In this article
With surging ad costs and data privacy concerns, word-of-mouth marketing has become more valuable and trusted. We’ll help you understand the nuances and figure out which works best for your brand right now.
Simple definitions: Referral vs affiliate vs influencer
Let’s start with simple definitions:
A referral program offers your existing customers a small referral incentive to share about your brand. The referred friend also gets a small discount when they buy.
An affiliate program happens when you partner with a content creator to create sales-oriented content. Affiliates typically make a commission on sales generated through their content. Audiences don’t get a discount but instead use the affiliate link to support the content.
An influencer marketing campaign involves working with influencers to share content with their followers. Typically, influencers get paid upfront to make a one-off post about your brand but there are also other forms of collaboration.
It looks like there are plenty of overlaps but each strategy serves a different need. Let’s ask some key questions to examine the nuances:
Referral vs affiliate vs influencer: An in-depth comparison
1. Who and what are you paying for?
- Through a referral program, you’re rewarding your existing customers for sharing their positive experiences with your brand.
- With affiliate marketing, you’re paying content creators—reviewers, bloggers, YouTubers, podcasters—to create marketing content about your products.
- With influencer marketing, you’re paying the public figures who have cultivated a following on one or more social platforms for access to their audience.
It’s possible to be all three—a customer advocate, a content creator, and an influencer at the same time. For example, Kait Bos is a happy customer and referral advocate for Christy Dawn but she also creates content about other brands (with affiliate links) and has also cultivated a following as a fashion influencer.
2. What are the pros and cons of each?
Referral programs are great for authenticity and sales. Since it’s your happiest customers sharing about your brand to their friends, there’s a real personal connection—and that can strongly influence buying decisions.
Referral programs are also quick to set up and launch since most of the processes can be automated by referral marketing software. After the initial set-up, there’s generally no active management needed, since it’ll be your customers figuring out how to sell your brand.
The biggest disadvantage of a referral program is that it is less scalable than an affiliate program or influencer marketing. You can find more affiliates or sponsor more influencers. But you can’t directly buy more customers. You could, however, encourage more customers to refer their friends by increasing your referral incentives.
Affiliate programs are perfect for creating marketing content for your brand. Your affiliates are incentivized by sales, so they become both salespeople and content marketers for your brand. And since affiliate marketing is an ongoing relationship, the right affiliate can be a reliable, consistent source of traffic and sales.
Affiliates also have a niche audience they’ve cultivated for their content, which means you can reach specific, targeted audiences by choosing the right affiliates. For example, Renogy’s solar panels have been popular with van life travelers but by reaching out to a boat life vlogger, they reached a new market of yacht owners.
On the other hand, affiliates may work with many brands, including direct competitors in your niche. This is especially true for review sites and unboxing channels.
Smaller teams may also find it difficult to manage affiliate programs because of the workload required in constantly identifying and recruiting new affiliates and providing existing affiliates with fresh content and collaterals.
Influencer marketing campaigns are amazing for reach and brand awareness. You get instant access to an influencer’s following overnight.
You can also scale up and down the scope for each campaign by working with different tiers of influencers, from world-famous superstars like Cristiano Ronaldo or campus student vloggers.
The right influencers can also elevate the image of your brand by associating their street cred/suave charm/wholesome positive energy with your brand. For example, Christy Dawn added a bit of Hollywood glamour to the brand through collab pieces with famous actresses Emily Ratajkowski and Leighton Meester.
The flip side of influencers’ amazing reach is that their following may be too diverse; some people follow famous people just because they are famous. For a merchant, that means that the number of potential customers is only a fraction of the total number of followers. And since influencers are paid for posts, not sales, they have little incentive to drive sales.
3. What size of business is each great for?
Referral programs are great for brands who have found product-market fit and are regularly growing their customer base but not so good for brands who are just starting. Small-to-medium businesses and bigger brands can all benefit from referral marketing programs.
Affiliate programs work well for brands at all stages of growth looking to create more marketing content. Even smaller marketing teams can work with agencies or affiliate networks to manage the campaigns.
Influencer marketing campaigns are amazing for brands at all stages of growth looking to reach broader audiences, whether it’s global brands who can capitalize on the increased reach and attention, or smaller brands looking to start building an audience.
4. What are the costs for each?
Referral programs are relatively cheaper to set up and maintain since modern referral marketing software automates most of the processes. Referral incentives are also usually small cash rewards or affordable store discounts, which also get customers to buy again.
Affiliate programs are medium to high cost, since affiliates may require free products for trial, will take some investment to recruit, and are paid a commission on sales.
Influencer marketing campaigns generally cost the most because influencers usually want to be paid upfront for their posts. But you can adjust the cost of your campaign by working with influencers with fewer followers.
Which one is right for your brand right now?
Now that we have a clearer picture of what each type of campaign can do, it’s time to ask which one works best for your brand right now. Here are five questions to consider:
1. Where is your biggest marketing bottleneck?
If your bottleneck is awareness: Influencer marketing or affiliate program > Referral program
- Influencers have built up large followings over time, and they can offer you instant access to improve your reach.
- Affiliates can also promote your brand to their audiences, but they may take time to produce the content.
