Many people mistake referral and affiliate marketing for each other. While they are both growth strategies that share some similarities, they are fundamentally different in how and why they are executed. Depending on the goals and structure of a business, they may be better suited to one approach over the other. Read on for an overview of how these approaches to growth and customer acquisition differ.
Referrals, also known as referral marketing or refer-a-friend campaigns, are a marketing strategy which revolves around the idea of the good old word-of-mouth marketing. If a business sells something which people love to recommend, it can encourage customers to make recommendations more often in a way that benefits all parties involved.
Referral marketing software like Talkable makes it possible for businesses to incentivize customers to share their personalized referral links with friends and family, use customized messages and designs, as well as analyze and improve referral campaigns just as one would with any other managed marketing channel.
Because people typically trust their peers’ recommendations more than marketing and advertising from brands themselves, referral marketing can be highly effective. By tapping into real social circles, brands can empower customers who already love a product to share that excitement with their friends. New customers who enter a brand’s ecosystem have the opportunity to participate in referral programs if they also enjoy the product, further extending the brands reach exponentially.
Let’s look at how referral campaigns work step-by-step:
Affiliates are people who earn money through their own websites or as independent marketers. They place either ads or other marketing content on their websites or run paid advertising campaigns that lead to an online store or sales pages. This is typically more of a broad approach to attracting new customers, rather than a targeted one.
Affiliates’ motivation to promote any business is solely money. They get paid for sending customers to a website that belongs to their partner. In other words, starting an affiliate program is similar to outsourcing marketing campaigns to hundreds of independent contractors.
The challenging thing about affiliate marketing is that (in most cases) anyone can participate in the program. This means that a business will not have much control over where and how their products are advertised. When trying to build a reputable brand that will last, this marketing channel needs to be approached carefully.
Now that we know how each type of marketing program works, let’s compare their pros and cons.
|Referral marketing||Affiliate marketing|
|Who does the
|Verified customers||Any independent marketers or webmasters who enter an affiliate agreement|
|Who do they promote to?||Their network, friends, family, and coworkers||Whatever audience they have access to|
|How they promote?||Share their experience and recommendations via social media, emails, messengers||Paid ads, content marketing, spam|
|What’s their motivation?||To share good products with people who’d love them too and to get their own discounts||Money|
|Easy to control?||Yes||No|
While both affiliate and referral programs have their place, we believe that referral marketing can provide higher quality long-term results for the right type of business. If customers are already acting as ambassadors for a brand, it is a great strategy to incentivize that behavior to increase its effectiveness.Thinking about what referral program software to choose? We can help you with that! Contact us here.