Affiliate vs Referral programs: a comparison
Partnership programs are an incredibly powerful channel to grow your business, revenue, and brand awareness.
Two out of three customers say recommendations affect their buying decisions ( source), while millennials are 247% more likely to be influenced by blogs or social media compared to traditional advertising (source).
In this article, we’ll break down the differences between the two most common partnership programs: affiliate and referral.
| Affiliate | Referral | |
| Partner type | Thought leaders, customers, brand ambassadors, etc. | Customers |
| Rewards | Monetary | Non-monetary (credits, discounts) |
| Reward recurrence | Recurring, usually monthly | One-off, immediate |
| Resources to be provided | Referral link, partner portal, marketing materials | Referral link |
| Audience reach | Online audiences (social media, websites, blogs), networks | Friends and family |
| Audience engagement (trust level) | Lower | Higher |
| Business goal | Customer acquisition | Customer retention |
| Partner needs | Higher | Lower |
Affiliate programs
Affiliate programs reward people for selling your product. Anyone can become your affiliate partner: customers, influencers, bloggers, review websites - you name it. Affiliate marketing is performance-based: more effort into promoting your product leads to more sales, which means bigger rewards. The rewards are usually monetary.
As a program owner, you need to provide your affiliates with a partner portal, where they can track their performance, access marketing materials, and manage their payouts.
Reward example: 20% commission for the first 24 months for every purchase made by affiliated customers.
Referral programs
Referral programs are geared toward your existing customers. Typically, a customer will receive a referral link upon signing up or purchasing your product. By sharing the link and inviting their friends and family to try out the product, they get a one-time reward. The reward is often non-monetary, such as credits or discounts.
Even though your customers will usually have a smaller audience reach compared to an affiliate, the engagement, and trust level is much higher - nothing beats a personal recommendation coming from a friend!
Reward example: A $20 credit for every new customer referred to the business.
So which one should you choose?
Both affiliate and referral programs have their strengths and should be considered as possible revenue channels for any business. Here are some of the questions that should be answered when deciding:
- Company goals: are you focused on customer acquisition or customer loyalty and retention?
- Maintenance capacity: how much time can be dedicated to working with your partners?
- Compensation means: are you comfortable with paying your partners money at this point, or would you prefer non-monetary options?
Whether you pick one or decide to have both, Partnero makes running partnership programs a breeze. Explore our features here.