- Customer advocates tend to refer within their social circle, so it does improve your reach but in a more limited way.
If you need help with consideration or conversion: Affiliate & referral programs
- Affiliates create informative, persuasive content to earn commissions, so they can help with educating customers on the benefits of your brand. Most review sites and YouTube reviews fall into this category and work with many brands on affiliate marketing.
- Advocates make a referral by sharing their personal experiences and often make recommendations to specific people. This can heavily influence the buying decision of customers.
If you need help with retention or advocacy: Referral programs
- Happy customers make great brand advocates, and when they get their referral reward, they’re more likely to buy again from your brand.
Where is the bottleneck in your marketing funnel?
2. What type of product do you have?
- If your product is accessible and needs no explanation, influencer marketing works best. Products like apparel or toothpaste are relatively straightforward and can be purchased by anybody.
- If branding is key to your product, influencer marketing or an affiliate program is better. For products like athleisure wear (e.g. Gymshark) or luxury items, the public image of the influencer/affiliate helps distinguish your brand.
- If your product has unique features or needs to be experienced, affiliate or referral programs work best. Affiliates and advocates can take the time to review and share their personal experiences, especially in matters of personal choice like underwear (e.g. Parade) and nutritional supplements (e.g. Rae Wellness).
- If your product has a strong community, affiliate or referral programs work better. Differentiated audiences like yoga fans (e.g. Alo Yoga) or mums of small children (e.g. Riff Raff & Co.) mean that related content and personal recommendations work better.
3. How do your customers shop?
- If your customers tend to shop while browsing social media, are influenced by celebrities, or make impulse purchases, influencer marketing works better. For example, Alo Yoga sponsors many influencers and has landing pages where you can buy products you saw on Kendall Jenner’s social feed.
- If your customers like researching between several brands, or watching review content, an affiliate program works better. This is also true if your customers are looking for specific features. For example, people looking to install solar panels on their van will watch this RV install video, featuring Renogy solar panels.
- If your customers trust personal recommendations and will read many reviews before buying, then a referral program may work better.
One example is skincare products, which affect people with different skin types differently. For example, this review of Alo Glow skincare would make a perfect referral recommendation:
People with sensitive skin who work out might enjoy this product
4. Do you have a small customer base?
If you have a small customer base, you will see limited returns from a referral program.
Otherwise, all three—referral, affiliate, and influencer—will work for your brand.
5. What is your budget?
Another important consideration is how much resources you have to invest in these marketing campaigns, in terms of both time (manpower) and money.
- TIme budget: Referral program < Influencer marketing < Affiliate program
Referral marketing requires the least time to set up and keep running, as modern referral marketing software automates most of the processes.
Affiliate and influencer marketing requires a much higher investment of time upfront, because of the effort needed to find affiliates or influencers to work with, provide a brief, and coordinate their posts.
Affiliate marketing also requires an ongoing investment of time to monitor affiliate content and provide them with new materials and collaterals to create new content.
- Cash budget: Referral program < influencer marketing or affiliate program
Referral marketing can be set up cheaply with software, and incentives are relatively cheap.
Affiliate and influencer marketing can cost anywhere from zero to millions of dollars, depending on the size of the audience or following. In general, affiliates and influencers will want upfront payment, whether in cash or products in kind. The cost can also increase if you use an affiliate or influencer marketing agency, who can help with the management.
Have your cake and eat it too: How some brands use several in parallel
Let’s end the article by taking a look at brands that rely on two or all three of the word-of-mouth marketing campaigns mentioned.
IPSY Cosmetics: Referral + Affiliate + Influencer
IPSY is a beauty subscription service that delivers you a monthly Glam Bag of skincare and cosmetic products, personalized to your preferences.
IPSY incentivizes subscribers with IPSY points for successful referrals, which can be redeemed for free products. The brand also runs an affiliate program for content publishers to ensure a steady stream of Glam Bag reviews and unboxing videos. Finally, the brand elevates the brand by collaborating with influencers like Khloe Kardashian, Huda Kattan, and Halsey on limited-edition Glam Bags.
Instead of your regular Glam Bag, you get curated items selected by Halsey.
YouFoodz Meal Deliveries: Referral + Influencer
YouFoodz is a meal subscription service that makes healthy eating easy, with ready-made meals delivered to your doorstep.
Since food is experiential, you’re more likely to trust a personal recommendation from a friend who has tried it, which is why YouFoodz invested in their referral program. To complement this, the brand also worked with many influencers to reach new customers across every demographic.
Baronfig Stationery: Referral + Affiliate
Baronfig offers classic productivity tools: custom journals, writing pens, and carrying accessories.
Once again, we have an example of a product with features that need to be experienced to be understood. Baronfig works with sites like Packhacker to review new products while also running a simple Give $10, Get $10 referral program.
One customer loved the brand so much he reviewed it on his YouTube channel—remembering to share his referral code, so he could buy more Baronfig.
Now that you've read through our thoughts on referral, affiliate, and influencer marketing, it's time for you to weigh out what makes the most sense for your brand at this time.
If you're interested in influencer marketing, we've recently pushed out a new initiative to help small-medium brands get authentic video posts from suitable influencers—without the crazy upfront fees and tedious coordination work. Learn more here.