What Is Affiliate Marketing for Ecommerce Websites?
Affiliates are your agents and partners who send qualified traffic to your website. When some of these visitors convert, you pay the affiliates a commission.
What Is Referral Marketing for Ecommerce Websites?
Customers or visitors who like your offering refer people to your website. In return they get some form of reward.
Err, What Is the Difference?
In the manner I have framed the definitions above, it might seem like distinguishing between affiliate marketing and referral marketing is like splitting hair. But there are important differences:
- In the case of referral marketing the people who are being referred to your ecommerce website are directly known to the referrer. Affiliates, on the other hand, will send you anybody they can.
- The affiliate partner is driven solely by financial reward. Regardless of whether it is a straightforward percentage of sales or a multi-tier incentive structure, affiliate marketing is all about the money. Referral marketing is a far more complex animal. Sure you could encourage referral by using a financial incentive. But referral marketing goes far beyond that.
In many cases, people refer other people selflessly. Haven't we all done that? A good movie, a good book, and a good meal -- each of these have provoked us to "spread the word." That is the premise on which referral marketing is based.
The Mode of Communication Varies
Affiliates will post reviews, usually glowing reviews, of your offering on their websites. They will append their codes to links pointing to you to ensure that they get credited for sales from traffic originating from their website. Some others will send out email blasts promoting your products.
Referrers operate in a wider variety of ways. Some will write testimonials and reviews on your sites. Others will post about you on their social media accounts thereby triggering traffic to your site.
In a Sense Affiliate Marketing Is a Type of Referral Marketing
Though contemporary online business does not seem to be able to make up its mind, I strongly feel that referral marketing includes several methods, one of which is affiliate marketing. After all, affiliate marketers do "refer" visitors to your ecommerce website.
Which Is Better: Affiliate Marketing or Referral Marketing?
In light of the fact that I have already labeled affiliate marketing as a subset of referral marketing, this is question is tough to decipher. But we could simplistically interpret this question as, "Is it better if people refer others to your website with the intention to gain financially, or are other motivations better?" This new question is easier to answer. I would love the utopian scenario where my customers love me so much that they work hard to get me more customers driven by genuine affection.
In General Referral Marketing Is More Cost Effective
Paying a commission for every sale can make a dent in your bottom line. Getting free referrals, or referrals based on a small initial reward, can be quite valuable. Of course, this would vary from case to case, but referrals are what sweet ecommerce dreams are made up of.
If Referral Marketing Is All That Great, Why Have Affiliate Marketing At All?
Aha! The other side of the coin. Since you do not live in a world that operates exactly as you want it, you might find it tough to get people to refer customers to you. However, creating a financial reward structure is an easy, and often compelling, motivator for your affiliates. This makes affiliate marketing easier to implement and scale up.
I go back to what I said at the beginning of this article. Both forms of marketing -- affiliate and referral -- are powerful. It is important for ecommerce merchants to give both approaches a chance.