Affiliate programs and referral programs are often mentioned in the same breath, for good reason. They both use third parties to direct customers to a particular brand, but they use different techniques to do so. They both provide different incentives and will provide different rewards for both merchant and publisher.
What they do have in common is a great way to supplement your customer loyalty program. Keep reading to find out more about referral programs and affiliate programs to see how you could be using them to boost your business.
How does referral marketing work?
Referral marketing has existed in some way since there have been products to market. It essentially involves turning someone on to a product or service by telling them directly about it. What is different today is the intricacies of how referrers can monetize doing so and the level of incentives at play.
Many people will recommend a product or service to their friends and colleagues simply because they have benefited them in some way. Passing on the recommendation often has no material benefit to the referrer.
With referral programs, a company will provide an incentive to encourage consumers to make a referral. These incentives can be anything from a discount off your next purchase to cashback rewards. A program will often be in place to organize these incentives which is only one way customer loyalty platforms can shine.
A great example is luggage company Trunkster who offer a $20 cash reward for a completed referral (i.e. the referred customer makes a sale), while also giving the referred a $20 discount off their purchase.
Referral marketing is a win-win as it only provides the incentive once a referral has been made. This means you only pay out when you earn the benefit. It also uses results in friends and family of the referrers being exposed to the company without direct contact.
How does affiliate marketing work?
Affiliate marketing is a more recent beast with a slightly more intricate business model. A merchant, the company selling the product or service, hires an affiliate to market them to a customer. This often involves publishing posts, blogs or even comments to drive traffic to the company. This is why affiliate marketers are often simply referred to as publishers.
The merchant provides an affiliate program which allows publishers to sign up and become marketers for them. The publishers set up the posts according to the merchant’s marketing needs. The type of compensation awarded to the affiliate depends on the company.
Rarely, the publisher will receive money for the CTR of the post. This means for every click or 1,000 clicks the publisher will receive a certain amount of money, often very little.
More commonly, the publisher will receive a PPS (pay per sale) amount, a (CPA) cost per action or they will simply receive some ad revenue. The benefit to the affiliate with a PPS is that for every sale they create, they will make a certain amount of money. The flip side of this, however, is that if there is not very much traffic to the post, the publisher may end up with very little.
With a CPA, the publisher model is very similar. The difference is that, although the action could be a sale, you might want to pay for something else. This could be a completed survey, a piece of customer information or whatever it is you are looking for.
With a piece of revenue, the reward to the affiliate might not change, whereas a PPS or CPA means the more traffic they direct to the merchant, the more they earn.
A great example of affiliate marketing is through food blogs. A food blogger might use a certain brand for a recipe, extolling its virtues to their readership. The brand merchant then pays either revenue up front or implements a pay system. Sometimes, the reward for the blogger might only be provision of product, but the better the blog, the more money there is to be made.
PinchOfYum is one of the leading food blogs out there and they generously have provided income reports for similar bloggers. When they started in September 2011, their total income for the month was $21.97. When they stopped providing these reports in 2017, their income for the month was in the tens of thousands, much of this derived from affiliate marketing.
How do they benefit the merchant and affiliates/referrers?
The benefit to the merchant is similar in referral marketing as it is in affiliate marketing. Only successful sales or provision of information will be paid for. This is opposed to paying for online ads where you may not be guaranteed an ROI. Affiliate and referral marketing means the merchant provides incentive rather than providing capital off the bat.
As shown above, Thrive Market’s affiliate program allows people to earn a financial reward when they bring new consumers to make purchases with Thrive. They provide up to 40% of the subscription cost to the affiliates who brought the consumer to Thrive through their social media, blogs, websites, etc. Below is the full description of rewards that users can earn by becoming an affiliate. Many times these kinds of programs allow affiliates to earn rewards in various ways, which can all be tracked through a platform like Social&Loyal.
For the affiliate or referrer, it allows for potentially exponential revenue streams, especially once they prove their worth. These programs have win-win style rewards for the company to gain visibility and new consumers while the affiliates earn profit and provide their reader base with a valuable referral. The best way to organize these affiliates is in a platform where you can set up various actions such as referrals, reviews, social media actions, etc. that they can do for rewards and various types of prizes. It’s also beneficial to be able to send the affiliate communications through the platform you choose to be able to stay on top of mind and nurture your relationship with them.
Considerations in affiliate marketing
With affiliate marketing, there are certain ethical considerations needing to be made. This is because, as they are essentially freelance marketers, you may not have much control over the way they publish.
Their content might not meet company standards and some affiliates have been known to use adware to promote certain content. They also can provide cluttered web pages which can slow down the browser, making your product seem complicit in annoying the user. Spam email is another annoyance which may be difficult to control.
Ethically, many affiliates might not chime with your company’s MO. Some will not be upfront with their affiliations which can lead to bad press once found out. PinchOfYum again provide a great example of an affiliate which is very open about their operations.
With referral programs, the directness of the marketing is often pretty straight forward, but there are similar ethical issues. What is more important is trying to keep track of how the referrals are being carried out.
This is where affiliate programs and referral programs are so useful. They will allow you to keep track of your marketers, ensure they implement the right kind of content and you’ll be able to analyze all of your data so you know what is working and what isn’t.
This way, you can market your product to as wide a customer base as possible. If you stay honest and keep an eye on your numbers, then you will reap rewards.
If you want to learn how your company can get started with a referral or affiliate platform, schedule a free consultation through this link!