Many online marketers actually don’t know the difference between affiliate programs and referral programs. In fact, most will think that both of these are the same. However, they couldn’t be any further from the truth. There is a huge difference between an affiliate program and a referral program. Knowing the key differences between these two can help a business owner decide on which program they should use for their offers in order to grow their business.The main difference between an affiliate program and a referral program is that an affiliate program is a where the referred leads come from someone the affiliate do not know and as for a referral program, the lead will come from someone they know personally (word of mouth to friends and family).By knowing the difference here you will know that there should be a difference in the structure and the compensation as well.Let us first look at the difference in structure of these two systems.StructureYou see, for affiliate programs, your affiliates are mainly website owners or traffic brokers who have existing traffic that is interested in your offer. So these affiliates place a link on their website and direct traffic to your offer. If someone who uses their link to arrive on your offer and then buys the offer your affiliate gets paid. And this is usually done automatically because of the use of modern technology that tracks the cookies of the visitors. Even the crediting of the sale is also done automatically.A referral program’s referrer however, is normally your own existing customers. Usually they are not webmasters or anyone who can bring in a lot of traffic. They are compensated if they would recommend your offer to someone they know personally. The main strategy here is to promote customer satisfaction via good quality and services so that your customers will start referring your offers around. The compensation is to encourage them to try harder to get you the lead.Compensation The compensation model is usually an agreed percentage based on the sales. It could differ greatly from the first 10 customer referred compared to the 1000th customer. The affiliates can be compensated with other bonus incentives as well or prize if they could reach a certain amount of sales per month. In order words, the compensation model for an affiliate program can be very complicated, but it is definitely very flexible as merchants usually would love to encourage their best affiliates to try harder to grow their business.The compensation model used in a referral program is quite simple when compared to the model used in an affiliate program. Usually is in in terms of cash or a bonus reward. No fancy tricks. Just a simple send me a customer and you get a discount on future purchases or some cash reward.Relationship with ‘Referred’ CustomersThe relationship of an affiliate with their referred customer is basically none. They do not know personally who their referred persons are, and they send traffic based on demographics. Hence the chance of conversion from a lead to a paying customer is much lower.In a referral program, the referred usually have a strong relationship with the person they refer it to. They will try their best to explain your product with enthusiasm. This usually results in a much higher conversion rate. The only problem is that referral programs usually do not bring in as much traffic as an affiliate could and affiliates can usually bring in much more profit than a referrer could.AgreementsWhen it comes to making an agreement with affiliates, you will need to be more careful as it is a two way link where it benefits both parties. You need your affiliates to perform as much as your affiliates need you to convert the traffic that they send to you. Plus, the agreements need to meet the FTC rules when it comes to affiliate programs.However, with referral programs, everything is kept as simple as possible. As long as they refer a customer, they get compensated. There is no need for any special agreements.Which One Is Better?It is safe to say that both types of programs are going to be beneficial to growing your business. Affiliates will definitely be able to bring in more traffic and sales for you. However, a good referrer can easily increase your branding and reputation. Giving the chance, they would even make good comments about your offer on social sites or Facebook, which can potentially help you get even more exposure and sales.Hence as a business owner, it is best if you could set up both an affiliate program and a referral program to get the best out of both worlds. Just think about it, your affiliate will drive you the initial sales and capital required for more advertising and improving on your product’s quality. And your referral strike force will be out there giving you the best kind of testimonials you could ever hope for.Lastly, you will realize that because referral programs generally convert better, affiliates are now using ‘review and recommendation’ tactics that are similar while mimicking a referrer’s job which is to build some sort of trust and relationship with their traffic first and thus preselling your offer first. This is known to help a lot with affiliate conversions.Therefore, although most people will think that referral programs are not worth the time, you should know better by now that referral programs can help you build a better brand reputation.
How do you fully implement an effective customer incentive program?Executives who lead sales organizations, and for that matter, those reading this book, are not expected to have advanced knowledge of marketing strategies and social media. Nonetheless, those same executives should understand the principles of keeping your companies’ brand and products in the foreground of your customers. After all sales and marketing are one in the same, understand the correlation. We will explore straightforward concepts that will augment the efforts of the marketing department within your organization that are directly related building sales results. We will discuss programs that are directly related to the sales function and would be a compliment to the marketing division in your company.Customer Incentive Programs – Airlines, car rental companies, credit card companies, and multiple other industries have proven that this is an effective way to influence customer purchasing habits. Incentive programs require a substantial investment for most organizations and they should be designed to provide significant return on investment to the organization. Incentive programs are widely used in private industry no matter how large or how small your company.The key element to any customer incentive program is to properly design the program and features to the benefit of your company and the interests of the customer. These programs require the full participation of the benefactors as well as the employees in your organization, every single person involved in the program must be fully engaged in order to make the program a success.It is highly recommended that you engage the services of a third party incentive-company. These firms will assist you in the development of the program details specifically suited to your business. In addition, these organizations have pre-printed merchandise catalogs, they have exclusive knowledge of resort properties, will administer the program tracking and will set up web-sites to enroll and track participant results.These companies work on a commission base related to the travel itinerary and merchandise purchases. The investment in these incentive companies will provide a valuable resource to you and will enhance the overall customer experience and support the minute details of the program. Details to be considered when designing the program include:What works for other companies does not guarantee success with your company; never emulate a competitors program, if one even exists.Engage the service of a professional incentive company to assist in the administration.Establish clearly defined rules and regulations and the rules should be easy to understand by the customer who will be participating in the program and easy to understand for the sales people who will be selling the program concept to the customer.The rules defined into the program should always cover who will be eligible for the reward, especially if you are offering a travel incentive to a resort destination. Many times, companies will hand the reward to family members and the primary concept of a travel incentive program is to spend quality time with your core customers, not one of their relatives.The program should be designed to promote the organizations strategic goals and product categories, make sure you consult other departments and thoroughly think about this objective to insure it is effective.The program should be designed as a profit center rather that a company expense. Simply stated, the goal of the program should be to drive corporate profit at a higher ratio than program expenditure.The program should be tailored to participants’ interests and the program should have attainable and measurable goals for the participant.Reward employees with participation in the program for getting a high percentage of their participants to enroll and qualify, possibly design it into their compensation plan.Insure that the program is quantifiable and accountable from an IT (reporting) standpoint. It is imperative that your company can track the data you designed into the program. If you designate certain base level purchases combined with performance goals, you need to make sure that these elements can be monitored and tabulated from an administration point of view.