Affiliate Marketing vs. Referral Marketing: Which Drives Better Results?

Affiliate Marketing vs. Referral Marketing: Which Drives Better Results? Affiliate and referral marketing are often confused with one another. But they have significant differences. These differences can lead to very different results when it comes to marketing.

Which approach should you use for your marketing? What’s the difference between affiliate and referral marketing? And why does it matter?

Affiliate Marketing vs. Referral Marketing: Which Drives Better Results?
What is affiliate marketing?

Affiliate marketing works like this: The brand partners with an “affiliate”. Often this affiliate will be an influencer, or someone with the kind of audience and reach that the brand could benefit from.

The affiliate works to promote the brand and/or particular products by leveraging their platforms. Unlike traditional sales operatives, who rely on tools like your outbound call center software to understand and reach leads, affiliates connect with their own, pre-built community using content marketing, reviews, and so on.

Using apps like Goaffpro, your affiliates can gain sales and get paid on a pay-per-conversion basis. Ideally, brands will connect with affiliates who have already built up a trusting relationship with their audiences. These audiences will believe affiliates when they give product positive reviews and will click through to buy.

What is referral marketing?

Referral marketing is similar to affiliate marketing, but instead of influencer “affiliates,” the brand uses its customers.

Typically, it works like this: A customer is given a referral link to pass to friends, family, and anyone else who could benefit. When someone converts via their referral link, the customer is given a reward such as cashback, a discount, or a gift.

The effectiveness of referral marketing depends on what you’re trying to sell, who you’re trying to sell it to, and (here are the wild cards) the strength of both your customers’ connections and their eagerness to promote your brand.

Have a look at how you can develop a long-term strategy for sustainable affiliate marketing income

What are the benefits of affiliate marketing?
What are the benefits of affiliate marketing?
Low overheads

Affiliates typically do their marketing, and you only have to pay per conversion. This means you aren’t spending a cent on marketing that doesn’t directly bring in new customers.

Even if (as you’d hope!) your affiliate brings in thousands of conversions and you pay them well for each one, you are still paying far less in overheads than you would have done for a self-run marketing campaign.

Greater reach

Unlike referral marketing, which gives you access to close colleagues, friends, and family of customers, affiliate marketing gives you access to the ready-made, large audiences of popular influencers and publishers. 

Many of those audience members may share the marketing with their audiences, pushing your reach even further.

Better targeting

You don’t have much control over who your referral customers share their referral links with. You hope that they share it with good leads, but there’s no guarantee.

With affiliates, it’s a different story. You can carefully select affiliates based on their content, values, and audiences. By partnering with affiliates who understand your industry and have audiences matching your target demographics, you can get highly targeted marketing at a very cost-effective rate.

More detailed analytics

Unlike referral marketers, many affiliates will have sophisticated analytics tools that they can bring to bear on their campaigns. They may even have remote management tools you can utilize, or be willing to let you sync your remote monitoring tools to their campaign. This allows you to monitor their performance in real-time.

Overall, you are much more able to use tools like dashboards and sales reports with affiliates, especially if you work through a sophisticated affiliate platform like GoAffPro.

What are the benefits of referral marketing?
What are the benefits of referral marketing?
Potential for greater customer retention

Referral marketing helps build a closer bond between the customer and the brand. When you give customers referral links, you’re not just incentivizing them to bring more customers in. You’re also involving them directly in your brand operations.

People feel connected to things they’re involved with. So, by giving your customers referral links, you can bring in new customers and simultaneously boost the loyalty and retention rate of your existing customers.

Great for non “influencer-friendly” products

Referral marketing is useful for products that can’t easily be turned into glossy Instagram posts. For example, if you sell domains and want more customers to buy .ai domain names, you might struggle to find an affiliate who could generate a lot of sales through their usual methods. 

But, by giving referral links to your existing customers, you can leverage their more direct and personal connections. For example, when a colleague asks for domain advice from one of your customers, they can use their referral link to direct them to you.

Cost-effective

Sure, the rewards you give your customers for referrals are a bit of a loss-leader. But the new customers you stand to gain make it worth it. 

Referral programs can be a very cost-effective way to bring in new leads without spending huge amounts on sales and marketing. Even if you do have to make the occasional voice call to convince an uncertain customer, you’re still getting much better ROI than you would from bringing in a lead via conventional sales calls.

Easy tracking

It’s easy to track new leads and where they came from using referral links. Tracking is baked into the concept, as it’s via tracking conversions that customers get their referral rewards.

It makes it easy to generate progress reports and monitor your program’s ROI.

Affiliate marketing vs. referral marketing: which will give you the best results?

Both affiliate and referral marketing have advantages and disadvantages. Affiliate marketing gives you access to a larger audience and can help you run sophisticated campaigns for relatively low output. It is especially true if you use a platform like GoAffPro to work with your affiliates.

That said, affiliate marketing isn’t the right choice for every situation. Some products, services, and campaigns benefit from the more direct and personal approach of referral marketing. 

Each approach will get you the best results in different situations. So, think hard about which approach will most benefit your campaign when you devise your campaign strategy.

Want to build an affiliate program for your store? With GoAffPro, you can easily set up a program for your store. Check out our app: GoAffPro

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