Word-of-mouth marketing occurs whenever people positively share a brand and encourage them to make a purchase. It’s a powerful tool for generating new customers because people trust the word of individuals more than they trust messages that come directly from your brand.
Word-of-mouth might seem hard to predict and control, but it’s never out of your company’s hands. Different types of word-of-mouth marketing strategies encourage people to spread the word about your brand by incentivizing their sharing. Some of these strategies include affiliate marketing, influencer marketing, and referral marketing.
These three terms can be very confusing. Are they really interchangeable? When is the right time to use a specific term? What do referral marketing, affiliate marketing, and influencer marketing have in common? What are the major differences between these three types of marketing? Let’s compare---and let’s start with referral marketing.
Any technique that a company uses to encourage people to tell others about their products and services counts as referral marketing. So, referral marketing is an umbrella term that includes techniques such as influencer marketing and affiliate marketing.
However, when many people talk about referral marketing, they’re talking about a referral marketing program. Given this, let’s define the features of a referral program, so we can compare it to affiliate marketing and influencer marketing.
A Referral program helps satisfied customers share a brand they love with people they know, who they think would also enjoy or benefit from the brand’s products or services. They accomplish this by formalizing word-of-mouth, and by making it easy for customers to tell their family, friends, and peers about a company.
- Depending on the program, customers can share via their personal email, their social media accounts, text message, or by copying and pasting a unique referral code or link anywhere.
- The best referral marketing programs include a pre-written message to make sharing easier, but let referrers customize the message however they wish.
- And the message is always addressed from the referrer (and is sent from the referrer’s channel), so it always has a personal touch---and makes it easier to trust.
Also, a referral program usually rewards customers for sharing, through some sort of incentive. These incentives vary based on the preferences of each business, and what the business believes will motivate each customer to share.
They are usually awarded to a customer when one of the friends they refer makes a purchase. Popular incentives include store credits, discounts, gift cards, free products, service upgrades, and cash.
And thanks to referral codes or referral links, referral programs make it easy to track where referrals are coming from, connect the person who was referred to the person who was doing the sharing, and see which purchases are the result of a referral.
Airbnb offers a prime example of a referral program. Customers who sign up receive a referral link, for easy sharing with friends. When a friend stays at an Airbnb for the first time, or rents out their own home with Airbnb, the referrer receives a travel credit reward.
Affiliate marketing occurs when a business recruits partners, such as bloggers, social media figures, marketers and other sales leaders, to help sell their products in exchange for commission fees. These partners are known as affiliates, and they agree to place links to the business’s products on their blog, social media account, or website, known as affiliate links.
The brand compensates these affiliates with a commission payment---always in cash--- for each sale they generate through the affiliate links. The brand is able to track how many website visits, and how many purchases, each affiliate link generates, so it’s easy for them to identify their top affiliates.
Sometimes, prospective affiliates will apply through an affiliate program, and then be approved by the brand. Other times, brands will directly recruit people who can reach a large portion of their target audience to serve as affiliates.
For example, a known mommy blogger might be asked to post about a brand’s new baby monitor, and include an affiliate link to purchase the baby monitor on the brand’s website.
Affiliates are, first and foremost, concerned with making as many sales as possible, by getting those coveted clicks and purchases through their affiliate links. They’re speaking to a wide audience of people they don’t know, through their website, blog, or social media. So, they’re not talking directly to friends or peers.
Also, an affiliate may not even be a regular customer of the brand. Rather, they’re admitted to the program based on their ability to reach a target audience. This differs greatly from referral marketing, where customers directly share a brand’s products and services with friends and family who they think might be interested.
When it comes to affiliate marketing programs, Amazon’s program is probably the most well-known example. It may be called an “associate” program, but it’s still an example of affiliate marketing.
You may have noticed that a lot of bloggers recommend products in their articles. Take a closer look, and you’ll see that those recommendations come with links, which often lead right to Amazon.
Amazon uses those affiliate links to track where sales are coming from. When they see sales coming from a certain blogger’s page, they remunerate that blogger.
When companies use influencer marketing, they recruit people with a substantial reputation---known as influencers--- to market their products or services. These influencers show how they use a product or service in real life, on their own social media accounts or blogs, and from their own perspective. Rather than explaining why someone should buy the product, they influence by example.
Influencers are either experts in the niche a brand serves, or authorities among a target audience. Although celebrities, and others with large amounts of followers, are often recruited as influencers, influencers don’t have to have huge follower amounts.
As long as their audience sees them as authorities, and as long as their recommendations feel authentic, a social media user will make a suitable influencer. This authority is what leads their followers to trust their recommendations of products.
So, micro-influencers, with smaller but tighter-knit communities of followers, work just as well (or even better) than more well-known figures.
Influencer Angela Jones promotes It’s A 10 Haircare with her authentic recommendation.
