Affiliate Marketing vs. Referral Marketing: See The Difference

Affiliate marketing vs referral marketing are the two most commonly used and just as often confused terms. 

We are sure you must have heard these two terms together while browsing the digital marketing landscape. So if heard and tossed around together, does it mean they are the same? 

Well, nope! Affiliate and referral marketing appear the same from the surface, but are actually different. While both marketing strategies have the same goal to boost sales, their paths are different. 

Curious to figure out how? Let us take you deeper into the affiliate marketing vs referral marketing difference. Here we go! 

What is Affiliate Marketing?

Affiliate marketing is a marketing strategy to boost sales by paying a commission to a third person for promoting your products or services. 

In affiliate marketing, a business pays people to promote their products which are called affiliates. Affiliates are mostly professional persons such as bloggers, social media influencers, or YouTubers. They promote your products or services in their own ways using special affiliate links. Whenever someone buys using that specific link, the affiliate earns a commission.

It’s a win-win marketing strategy for both affiliates and businesses. The main goal of an affiliate is to drive more new sales through their promotions in exchange for a commission on each sale they made. And that can also be tracked easily using affiliate marketing tools and WordPress affiliate plugins.

What is Referral Marketing?

Referral marketing is a marketing strategy to boost sales by letting existing customers recommend your product or service in return for rewards. 

In referral marketing, existing customers get unique referral links to share. Suppose a customer shares the referral link of your product with his friends and family members. And one of his friends buys the product, both get discounts, credits, or freebies. It’s more like word of mouth marketing strategy to build trust of new customers and encourage existing customers. 

Here, existing customers and new customers both get benefits, and the business gets more sales.

What are the Key Differences: Affiliate Marketing vs Referral Marketing? 

Still confused between affiliate marketing vs referral marketing? No worries! Here’s the quick comparison of the key differences between an affiliate marketing program and a referral marketing program.

Factor	Affiliate Marketing	Referral Marketing
Who Promotes	Affiliates like bloggers, influencers, or marketers	Existing customers who already use the product
Goal	Get more new sales through professional promotions	Build trust and boost sales by word of mouth
How It Works	Affiliates share links and earn commission per sale	Customers share referral links; both get rewards
Incentive	Commission per sale	Discounts, credits, or freebies
Trust Factor	Based on the affiliate’s influence and reach.	Based on personal trust and recommendations.
Cost for Business	Higher (commission payouts)	Lower (small discounts/rewards)
Focus	Expanding reach to new customers	Strengthening customer relationships

Affiliate Marketing vs Referral Marketing: Why People Confuse Them? 

Now you might be wondering if they have so many differences, “why do people still get confused between them?” Plus, when surfing the web, we’ve come across multiple articles and posts where people are not sure between affiliate marketing and referral marketing.

The answer is simple, Affiliate and referral marketing overlap! 

Yes! Affiliate marketing and referral marketing are the same, same but different. They both are performance based marketing strategies where the promoter earns a reward when they bring in new customers and sales. Plus, both of these persons rely on links and codes for the promotion. 

Moreover, even their goal are the same. More promotions =  more sales = more rewards!

However, these rewards can be different for both individuals. While affiliates get rewards in the form of commissions or, in simple terms, money, existing customers get rewards like discounts, credits, or freebies. 

Even the way they promote is also different. Affiliates promote products or services by professional channels such as blogs, websites, YouTube videos, or social media. This helps them get a wide range of audience and potential customers. 

Meanwhile, existing customers promote products by sharing the referral link within their circle only including family and friends. Thus, this boosts the word of mouth marketing strategy and increases the chances of more sales. 

Pros and Cons of Affiliate Marketing vs Referral Marketing

Now it’s time to look at both sides of the same coin. The pros and cons of each marketing strategy, the referral marketing, and the affiliate marketing. 

Pros and Cons of Affiliate Marketing

Pros of Affiliate Marketing: 

• Low setup costs by using affiliate marketing plugins, like AffiliatePress.
• Less investment means less risk.
• Pay only for the real sales, clicks, and leads only.
• Broad and wide market reach.
• More network of affiliates can boost brand awareness.
• Scalable and flexible with more affiliates.

Cons of Affiliate Marketing: 

• Less control over branding.
• Risk of affecting brand reputation due to some poor affiliates.
• High competition as many affiliates target same customers.
• Needs software or a WordPress affiliate plugin to manage.

Pros and Cons of Referral Marketing

Pros of Referral Marketing:

• Better conversion rates due to more trusted customers.
• Boosts customer loyalty and retention rates.
• More reach from word of mouth marketing.
• Cost effective due to small incentives such as discounts or freebies.
• Builds trust of both existing and new customers.

Cons of Referral Marketing: 

• Needs a good number of existing customers.
• Slower growth than affiliates as not continuously promoted.
• Difficult to scale quickly.
• Not all customers would be interested or aware of your referral program.
• Not easy to track and manage accurately.

Which One Should You Choose: Affiliate or Referral?

The truth is, one shoe will not fit all. There’s no one “Best” marketing strategy that works for all. It depends on your business type or your product. 

But mostly, it’s recommended to choose affiliate marketing if you want your online business to grow and scale faster. Or maybe if you don’t have a big customer base or a new online business, then also affiliate marketing is the best choice. 

Furthermore, go with referral marketing if you already have a strong customer base. Or simply looking for cost effective or word of mouth marketing. 

However, what we recommend is to get the best of both. 

Yes, you can start both affiliate and referral marketing programs to get the pros of both sides. It is a smart hybrid strategy which many popular websites and online businesses do. 

You get the best of both worlds! Your affiliates work and promote your products to a wide range of potential customers, while your existing customer recommends your products to their inner circle, building more trust. 

Here’s the best referral and affiliate website example using this smart hybrid strategy. 

Dropbox – the best example of this smart hybrid strategy, leveraging the best of both affiliate marketing and referral marketing. 

Dropbox has grown at lightning speed by offering 500MB of free storage per referral for its basic plan.

At the same time, Dropbox expanded its reach by running an affiliate program through Impact & PartnerStack, where bloggers, social media influencers and SaaS reviewers can earn commissions for boosting more sales. 

Dropbox is a real-life example of our smart hybrid approach by using both affiliate and referral marketing.

FAQs

Is referral marketing the same as affiliate marketing?

No, referral marketing and affiliate marketing are different marketing strategies. They both are performance based marketing strategies, yet different.

What is the difference between affiliate program and referral program?

In a referral marketing program, a business encourages its existing customers to recommend their products to family and friends. Meanwhile in affiliate programs, a business attracts or hires affiliates to promote their products in exchange for commissions.

Is referral marketing worth it?

Yes, of course! Referral marketing is worth your time if you have a large and strong customer base. It’s a win-win marketing strategy for everyone involved. The business gets more sales and referrals, and new customers get discounts. 

What are some real-world examples of affiliate and referral marketing?

Here are some real world examples of online businesses using both affiliate and referral marketing:

• Dropbox
• Amazon
• GetResponse 
• YoloFoods
• Shopify
• Semrush

Can a business use both affiliate and referral marketing together?

Yes, Absolutely! A business can use both affiliate and referral marketing together. By combining these two best marketing strategies, you can grow your online business much more efficiently.

Other Helpful Articles:

• Digital Marketing vs. Affiliate Marketing: Which is Better?
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