Referring To Friends Vs. Affiliate Marketing: Which Strategy Do You Use To Win New Customers?
As an entrepreneur, you know what he has to offer best: no one else can describe the advantages of the products or services so well and convincingly! Almost nobody. Because it becomes particularly credible when a third party – for example, an existing customer or partner – advertises the product, as a rule, their aim is not to sell something but want to give a good tip. Refer-a-friend campaigns are not only a very old and proven way of attracting more customers: if you compare them with other forms of advertising, they also perform well above average.
Affiliate marketing, in which sales partners recommend a fee, is a little more recent but has since become similarly relevant. In this case, the tip is no longer entirely altruistic. In both cases, the company is only laying the foundation for customer acquisition. The “effort” of advertising is taken on by partners or existing customers.
Same Same But Different: Affiliate Marketing Vs. Referring Friends
Refer A Friend Programs
Everything starts with a satisfied customer. As soon as someone has had a good buying experience, they tend to be ready to share it with friends, business partners, or acquaintances from their network. This can take the form of an individual recommendation, by participating in a recommendation campaign, or simply by having the customer submit reviews on blogs, forums, portals, or social networks.
Since very few customers come up with the idea of sharing their good experiences on their own, the first step is to make them aware of it – for example, through a mailing or in a personal conversation. Many companies are also considering tempting rewards for existing customers and potential new customers.
This can be a discount on the next purchase, a bonus, or a product upgrade. Dividends are usually paid out when the recommendation is booming and a purchase is made. But gifts alone do not turn customers into sellers. What matters is whether the person recommending had a great buying experience beforehand and is wholly convinced of the offer. After all, who wants to risk their reputation with a foul tip?
The principle is similar: an external person expresses positively about a company and thus provides new customers. However, this recommendation is not made out of pure benevolence or enthusiasm for the product but to receive a commission from the company. The intermediary is also called an affiliate or publisher.
The company is known as a merchant or advertiser. Affiliate marketing usually takes place on the Internet. This idea is said to have originated in 1997: At a party, Amazon founder Jeff Bezos was talking to a young woman who offered him the opportunity to market his books on his website. As soon as a user clicks on a link, he is redirected to Amazon. A tracking process follows the user’s “journey.” If he then buys a book, the website operator receives a commission. A good deal is closed, and affiliate marketing is born!
In addition to links, many affiliates also share other information and advertising material made available to them by the product provider. Ultimately, both parties aim to win as many new prospects as possible: more new customers and more commission. As a rule, one of these three commission models is used in affiliate marketing:
- Pay-per-sale: a commission is paid for every product sold
- Pay-per-lead: There is a commission for each new customer won
- Pay-per-click: Every click on an affiliate link is rewarded
The Differences At A Glance
Refer a friend: The person making the recommendation knows the product.
He is already a customer and speaks from his own experience.
Affiliate: The person making the recommendation does not necessarily know the product.
It’s all about using your reach or popularity to advertise a company. However, good affiliates select their recommendations in a targeted manner and sometimes test them themselves.
Refer a friend: The recommendation is not tied to a commission or contribution in kind.
Indeed, referral campaigns often lure with bonuses: the main prerequisite for a recommendation is that you are enthusiastic about the product.
Affiliate: The recommendation is always linked to a reward.
The affiliate’s goal is to make money by promoting a company.
Referring to friends: The implementation is not necessarily tied to costs.
In some cases, it is enough to ask for a recommendation kindly. Costs arise primarily from the organization of a campaign or the bonuses.
Affiliate: Marketing always comes at a cost.
The merchant is entitled to a commission for every successful mediation.
Refer friends: Recommendations are usually intuitive and straightforward.
It is our nature to tell others about good experiences or give helpful tips. Anyone who has previously experienced the product themselves also knows what they are talking about.
Affiliate: The affiliate needs technical understanding and needs to be briefed.
Anyone who advertises for companies professionally should master all the technical functions (website, online advertising, etc.). A product briefing is also required to explain which features and messages should be emphasized.
Advertise friends: Existing customers must be consciously motivated to advertise.
Hardly anyone comes up with the idea of recommending their wireless service provider or business coach to friends. Here an active request is required (again and again).
Affiliate: The motivation to advertise is in your interest.
The more numerous and successful his recommendations are, the better the affiliate earns.
Referring to friends: input is not always output.
Not every refer-a-friend campaign immediately brings the desired success. Instead, it often takes several attempts before a customer passes on his excellent experience. It is not directly apparent whether the investment in a campaign was worthwhile.
Affiliate: Input is the same as output.
Since the company only pays when a recommendation has paid off, there is no financial risk.
Advertise friends: Advertise to a suitable customer base.
There is a good chance that acquaintances and friends of the person recommending will be interested in similar products. This means that the right target group is advertised by itself.
Affiliate: The target group is preselected.
For companies, the first question is which affiliate suits their product. Anyone who makes vegan dietary supplements may have come to the correct address with a corresponding food blogger. The affiliate’s fan base is very likely to have similar interests or search for product tips on their website.
Which Method Is Suitable For Your Company?
Both forms of marketing can – if implemented well – really boost your success. Affiliate marketing pays off, especially when you want to increase sales quickly and reach many interested parties in one fell swoop. Refer-a-friend campaigns are worthwhile, among other things, if your product is very complex, requires explanation, or is expensive. But also if you attach great importance to ensuring good customer loyalty over the long term. Companies that maintain a large community and constantly communicate with their customers create more security for themselves in the market. Existing customers who recommend your offer naturally feel more connected to the company. New customers who come to you through a friend also bring a trust bonus. Whether refer a friend or an affiliate: