Most businesses are familiar with referral programs.
Referral programs can be a fantastic additional revenue channel and more and more small to mid-sized businesses are taking advantage of the increasingly advanced yet user-friendly options at their fingertips via modern CMS/website platforms (such as WordPress and Shopify) to set up their own customer referral programs.
Fewer businesses are familiar with affiliate programs, though these programs can be another incredibly effective and profitable advertising and revenue generation tool.
If you aren’t familiar with what affiliate programs are, how they work, and how they differ from referral programs you aren’t alone. In this post, I’ll break down what an Affiliate Program is, what Affiliate Marketing is, and how affiliate programs and referral programs are different.
What is an Affiliate Program?
Affiliate programs are an arrangement where brands pay a % of sales to affiliates who promote their products and/or services.
How does Affiliate Marketing work?
In affiliate marketing, an affiliate receives a commission (a % of each sale that is made to someone who followed their affiliate link to your business’s website and made a purchase within a certain # of days). Affiliates can promote businesses by using different links (text links, banners or other ad creative) provided in their affiliate marketing management accounts or by using special tools on these platforms to generate unique links to promote specific products or services.
Affiliates normally find and join affiliate programs in one of two ways. Either they find affiliate programs by searching on one of a handful of large affiliate marketing/advertising platforms or they are personally invited by a brand or that brand’s affiliate program manager.
Brands/Advertisers that launch affiliate programs generally launch their affiliate programs either on a large, existing affiliate advertisting platform (Shareasale, Awin, and Rakuten are three examples) or they they create their own affiliate program. If a brand/business creates their own affiliate program (versus joining an existing platform) they generally do this is one of two ways. Either a business will use an affiliate program/marketing tool (for example, WordPress users might use a plug-in such as WP Affiliates while Shopify users might choose to use the Refersion App) or they can have their own, unique program built by a developer.
Who is the Audience for Affiliate Programs?
An affiliate program is a program targeted towards influencers (bloggers, social media influencers, niche site owners, review sites, etc.) and publishers (online publications that monetize affiliate links in their content), etc.
Affiliate programs allow brands to widen their reach, get exposure and advertising without paying as much for that exposure/advertising, i.e. businesses often (though not always) only pay commissions on sales made, not on a pay per click basis like advertising. Affiliate programs also allow brands to reach a much wider audience in a larger number of places online, and to create an additional reevenue generation channel that has much higher conversion rates than other forms of advertising.
Affiliate programs are generally not visibly promoted on a brand’s main website pages nor are they available to the public. Brands are either found by affiliates on affiliate advertising platforms (where affiliates apply to become affiliates of that brand) or they reach out directly to invite affiliates to thier program.
What is a Referral Program?
A referral program is a program that incentivizes your previous customers to recommend your business’s products or services to their friends and/or relatives.
The objective with a referral program is to your brand or business’s most satisfied customers to refer you more business. The incentive for current customers to refer you more business normally takes the form of a discount or credit, where the amount of the discount or credit is credited to both the referrer and the new customer who makes a purchase.
Referral programs are generally programs that are visible and available to the public and that are often promoted (or easily findable) on a brand’s main home page or website.
Businesses generally launch Referral programs in one of two ways. Either they use a Referral Program software application (in the form of an App or a Plug-in available on their CMS/website platform) or they have a developer build something unique/proprietary. Two examples of referral program apps/tools that are popular with WordPress and Shopify users are Referral Candy and Yotpo.