Here at QuickLinkt, we often get asked what the difference between affiliate and referral marketing is. While referrals account for 65% of all new business, the affiliate industry is set to grow to $4.5B by 2016 – so it’s no wonder there’s confusion. While there’s similarities between the two, there’s also clear distinctions. So to clear it up, we decided to do a run down of affiliate and referral marketing – and how they differ.
The Basic Definitions
Affiliate Marketing: Agents or partners (aka affiliates) send traffic to your website or new customers to your business.
Referral Marketing: A current client, customer or business connection recommends you to their friends and family, and often provides you with their contact information.
So…. What’s the Difference?
Just looking at these definitions, affiliate & referral marketing may seem to be pretty much the same …. They’re both based on people sending you new customers/clients. However, here’s the BIG differences:
- In Referral Marketing, the referred customer is known by the referral source. In Affiliate Marketing, the affiliate has no personal relationship with customers they send.
- Affiliates are paid commission for every customer/client they send. Referral programs can include rewards for making referrals, 2-way rewards for both the referrer and referree, or have no rewards.
- Affiliate partners are driven solely by financial gain, whereas referrals are based on personal relationships and trust.
- Affiliate commission rates typically start at 20% and increase to as high as 60% as success rates increase. Over time, the cost per new sale increases.
- With referrals, the cost per new sale decreases over time as the number of customers making referrals increases.
The Extra Benefits
While affiliate marketing has its uses, referral programs have additional benefits that make them a better long term solution. First, referred customers are far easier to close than those sent from affiliates because consumers are 4X more likely to buy when referred by family or friends. Better yet, referral programs increase loyalty among your current customers. The effects of referral programs also snowball over time because every referred customer becomes a source for new referrals. So while affiliates are useful for driving web traffic, if you want a marketing solution that builds your reputation, increases loyalty and decreases advertising costs over time, a referral program is the way to go.
If you’re interested in referral marketing for your business, check out how you can get started with QuickLinkt for free. It’s a great way to encourage, track and reward referrals – without breaking the bank.