Affiliate or Referral: How to Pick the Perfect Partnership

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If you find it difficult to differentiate between channel partner types, don’t sweat it. You’re definitely not alone. It can be confusing figuring out what each partnership structure entails, let alone which is the right fit for your business. 

Take affiliate partners and referral partners. They definitely have some overlap, but each has nuances that make them better suited to certain products and businesses. Here’s a primer on each, plus some tips to help figure out which could work best for you.

What’s a referral partner?

A referral partnership is built on relationships. A referral partner has a pre-existing connection with the person they’re referring to you. They may know them personally – think family members, friends or colleagues – or through an established client-customer relationship. They tend to be big believers in, and advocates of, your product, but also usually get an incentive for completed sales. For example, a software solution company may know their product jives really well with another, and refer a client to them.

These referrals can be powerful: that pre-existing relationship means the potential customer is more likely to value and act on the partner’s recommendation. The strength of a referral partner is that they bring in high-quality leads. You can even work with them to understand how to identify good potential customers, making the prospects they bring even stronger. Their referrals tend to have a strong close-ratio, shortening the sales cycle and reducing your expenses. The downside is that referral partners have a limited pool: they’re drawing from their close circle.

What’s an affiliate partner?

Affiliate partnerships are an evolution of referral partnerships. The affiliate partner also makes referrals, but our connected world has expanded their reach way beyond their close circle. They draw referrals from an audience they’ve already established, whether it’s website traffic, blog readers, or social media followers. It’s unlikely they know potential customers personally. An affiliate partner gets a cut of each successful sale they’ve referred, so their motivation is primarily financial, though they may like, or understand why their audience may be interested in, what you’re offering. For instance, think of a food blogger who links to baking equipment via the Amazon Associates program.

The strength of an affiliate partner is that their reach can be very wide and they have the power to bring many leads your way. They can also introduce your product to customers you may not have otherwise reached. Because they don’t necessarily have that personal connection with the potential customer, those leads tend to be of less quality as compared to those of referral partners. Fewer leads will end in completed sales, and you may have to put in some legwork after the referral to close them. 

What’s the best match for me? 

There is no one-size-fits-all answer. Both referral and affiliate partners can be effective, but you’ll have to evaluate your company, product and current status when deciding whether one or the other, or both, are a good fit. Ask yourself:

1. What are you offering? There are some products and services better suited to one partnership over another. Are you primarily website-based? Is your product something that’s pretty universal and appealing to a wide audience? An affiliate partnership may be more suited to your business. Is your product or service something rather specialized, or of niche interest? The trusted and targeted recommendation of a referral partner may bring in more funneled and well-suited leads.

2. What’s your budget? Referral partners tend to bring in leads that aren’t going to require a ton of work on your end, potentially lessening costs. You must have a wider network of affiliate partners to bring in good referrals, and you could potentially have to do a bit more work on your end to close sales. Choosing between them means looking at your budget and examining the size and capacity of your in-house marketing team.

3. How sophisticated is your business? How sophisticated is your company? Are you at the development phase? It could be that referral partners are the way to go. They will help you build slowly but steadily, and can offer you valuable feedback as you grow. Are you looking to scale quickly? Affiliate partners may be the answer for you. They have a pre-existing audience and can allow you to show your product off to a really large audience. 

4. What feels like the right fit? You know your company. You know your target audience. After some reflection, your gut will tell you whether an affiliate or referral partnership is the right fit.

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