Digital marketing efforts come in many forms, but there are two types of marketing initiatives that cause a bit of confusion: referral programs vs. affiliate programs.
What’s the difference between a referral and an affiliate? Which one is better for your business? We compare affiliate vs. referral programs to find out.
Referral programs vs. affiliate programs
What makes referral marketing different from affiliate marketing? Here are the main differences between affiliate programs vs. referral programs.
In a referral program, your existing customers share your brand with family and friends (people they know) to earn rewards.
Meanwhile, an affiliate partner does not have to be an existing customer of yours. Rather, an affiliate is a third-party content creator who shares your business on their channels and receives commissions on new sales. Affiliates must have an audience that matches your company’s target market. But many members of this audience are people the affiliate doesn’t know personally.
Now let’s take a deeper dive on what makes affiliate marketing different from referral marketing, and what similarities both marketing programs share.
What is a referral program?
A referral program offers existing customers an incentive each time they successfully refer someone they know to your company. The incentives vary from program to program – common incentives include one-time discounts, store credits, a gift card, or a service upgrade.
The key participant of a referral program is the customer (or advocate). The advocate shares a unique referral link with family and friends, which traces every referral back to them. When a referred friend makes their first purchase, the advocate earns the incentive as a thank you for bringing in the new business.
What is an affiliate program?
An affiliate program, on the other hand, compensates content creators (bloggers, influencers, brand ambassadors, and other partners) for any new customers they bring in. Affiliates place trackable affiliate links within their content. If one of their readers or followers clicks the affiliate link and makes a purchase, the responsible affiliate earns a reward.
Affiliate program rewards are called commissions, and are almost always cash-based. Affiliates could receive a flat fee commission payout for each sale, a percentage of the first sale, or a recurring percentage (if the product is a monthly subscription).
What’s the difference between referral and affiliate marketing?
To further understand the differences between affiliate programs vs. referral programs, and help you decide what work best for your brand, here are some defining factors.
1. The individual referring new customers
From the start, the individuals invited to join an affiliate program vs. a referral program are vastly different. The following table explains the difference between the two:
| Referral programs | Affiliate programs |
| Referral programs typically target current satisfied customers, fans, or brand advocates.
A form of word-of mouth marketing, referral programs give each customer a unique referral link and reward them for every successful referral (successful referral can mean a qualified lead OR a new customer). Advocates in a referral program already know and love your products, and want to share the awesome experience they’ve had. |
An affiliate can be any content creator interested in generating income by promoting another business (with a unique affiliate link to place in their content). Individuals apply to join the affiliate program or are contacted directly by the business.
Affiliates don’t have to be familiar with your products or services before they become affiliates. But if they haven’t used your products before, it’s a good idea to let them try your products for authentic promotion. |
2. The relationship with the potential customer
Another big difference between an affiliate program and a referral program is the type of relationship between the person who is referring (the affiliate or customer) and the person being referred to the business (the potential new customer).
| Referral programs | Affiliate programs |
| Referral marketing works best when there’s an existing relationship between the customer and the referral, so it leads to a more personal recommendation.
Successful referrals are usually friends, family, or colleagues. The existing relationship and trust between parties is what leads to a successful referral. |
In affiliate marketing, there’s no direct relationship between the two parties. The person who clicks the affiliate link doesn’t need to personally know the affiliate, although there is usually some degree of trust.
For example, subscribers to a YouTube channel, newsletter, or podcast don’t know the host, but they trust their recommendations based on the quality of the content. |
3. How the program is shared
The strategies for sharing these two types of reward programs are slightly different. Referral programs usually take a more direct approach, whereas affiliate programs rely on people landing on an affiliate page.
| Referral programs | Affiliate programs |
| Referral programs have a more specific, intentional approach. Most messages are sent to friends and family through direct channels, such as email, text, or social media messages.
This personal customer engagement usually results in a higher chance of the person making a purchase. |
Affiliate programs involve promotions on public channels, within related content the affiliate creates. It’s as simple as including a link on the affiliate marketer’s site, newsletter, or social media post.
This means that affiliate sharing has a wide reach: one affiliate link can reach a large audience all at once. |
What’s the difference between an affiliate link and a referral link?
Both affiliate links and referral links are used to track any new lead or customer/sale that comes from a program participant. As soon as an affiliate or customer signs up to your program, they’re given a unique link they can use to invite others to visit your website or product page. This link contains a unique code that traces sales made through the link back to the person who shared the link.
The key difference between affiliate links and referral links is where they’re shared. An affiliate link is published to the public, usually through a website, blog post, or social media posts or bios.
A referral link is typically sent as a direct message from person to person (although providing message templates can make the sharing much easier).
4. The types of rewards
Rewards are the ultimate driving factor in both referral programs and affiliate programs. Even if someone really loves your business and already shares it organically, an attractive incentive will keep them motivated to refer others.
Rewards can vary greatly across different affiliate vs. referral programs. Programs can choose between giving one-time rewards, recurring rewards, tiered rewards, and more.
But there’s one key difference between rewards in affiliate vs. referral programs – affiliates generally expect cash as their reward. Meanwhile, there are lots of different types of referral rewards you could offer in a referral program, including cash, gift cards, store credits, discounts, upgrades, and swag.
| Referral programs | Affiliate programs |
| Popular incentives for a referral program include discounts, store credit, coupons, cash back, or gift cards.
