I would recommend opting for the affiliate route Consider the following about your business

• If your business has smaller margins
• If your marketing is brand based
• If your product or service is a social friendly and consumer brand
• If you have a large in-house marketing team

If one or more apply to you, I would recommend opting for the referral route. Whilst the digital age has completely transformed marketing in many ways, some of the principles remain the same. As fancy as affiliate and marketing sounds it is basically the online version of a salesman vs the online version of word of mouth, both have their merits and will bring in leads if done correctly.

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