Both Affiliate Marketing and Referral programs are pay-for-performance marketing methods in order to attract new customers. Although both are being used frequently and look very similar from the outside, there are some important differences between them of which (potential) Advertisers should be aware. Just to get the terms clear, in this article we call the company or individual that promotes the campaign in order to get a financial reward the ‘promoter’ and the person that he is promoting it to the ‘receiver’.

Below you can find a overview of the main similarities and differences:

Similarities Differences
Pay-for-performance No relation between promoter and receiver in Affiliate Marketing
Recommendation-based In referral programs promoters mainly promote what they like
Focused on driving new customers In Affiliate Marketing promoters are only focused on the financial rewards
Promoters can be companies and/or individuals that do not work for Advertiser.

So generally speaking for Advertisers from the outside it is the same thing. They have externals recommending their campaigns to their networks and they only have to pay for new customers/downloads/leads/installs or anything they want to promote.

Looking at the mechanics of how those recommendations take place there is a clear distinction on the why and how those promoters are communicating with the receivers.

  • In Affiliate Marketing the promoter has no relation with the receiver of the campaign where in referral programs there is a relation between the promoter and the receiver.
  • As in referral marketing there is a relation between the promoter and the receiver, the promoter generally promotes campaigns he likes instead of everything that he can make money on, in order to not damage his trustworthy reputation.
  • In Affiliate Marketing, the promoter promotes anything that he believes he can get financially rewarded.

Usually for Advertisers it makes sense to implement both Affiliate Marketing and Referral Marketing campaigns as both offer a unique opportunity to grow your sales and only paying for performance. However the impact of each program really varies per Advertiser.

Generally speaking the impact of a referral program on sales depends on the specifics of the campaign. Advertisers with a huge brand name and product that is socially accepted of promoting (think about fashion clothes) can get a huge boost of referral marketing. However the majority of Advertisers does not have the luxury of being a top A-brand or does not have a really cool product (think of anti-virus software) and the impact of referral marketing is rather small ad few users feel identified with the brand and don’t take the time and effort to promote it.

On the other hand most Advertisers can increase their sales with Affiliate Marketing as long as the financial reward is interesting for promoters and they connect with the right Affiliate Networks.