Rewards can also be given to only the existing customer (the one referring others), the new customer (the referral), or both (a dual-sided or 2-sided incentive). |
Affiliate programs typically offer cash-based incentives (affiliate commissions), in the form of a flat fee or percentage of each sale.
It’s also common for affiliates to get a free product on top of their cash compensation, especially if they perform well or have been affiliated with the company for a while. |
5. The customer lifetime value (CLV)
Customer lifetime value (CLV) indicates what you can potentially earn from a customer over the period of their relationship with your business. Will the customer only make a one-time purchase, or will they become a long-time customer with regular orders?
This greatly depends on the product or service you are selling. Some products, like cars or larger equipment, are commonly a one-time purchase. (Of course, the company can also supplement this with other items and services.) Other products, such as lower-cost consumer products and subscription services, will naturally keep your customer base coming back.
| Referral programs | Affiliate programs |
| A referral program works well with a variety of products and services.
Since referral programs are based on loyal customers and trust, they work especially well for products with a higher CLV. |
Compared to a referral program, an affiliate program can work better for businesses with a lower CLV (as long as that business is established).
As affiliate programs pay for every new customer, affiliates are more focused on quantity and scale. |
What are similarities between an affiliate program vs. referral program?
While affiliate programs and referral programs have their differences, they do share a few similarities. The biggest similarity is they both encourage others to promote a brand and typically offer an incentive for every sale.
Below are a few other ways affiliate programs and referral programs are alike.
1. They rely on social currency
Both programs are based on inviting others to become new customers. Whether that invite comes from an existing customer or an affiliate, it naturally involves a level of risk.
What happens if the referred customer doesn’t like the product or service? Or has a bad experience with the business?
If things don’t go as planned, there’s a certain amount of trust or social currency that’s lost from the referring party.
| Referral programs | Affiliate programs |
| Since referrals come from existing customers, there’s an implied guarantee the product or service is good. After all, they’ve already tried it themselves.
So when a customer refers their family and friends, it’s assumed that the product is worth trying and will work for them, too. |
In affiliate marketing, the link is placed on a public platform, like a blog post, landing page, or an online video.
Even if there’s no direct communication, visitors decide to click on the link based on trust and the affiliate’s reputation. |
2. They’re both repeatable marketing strategies
Both affiliate programs and referral programs are intended to drive consistent growth. They rely on other parties to advocate their business, generate word of mouth, and help bring in new leads and sales.
| Referral programs | Affiliate programs |
| A referral program build a long-term meaningful relationship with your customer, inviting them to share with their friends and rewarding them for their efforts.
Though referral programs may not see much traffic as an affiliate program, they do generate higher quality leads and higher conversion rates. |
Many affiliate programs include their links in engaging content, such as high traffic blog or posts on their social network.
Even if there’s no direct communication with potential customers, these affiliate links are easily clicked by anyone with an existing interested in your product or service. |
3. They’re both cost-effective
Assuming you use referral software or affiliate software –and not an affiliate network – referral and affiliate programs are much more cost-effective than other marketing methods. Both programs also carry a much lower financial risk than paying for ads. After all, with referral and affiliate marketing, you only pay for performance (in other words, you only give rewards when a sale is made).
| Referral programs | Affiliate programs |
| With a referral program, you’ll pay once for referral software, and then you’ll only pay when a customer’s referral results in a purchase.
You also have full control over the value and types of rewards you offer. Although both programs are cost-effective, referral programs are more affordable to set up than affiliate programs. |
With an affiliate program (run with affiliate software), you’ll only pay once for the software, and then you’ll only pay when someone clicks an affiliate link and makes a purchase.
Although you’ll need to pay an affiliate in cash, you’ll have full control over the commission amount. |
Pros and cons of referral vs. affiliate programs
Still need to know more about referral vs. affiliate programs? Compare the advantages and disadvantages below. We’ll start with referral programs:
| ✅ Pros of referral programs | ✖️ Cons of referral programs |
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And now, here are the pros and cons of affiliate programs:
| ✅ Pros of affiliate programs | ✖️ Cons of affiliate programs |
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How to decide between referral vs. affiliate programs
Now that you know the basics of referral programs vs. affiliate programs, and you’ve compared the advantages and disadvantages, you’re ready to find the best one for your business. To help with your decision, we break down which type of affiliate referral program to consider for every different industry. (As you can see in the table below, some businesses can see success with running both a referral program and an affiliate program!)
| Business type | Referral program | Affiliate program |
| Ecommerce/ Online store | Ecommerce referral programs work well for any online store (see this case study as an example) | An ecommerce affiliate program works very well if products have higher profit margins |
| SaaS (B2C) | Great for showing customers appreciation with a reward | Possible, but since price points are generally lower, it might not attract many affiliates |
| SaaS (B2B) | Yes, as long as you provide attractive incentives (particularly for high-ticket products or services) | Great for high-transaction sales with no sales person. (It can be pricey to compensate both an affiliate and a salesperson.) |
| Local services | Great for services with higher price poin |