There are many ways to approach digital marketing for brands, businesses, e-commerce stores, and B2B merchants, and it takes a lot of research to find the one that works best for your company.
In this research, you are likely to come across referral marketing and affiliate marketing programs. Although the two are often confused, they have distinct differences in intent, strategy and technique. However, both can lead to significant increases and growth in revenue and customer reach.
But which one is best for your business? This guide to both marketing strategies will explain what they are, how they work, and provide examples of businesses using each effectively. It will also help you decide which option is better for you.
What is Affiliate Marketing?
Affiliate marketing is about the collaboration a company undertakes to increase the recognition of its brand and products. It focuses on the professional relationship between an organization or brand and an affiliate, i.e. an entity or individual who has influence or influence over the target audience of the business.
The affiliate marketing industry will be worth eight billion dollars by 2022. Affiliates may include:
The organization creates a performance-based marketing model that pays the affiliate to promote the brand and brand products. A popular example of this is the use of social media influencers who share paid product reviews with their followers and other users.
Benefits of Affiliate Marketing
- Increases audience reach by leveraging the affiliate’s customer base.
- The affiliate is responsible for the marketing efforts of this campaign, so it’s an easy-to-manage process that requires fewer resources from the company’s marketing team.
- The audience and customers have a prior relationship with the affiliate, which makes them trust the promotion.
- The company can build its performance-based model based on the metric they need to increase (for example: if registrations are low, you can pay an affiliate based on the number of new registrations they bring).
Disadvantages of Affiliate Marketing
- The brand has less control over how the affiliate shares products, but they can indirectly influence this by providing the affiliate with clear marketing summaries.
- It can generate low-quality leads.
- More often than not, traffic generated through affiliate marketing has low spend purposes, hence low conversion rates.
- Connection with the reputation and image of another person or institution can be a disadvantage. Their bad press links are directly linked to you because you are affiliated with them.
Affiliate Marketing Examples
– Amazon (Amazon Partners)
– Target (Target Affiliates)
Check out Tapfiliate’s affiliate marketing features 👉👉
What is Referral Marketing?
Reference marketing functions around the brand network created between your existing customers, their connections and partners, and your business. Word of mouth and good customer reviews have long been important tools for brand and eCommerce marketing, and referral marketing grows your brand in line with these techniques.
Through referral marketing, you encourage existing customers to promote the brand with a rewards system that rewards them for every new user they bring to the company.
Benefits of Referral Marketing
- It leverages an existing customer base and human connections.
- It benefits from customer loyalty. Of course, you still need to provide the best to achieve this loyalty. For example, by making sure stock is available while saying you’re using the best Amazon inventory management software.
- The technique is simple, easy to implement, manage and change.
- New customers who encounter a business through referrals are more likely to refer others.
- The business retains control of all marketing efforts, which means full control over brand reputation.
Disadvantages of Referral Marketing
- Not as effective if you don’t have a large existing client base.
- It’s ineffective if your product or service still lacks quality, as customers won’t want to refer them to their network.
Reference Marketing Examples
Check out Tapfiliate’s referral marketing features 👉👉
Affiliate Vs. Referral Marketing – Similarities and Differences
People often confuse these two concepts, but they are definitely different. To better note the differences between referral and affiliate marketing techniques, let’s take a look at the factors that make them similar and different.
1. Redirect source
Both of these marketing techniques rely on social networks and the power of connections to build trust in the brand and its products. This is a similarity, of course. However, the type of connection and the types of people who bring in new customers differ in each program.
Referral programs are based on word of mouth recommendations and networks from existing customers of the brand. The brand uses its customers as marketing agents – usually each customer has a unique code to share, and each customer receives a reward for successful referrals.
Affiliate marketing is open to all individuals who generate income through brand and business promotions. This affiliate individual, then, is the referral source.
2. The dissemination method of the program
Due to the difference in referral resources, it makes sense that the sharing method will also be different.
Referral marketing relies on personalized and focused or tailored communication. For example, your existing customers’ email, social media, text, etc. You can enable them to share their special codes with their friends through a link they can add in various digital communication channels such as This personalizes this approach and makes it dependent on an existing special relationship. .
For affiliate marketing, the dissemination approach is often more general and general. Affiliate marketers post their special codes or links on their websites, social media accounts, blogs, etc. for their audience to access. This approach relies on the affiliate’s influence as a public figure.
The similar thing about expanding these programs is that both can be used over and over again to create sustainable growth. Consider how Uber Eats and AirBnB keep your promo code open for you to constantly share. Both methods can lead to long-term traffic and growth and drive customer engagement and loyalty.
3. The relationship of the business with the potential customer
Clearly, each technique relies on different dynamics between the source and the potential audience. Ideally, for referral marketing to work, the referral source and client must have a private or personal relationship that fosters trust.
While trust is also important for affiliate referrals, it has more to do with the expertise and reputation of the affiliate marketer. It may not be a direct personal dynamic, but the individual must have credible legitimacy to support their recommendations.
4. Types of rewards
Of course, both programs only work effectively if the referral source has an incentive to actively bring in new customers for your business. The type of reward a business offers is variable and depends on costs and what they think will be most beneficial to the referee.
However, referral programs often offer bonuses like discounts, gift cards, cashback, and free ASN shipping. These rewards can be for a referral customer, a new referral customer, or both.
Affiliate programs, on the other hand, often offer some form of cash incentive (i.e. payout percentages from each sale made as a result of affiliate efforts). Sometimes, affiliates get a free branded product or product discount in addition to cash out.
5. Customer lifetime value (LTV)
Lifetime value refers to the potential revenue a business can generate from a single customer over time. Customers who make one or two purchases only have low LTV and customers who consistently return a higher lifetime value.
In general, referral programs lead to long-term customer relationships, while affiliate programs are suitable for businesses that rely on shorter LTV.
Affiliate Vs. Referral Marketing – Which One Should Your Ecommerce Use?
Your eCommerce business should go for referral marketing if:
- Your brand already has highly satisfied and loyal customers, as you can leverage them to increase revenue from referrals.
- You are more comfortable maintaining control over all aspects of your brand’s reputation and marketing.
- Your brand wants to drive long-term customers and increased profits by using the gross margin formula instead of short-term peaks.
- Customers love your products and services, and you’re already making a good income from referrals.
- You need an easy-to-manage marketing strategy that doesn’t require a lot of resources or funds.
Your eCommerce business should go for affiliate marketing if:
- The e-commerce trends of your product or brand show spontaneous increases in demand.
- Your business tends to work towards quantity rather than quality.
- Your existing customers are not inclined to recommend your products.
- It will be easier for your business to have someone else take over one aspect of your marketing.
- Your brand does not yet have a loyal or established customer base.
Both affiliate and referral marketing techniques have benefits for your business, adding value and growth to your conversions and increasing your reach.
You can use this guide to decide which program is best for you, based on the direction your business wants to take in terms of your goals and KPIs, your risk assessment, and your relationship with your customers.
One last thing to keep in mind is that you can apply a combination of both of these marketing methods. It’s all about figuring out what your business needs and what works best so you can get your company where you want it to be.