Referral programs & affiliate programs – 4 big differences

I am a referral program consultant with Amplifinity, and a frequent question asked by prospective customers with whom I work, is: What is the difference between a referral program and an affiliate program, and which one is better for my company?

The differences are more pronounced than they expect. The simplest answer is, referral programs leverage the trust and enthusiasm of people who know your brand, and turn those trusted individuals into a new and high quality customer acquisition channel.  On the other hand, affiliate programs place a brand link on a brand or blogger website with the intent of motivating site visitors to click the link.

Let’s look at four major differences between these two programs:

Referral programs more successful than affiliate programs

1) Referrals are personal.  The advocate (the person who makes the referral) and the prospect know and trust one another.  Prospects are more likely to trust a recommendation from a friend than any other source, Nielsen has found. In contrast, affiliate programs generally don’t leverage relationships and transparency. When I read a blog post recommending a brand, it’s not nearly as influential on me as if a friend recommended the brand.

2) Referred leads are higher-quality.  As opposed to affiliate programs with their low personal connection, in referral programs brand advocates know both the brand and the prospects they refer, so there is a high probability that they are referring friends and associates that are a good fit for the brand.  The advocate has effectively pre-qualified the prospect and provided the prospect with an endorsement of the brand.

3) Referral programs drive high lead-close rates.  With referrals, the marriage of high advocacy participation rates and trust that originates from the personal connection ensures higher conversion rates and a shorter sales cycle.  Our data shows that personal referrals close 42% of the time, double the industry average of 21%.  That translates to two new customers for every five referrals made.

4) Referral programs drive high advocate participation. They enable brands to directly reach out to their customers, employees, and partners to uncover loyal brand advocates.  Affiliate programs typically do not reach the level of engagement and penetration that referral programs do, mostly because of less program structure and, again, an absence of the personal relationship that naturally drives trust and brand loyalty.

 

All-in-all, the proactive approach of referral programs trumps the generally more passive nature of affiliate programs. This is not to discount the value of affiliate programs – just to show that you can do better.  In fact, affiliate programs can work well in parallel with referral programs.  But, on their own, our data proves time and time again that affiliate programs will not contribute to the bottom line to the same extent as a well-managed referral program.

 

The orange cat: A brand advocacy fable

My family has two cats. One is an orange cat. One is a black cat. And we have this weird thing that happens in our house– my nine year-old son and his buddies like to have Nerf Gun battles, and they shoot these fluorescent orange foam bullets at each other.

Nerf bullets for brand advocacy The bullets end up behind curtains, under sofas – everywhere. The weird thing I mentioned, is that a couple hours after they finish a fight, our orange cat walks mechanically around the house, collects the orange bullets, and deposits them in a specific location – just outside our kitchen. Then he meows repeatedly, at a very specific pitch, sort of like a submarine sonar. My daughter pets the orange cat and tells him he is a good kitty while he picks up the bullets. The black cat watches all of this without helping in any way. The black cat has never retrieved even a single foam bullet.

Having looked at data across many of our clients here at Amplifinity, I can tell you that these cats are a lot like your customers, and my daughter has the right idea. Be good to the black cat, but don’t spend too much time trying to get him to do stuff he isn’t going to do. Likewise, don’t waste too much money chasing customers who will never advocate for you.

We consistently observe that there will always be a segment of your customers who take on the role of serial brand advocate. These customers will dutifully and tirelessly serve your brand whenever you ask. And like my daughter rewards the orange cat for gathering up the bullets, you need to reward these customers every time they refer a new prospect or advocate for your brand. In fact, once this group gets going, they will become upset if you don’t give them an extra pat on the back. Our orange cat now meows loudly until someone tbrand advocate cathanks him for retrieving each individual Nerf bullet. Trust me, you don’t want to get a call from an angry customer like him! He might sharpen his claws on your sofa if you forget to show him your appreciation.

At Amplifinity, our data shows that escalating rewards is an excellent means by which to nurture serial brand advocacy. Our software platform makes these types of programs possible, even if it is across thousands or even millions of customers. And, our detailed process flows and integrations make sure that the orange cats get rewarded every time.

Your brand advocates are talking. Are you listening?

Most large companies know the value of a loyalty program, whether or not they implement it. Asking your current customers to buy your product or service again is often a natural effect of a product of quality. But do you know that your customers are enthusiastically endorsing your brand to their friends, family, and colleagues without a reward or acknowledgment from you?

According to WOMMAPEDIA, 66% of consumers, whether online or offline, talk positively about brands when presenting or promoting your brand. Think of all the people who are on your Facebook page or who have “liked” your brand. Think about all the people in your loyalty program, if you have one. They are advocates promoting your brands to their social networks online and offline.

The number of advocates you have can be greatly increased by acknowledging them, thanking them, nurturing them, and of course rewarding them. A reward isn’t necessarily discounting your product or service. Sometimes, it is VIP status for a laser center. Other times it is getting a first view of the new game for a video game manufacturer. Look to what your advocates want the most and give it to them by referring your company.

My trusted friend has been going to a chiropractor and she has convinced her husband to see the chiropractor, too. She feels so good after getting adjusted that she tells everyone who will listen about her experience. Andrea’s recommendation has convinced other friends to go. They have raved about it, even ones who have been skeptical about going to a chiropractor. That is the power of brand advocacy.

So, is it necessary that you have all your brand advocates screaming your company’s message from the rooftops? Of course it is! They will be your spokespersons who promote your company and brands.Their relationships will bring in customers as they spread the word. What could be better than that?