2013 UPDATE: We explored this idea further in an infographic: Referral vs. Affiliate Marketing: What’s the difference? [Infographic]
“You guys do referral marketing? Isn’t that the one where affiliates do referrals for you?”
Not many people make a precise distinction between referral and affiliate marketing. After all, affiliates do refer customers to your business… right? Technically, affiliate marketing could be considered a subset of referral marketing.
In practice, though, referral and affiliate marketing are rather different ways of finding new customers.
Both drive new customers to your business through a group of people selling your product who don’t work for you directly (the advocates). This similarity is the reason that referral and affiliate marketing are often mistaken for one another.
But there’s something very different between the two that sets them apart.
The answer lies in the relationship between the advocate and the prospective customer.
In affiliate marketing, the advocate doesn’t know the prospect personally. It’s unlikely that they would go out for a beer after work or know the names of each other’s kids. And this changes the motivation for the endorsement being made. The advocate helping you make the sale in affiliate marketing is doing it for the financial reward involved.
“I’m going to refer this product to anybody I can so that I’ll get rewarded for it.”
In referral marketing, the advocate is recommending you to someone he or she knows quite well. This could be a college roommate or a co-worker.
So the big difference lies in the main relationship involved, you’d say. But this relationship makes all the difference in the world!
“I’ve found a great product or service that I want to tell my friends about because I believe that it will make their lives better.”
The reason for the referral is altruism and making referrals is a deeply satisfying way to connect with others.
Yes, there might be a discount or some other incentive thrown in to sweeten the deal. But this doesn’t change why it’s being done.
“I’m not going to wreck my reputation unless I think the recommendation will really help my friend.”
So there you have it. The core difference between referral and affiliate marketing is in the relationship between the two people talking about you.
The relationships in referral marketing are personal while the ones in affiliate marketing are financially driven.
This distinction leads to certain practical nuances that need to be considered when implementing the two forms of marketing. It also results in each having its own pros and cons.
But we’ll save that for a future post. For now, we’re content that there’s a stake in the ground to start from.
Read next: An Epic List Of 47 Referral Programs