Affiliate marketing and referral marketing are strategies that businesses use to achieve various goals. This includes growing their brand awareness, expanding their reach, and acquiring more customers.
If there’s one thing these approaches have in common, it’s that they involve working with other people to promote a business’s products and services. Need help deciding what’s better for your business? Keep on reading to learn the difference between affiliate vs. referral marketing!
What Is Affiliate Marketing?
Affiliate marketing is a type of marketing strategy that involves partnering with affiliates (individuals or other businesses) that can promote a business’s products or services to the market. These affiliates are rewarded for driving sales to a business with a commission. 💰
This is done through an affiliate link, which typically redirects you to a website or store where you can purchase the product being promoted or take a specific action. Once you make a purchase, the affiliate receives a commission.
Here’s an example: Let’s say you’re an online fashion retailer. You then reach out to fashion bloggers who want to earn by promoting your products. These affiliates create high-quality content (such as reviews and guides on styling tips) that mentions your products.
Readers who are intrigued by your products in their content will click on the provided affiliate link to make a purchase. The affiliate earns a commission on each sale made while you, the fashion retailer, grow your sales — thanks to their efforts! 😉
What Is Referral Marketing?
Referral marketing is a type of marketing strategy that relies on word-of-mouth recommendations from your existing customers, clients, or contacts (such as email subscribers, friends, and relatives).
It capitalizes on the trust and credibility that come with recommendations from people who already know you — and are satisfied with your products and services!
Here’s a scenario that uses referral marketing:
A pet food business owner decides to run a giveaway campaign to increase their customer base. They offer a prize that’s desirable to their target audience: a month’s supply of premium pet food! 🐕
To join the giveaway, followers of the pet food business are encouraged to refer others to sign up. The more referrals these people make, the higher their chances of winning and the more leads the pet food business gets!
Check out the video above where Wilco de Kreij, founder of UpViral, shares more about the difference between affiliate marketing and referral marketing.
Affiliate vs Referral Marketing: What Makes Them Different?
You’ve just learned some affiliate vs. referral examples. Now, the next step is to choose what’s more appropriate for your business.
Even though affiliate and referral marketing have their similarities, there are certain aspects that make them unique. Below are some differences to take note of:
Structure
Affiliate marketing involves:
- Affiliates or external partners who promote a business’s products and services
- A commission, which is often a monetary incentive given to affiliates in exchange for making a sale happen
- A target audience that’s made up of the affiliate’s followers (e.g. readers of their blog)
On the other hand, referral marketing involves:
- Referrers, who are usually the existing customers or fans of a business
- Incentives, which are given for each successful referral, such as discounts, free products, gifts, or other non-monetary rewards (e.g. experiential rewards)
- Referrals or leads who receive personal recommendations about a business’s product or service from referrers
Goal
The main goal of affiliate marketing is to promote products and services, get more leads, and drive more sales with the help of affiliates. As a business, you’re going to tap into their online presence and the audience they already have in order to reach this goal.
Given that affiliates are present in different markets and geographic locations, they have a wider reach. 🌍
On the other hand, referral marketing’s goal is to acquire new customers and drive more sales through word-of-mouth recommendations from an existing customer base. Not only that, but its goal is to also retain and engage existing customers by incentivizing them to refer their family and friends.
This can result in building a community with a stronger connection to the brand. ♥️
Learn more about the difference between customer acquisition and retention in this guide
Participants
In affiliate marketing, businesses partner with affiliates — such as individuals or other businesses — to promote their products and services in exchange for earning a commission.
Affiliates have built their following through their blogs, websites, social media pages, or email lists. Note that affiliates are typically not customers of your business, and the audience of these affiliates may or may not have existing knowledge of your business.
In referral marketing, participants are usually your existing customers who recommend your products or services to people they already know. They’re usually motivated by the feeling of satisfaction when they recommend you to others, along with the incentives you provide, such as free products, discounts, and other rewards. 🎁
Trust and Relationships
Trust in affiliate marketing focuses on the affiliate’s credibility and expertise in a certain niche (e.g. beauty influencers, authority figures in health and wellness, etc.). Followers value the opinion of these affiliates, trusting that they would promote products and services that are high-quality and provide real value. Affiliates and businesses often have a transactional relationship.
Meanwhile, referral marketing is all about building trust and relationships between the referrers and referrals. Referrers will only recommend a brand they trust to their family and friends.
