An organisation may become engaged in affiliate marketing as it recognises it as a meaningful strategy to increase leads and sales volumes. But, how is affiliate marketing different from referral marketing? Distinguishing between the two can often be confusing, but there are clear differences, as well as pros and cons for both strategies.
What Do They Both Mean?
Affiliate marketing and referral marketing are both valuable strategies an organisation might employ to increase sales.
Affiliate marketing involves an affiliate promoting your products or services either on a website or blog, using links which are then clicked on and directed to your own website – hopefully, resulting in a sale. The motivation for the affiliate marketer is a financial one. The affiliate doesn’t know the people who are being driven to your site, and they will forward anyone on. Tech Radar has a great post on a beginner’s guide to affiliate marketing.
In referral marketing, a satisfied customer usually lets friends and family know about your products or services, and refers them through word of mouth. The customer already knows the person they are referring, and the motivation for them is personal and based on satisfaction. They may be offered some kind of incentive or reward for referring the person on. It’s a more complex process than affiliate marketing, and referrals operate in a wider way to communicate their satisfaction than affiliate marketers.
What are the Pros and Cons?
Affiliate marketing is a more costly strategy to implement than referral marketing. However, you are likely to get more results with affiliate marketing, as your audience is much bigger. And most organisations would find it hard to just rely on referral marketing.
Affiliate marketing is based on commission, where you pay an affiliate when they introduce someone who purchases your goods or services. There is often a more flexible approach to rewarding a referral than with affiliate marketing, which can make it a more attractive proposition for a business owner.
Referral marketing is often seen as a more natural and convincing method than affiliate marketing as it’s based on pure satisfaction. It’s more likely to generate longer-term customers than affiliate marketing. People who visit your website as a result of a referral will know more about your products or services than those who have been introduced via affiliate marketing.
An affiliate marketer will probably need to spend a significant amount of time marketing their efforts, writing user reviews and articles etc. and looking at ways to boost visitors to their site. In referral marketing, the referral is usually done by word of mouth, so there is no need to write reviews or engage in marketing efforts.
Referral marketing is based on personal contacts and a common relationship already exists. This can help bolster trust and enthusiasm for a product or service. Because there is no existing relationship between the affiliate marketer and the visitors driven to your website, it might take them longer to build this level of trust up.
In most cases, affiliate marketers should try out the products they promote so that they have an awareness of them. But, the reality is, referral marketers will have a closer connection with the product because they gained satisfaction from it. Many believe that this means you are more likely to a get a more accurate representation of a product through referral marketing than affiliate marketing. If an affiliate marketer is good at what they do then this won’t be the case.