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affiliate program

What’s the Difference Between Affiliate and Referral Programs?

For any business that depends on a constant stream of new customers, the main concern is where to find new customers on a restricted operating budget. Of course, making efforts to hire sales staff or running an SEO or pay-per-click campaign are all traditional options. These solutions are also not affordable. So, as an online merchant, the two effective options to access more customers to buy your products are the affiliate programs and referral programs.

Many Magento marketplace site owners are actually are not aware of the difference between affiliate programs and referral programs. There is a misconception that both of these programs are one and the same. However, there is a wide difference between an affiliate program and a referral program. Understanding the key differences between these two programs can help online business owners decide on which program they must choose for growing their business.

Affiliate Programs

The main distinction between an affiliate program and referral programs is that an affiliate program is where the referred leads come from some affiliate which the merchant is not familiar with and as for a referral program is concerned, these leads will come from somebody the merchant knows personally.

By knowing the basic difference between these two programs, it is worth knowing the difference in the structure as well as the compensation involved in these two programs.

The structural difference between Affiliate and Referral programs

In affiliate programs, the merchant’s affiliates are mainly website owners who have existing traffic that interests the merchant’s offer. So these affiliates post a link on their website and direct traffic to the merchant’s offer. If someone uses the link to access your offer and buys the offer, then the affiliate gets commission by the merchant. And this payment is usually automatically done, because of the use of sophisticated technology that tracks the cookies of the visitors of the site. Even crediting of the sale performs automatically.

In a referral program, the referrer, however, is usually the merchant’s own existing customers. But normally, these referrers are not webmasters who can bring in a lot of traffic to the merchant’s site. These referrers are compensated with an offer to someone they know personally. The main focus is to promote customer satisfaction through good quality services.  This helps the customers to start referring the offers to others. The compensation offered is to encourage them to make efforts to get the lead for the merchant.

Read also: Magento Reward Points extension to improve customer engagement

Difference in Compensation

The compensation model employed in a referral program is quite simple when compared to that for an affiliate program. Usually, the compensation will be in terms of cash or a bonus reward or a discount on future purchases.
The compensation model in an affiliate model is usually based on an agreed percentage depends on the sales.

The affiliates can get compensated with other bonus incentives as well or prize if they are able to reach a certain amount of sales per month. In order words, the compensation model for an affiliate program can be very intricate but is definitely very flexible as merchants usually would like to encourage their best affiliates to try harder to grow the merchant’s business.

Relationship with ‘Referred’ Customers

Basically, the relationship of an affiliate refers to the customer, because they do not know personally who refers whom. And the affiliates simply send traffic based on demographics. Thus, the chance of conversion from a lead to a paying customer is very meager.

On the other hand, in a referral program, the referred persons usually have a strong relationship with the person they refer to the site and will try their best to explain your product with more enthusiasm. This can lead to a much higher conversion rate. The only issue in referral programs is that it usually does not bring in as much traffic. When compared to affiliate programs, the affiliates can bring in much more profit.

Conclusion

In short, both these types of programs are beneficial to growing an online business. No doubt, the affiliates will be able to bring in more traffic and sales. However, a good referrer can easily help to enhance the branding and reputation of the online business. Given a chance, they would even make good comments on social sites, which can possibly assist in more exposure and sales.

Using a mobile app builder tool enhances the possibility of reaching more number of customers. In turn, you benefit from the referral programs. Hence a store owner has to set up both an affiliate program and a referral program to get the best.

Sathish

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