On top of that, other people are more likely to believe the recommendation of someone they already know and trust. This can result in higher conversion rates compared to affiliate marketing! 📈
Strategies for Sharing (Getting the Word Out)
Businesses planning to implement affiliate marketing can reach out to affiliates through an affiliate program. This program should offer competitive commissions and incentives to attract more participants.
To get the word out about their program, businesses can create a dedicated landing page on their website, send out email announcements, promote on social media, or run paid advertising campaigns.
With referral marketing, businesses can motivate existing customers by also creating a program (called a referral program) and sharing it through email campaigns, social media posts, website landing pages, mobile apps, customer feedback surveys, and others.
As you can tell, the way it is shared is similar to affiliate marketing!
However, the difference is that referral marketing usually involves running giveaways and contests where participants are encouraged to refer others to earn a prize.
🤓 Pro Tip: To get the best of both worlds, it is also an option to implement a referral affiliate program. This involves incentivizing both existing customers and affiliates to refer new customers!
Examples of Referral Marketing
Based on what you’ve just learned, it’s obvious that referral marketing is the best choice if you want to strengthen the bond between your brand and your customers. You have greater chances of building a community of more engaged and loyal customers with referral marketing.
Thanks to UpViral, anyone can implement a referral marketing strategy to achieve their goals. Here are some real-life success stories to inspire you: 👇
Siddharth Pal's Giveaway: Succeeding Without Breaking the Bank on Prizes
Siddhart Pal is a dropshipping business owner who wanted to increase awareness for his business. He decided to use UpViral to run a giveaway with prizes worth $13,000. But here’s what’s amazing: he did it without spending a dime on the prize!
He collaborated with other businesses and affiliate managers that offer software products and online tools. He offered numerous prizes such as Semrush accounts, Rank Math Premium accounts, Whatsapp Chatbots accounts, and Canva Templates. 🔥
To join the giveaway, participants were asked to provide their email, share the giveaway with their friends, and complete other actions for extra points.
Siddharth promoted his 3-week campaign through Facebook ads. He also asked the businesses he collaborated with to share the giveaway, and built hype through email marketing. The result? More than 4,500 leads, enhanced brand awareness, improved sender email reputation, and stronger brand partnerships! 🔥
How Nina Franks Made 3,331 Leads and $4,900 in Beauty Brand Sales in Just 21 Days
Nina Franks owns a marketing agency that helps small to medium-sized businesses grow. At the time, she was working with an online skincare brand named Elixseri that wanted to grow its email list and generate more sales.
To achieve these goals, they implemented the “Hello Glow” campaign with the help of UpViral to give away a set of skin serums as the main prize. Additionally, 20 runners-up will earn a prize.
The rules are simple: participants enter their email. By sharing the contest on social media, they earn points! When someone signs up through a referral link, this would also give them more points and boost their chances of winning.
How to Get Started with Referral Marketing
By now, you’ve realized that referral marketing can help your business grow in a short time. Here are the steps to help you get started:
1. Establish your goals. List down what you want to achieve with referral marketing, whether it’s customer acquisition, brand awareness, or a sales boost.
2. Choose your rewards. Select incentives that are relevant and attractive to your target audience. This could be in the form of discounts, free products, gift cards, exclusive access to events, or personalized gifts. Watch this 5-minute video where Wilco reveals how you can get more leads in referral marketing using viral lead magnets! 🧲
3. Identify a referral method. Select a referral method that makes the process seamless for people sharing your campaign. The most popular way is by providing referrers with unique referral links that they can send others. When someone clicks on this link and signs up for your giveaway, the referrer wins points or an automatic incentive.
4. Create a referral program. Besides defining your goals and choosing your incentives, make sure to list down the guidelines, terms, and conditions of your referral program that your audience needs to know. To streamline the whole process, use UpViral.
5. Promote your program. This is where you make use of different marketing strategies to ensure that your referral campaign reaches as many people as possible. Read this guide on promoting a giveaway.
6. Monitor your referrals and improve your strategy! Monitoring and refining your referral program is important for its long-term success. Keep an eye on key metrics like your conversions and promotion channels that are most effective. Also, stay competitive. This means checking out what your competitors are doing with their referral programs.
Final Thoughts
At the end of the day, both affiliate and referral marketing are great strategies to use for your business. Since each approach is unique in its own way, think hard about what you want to accomplish (your goals and priorities) before making a decision.
But, remember, if you want to foster the loyalty of your existing customers and build a community based on trust and relationships — then referral marketing is the one for you! 😉
Got questions about using UpViral as your referral marketing platform? We invite you to see how UpViral works and check out our case studies.
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