Referral vs Affiliate Marketing, These are the Similarities and Differences!

Referral vs Affiliate Marketing, These are the Similarities and Differences!

An explanation of the similarities and differences between the two forms of digital marketing.

Within the scope of business marketing, there are two forms of digital marketing activities that are popularly carried out by business people today, namely referral marketing and affiliate marketing.

The two are often considered similar because they have a lot in common. The main similarity is that both encourage others to promote the brand with an incentive offer, through a program run by business people.

However, apart from that, the two are actually different. The most striking difference lies in the participants or program partners. Referral partners are customers who are already owned by the business, while affiliate partners do not have to come from business customers.

It doesn’t stop there, here’s a further review of the similarities and differences between the two forms of digital marketing. Read more.

Similarities of Referral and Affiliate Marketing
Some of the similarities between the two forms of digital marketing, namely referral marketing and affiliate marketing, include the following:

  • Relying on Public Trust

Basically, both referrals and affiliates are marketing strategies that rely heavily on opinions and testimonials, so they need to build trust and a positive reputation.

In the referral program, testimonials come from existing customers, so the product or service being promoted has definitely been tried yourself. Meanwhile, in the affiliate program, promotion can be done by anyone on a public platform.

  • Is a Repeatable Marketing

Both forms of marketing are repeatable marketing, which is intended to drive consistent business growth. Both rely on others to help bring in new leads and sales.

Referral programs build long-term relationships between businesses and customers, by rewarding them for their promotional efforts. Also, affiliate programs tend to easily attract new customers, with just a click.

Difference between Referral and Affiliate Marketing

Despite the similarities, referral marketing and affiliate marketing are two different things. The difference lies in several things, including the following:

  • Program Participants

The targeted party to join the referral and affiliate program held by a different business. In the referral program, the target is existing customers. Meanwhile, affiliates can be followed by anyone who is interested in generating income by promoting a business through the registration process first.

  • Relationship with Prospective Customers

The next difference lies in the type of relationship between the person doing the promotion and the potential new customer or the person who is the target of the promotion.

In referral marketing, the relationship between the two parties tends to be closer, for example, such as friends, family or closest colleagues who already know each other personally.

Meanwhile, in affiliate marketing, there is no direct relationship between the two parties. People who click on affiliate links do not need to know the affiliate partner personally, but usually retain certain beliefs. For example, followers or subscribers.

  • How to Promote

Referral programs usually take a closer promotional approach, for example via email, chat on WhatsApp, or face-to-face meetings. Meanwhile, the affiliate program approach is usually through common channels, such as websites, blogs or social media.

  • Reward Type

Rewards are the main driving factor in referral programs and affiliate programs. The rewards given themselves can vary greatly, depending on the provider of the referral program or affiliate.

In a referral program, the rewards provided are generally in the form of discounts, store credits, coupons, cashback, or gift cards. Meanwhile, affiliate programs usually offer cash-based incentives, in the form of a flat fee or a percentage of each sale.

  • Customer Lifetime Value (CLV)

CLV value or customer age refers to the value of a consumer to a business brand while being a customer. This value is influenced by the type of product or service the business offers.

With referral marketing, the resulting CLV value will be higher, because this program is based on the trust and loyalty of existing customers, so it has the potential to bring in new similar customers.

Meanwhile, with affiliate marketing, the resulting CLV value is lower, because this program focuses on bringing in new customers by making payments for each new customer. Affiliate programs tend to focus more on quantity and scale.