Influencers enter a short-term relationship to promote a brand. The brand and influencer establish how many posts the influencer will make, or for how many weeks the promotional relationship will last. Keep in mind, though, that influencers aren’t always customers of the brand before this relationship.
Often, the brand will reach out to prospective influencers first, to familiarize them with the brand and its products, especially if they weren’t customers before. But regardless of if they were familiar with the brand before, the best influencers will only promote products they enjoy and think their audience would benefit from.
An influencer relationship is always a business relationship. A business will compensate influencers with cash, credits, free products, or some other incentive in exchange for the promotion.
Here’s an example of an influencer relationship: Shannon, a vegan recipe blogger who also maintains a connected Instagram, entered into an agreement with Silk to promote their almond milk. She crafted an article on her blog, “Yup, It’s Vegan,” with three recipes that include Silk’s almond milk, and made a post on her Instagram to promote the article.
As a vegan blogger with high authority in the plant-based cooking niche, and among a focused audience, Shannon is a great fit to be an influencer for Silk.
Breaking Down the Differences
There are several differences between referral, affiliate, and influencer marketing. Let’s break them down.
Are advocates (the people doing the sharing) customers of the brand?
- Advocates who use referral programs are satisfied customers of a brand.
- Affiliates don’t have to be customers of a brand and don’t always purchase the products they promote.
- Influencers haven’t necessarily purchased from a brand prior to their relationship with the brand. They will only promote a brand, though, if they like what the brand has to offer.
Why are advocates chosen? (Key qualities of advocates)
- Influencers are chosen by a brand because their authority---among an audience or within a niche---makes them easy to trust.
- Affiliates have reasonable reach among an audience, and have skills in engineering sales. They might sign up for an affiliate program on their own accord, or might be recruited by a brand.
- Referrers “choose” themselves---they usually sign up for the referral program on their own (although a brand might choose to invite top loyal customers to participate in their program). They’ll only sign up when they’re satisfied with a brand, and know others who might benefit from the brand’s products or services.
Who are advocates sharing with?
- People who use referral marketing programs always share with people they know---friends, family, and/or peers.
- They will either directly share personalized notes with individual friends, or reach many friends at once on social media.
- The friends already trust the referrer, so they’re motivated to check out the brand that the referrer recommends.
- In contrast, affiliates share with the general public.
- When they place an affiliate link in their post, anyone can click on the affiliate link and make a purchase, and money will go to the affiliate.
- So, affiliates are sharing with people they’ve never met, in an impersonal way.
- A person who clicks the link places some trust in the affiliate, but this trust level is lower than the trust involved in referral programs.
- Influencers fall somewhere in between.
- They’re largely sharing with their network of followers, a community they’ve built up around them.
- Some of these followers are usually real-life friends or acquaintances. The others are people they’ve never met but have interacted with digitally.
- So, influencers are addressing people they’ve built a connection with, but haven’t necessarily met physically.
Advocates’ Priorities and Motivations
- People who use referral programs share products they love with friends who they think would be interested in a brand. They might be enticed by the referral program’s incentives, but their first priority is to help their friends.
- Similarly, influencers share products they enjoy and that they think their followers would use, so the followers can reap the benefits. Again, incentives are also a motivation, but they should not be the primary factor.
- However, affiliates prioritize selling products above all else, as they receive a cash payment every time someone makes a purchase using their affiliate link.
- Referral program marketing has the most trust on its side.
- Because the referral comes from a trusted friend, there is usually a higher chance of the prospective customer actually moving forward with the next steps.
- Referral programs also directly offer a product or service to a prospect (and sometimes sweeten the deal for the prospect with a reward for purchasing).
- But the referral is sometimes the first time a friend is exposed to a brand, so they might not fully realize the benefits of a product.
- Affiliate program links are easily blended into blog or social media content. It’s easy for quality content to drive trust---and clicks.
- Keep in mind that the people who landed on the affiliate page are already interested in the product or service that is recommended---which makes the process of converting a lot easier.
- Influencers can use the authority they have over their audience to easily drive conversions.
- But depending on the social network, it can be harder to direct prospective customers to find and click a brand link.
- And many audience members of influencers are first exposed to a product through the influencer, so they might not fully realize how the product or service can meet their needs.
Compensation/ Types of Incentives
- Referral programs reward customers when their friends make a purchase. These rewards can include discounts, store credits, free products, cash, gift cards, and more. However, referral programs don’t always include incentives for the referrer.
- Influencers are usually compensated with cash, store credits, free products, or all of the above. They may be paid upfront (when they enter the relationship) or once they finish making the agreed-upon posts.
- Affiliates are paid every time someone purchases a product using one of their affiliate links. The amount is paid in cash, as a set percentage of the product’s price.
Breaking Down the Similarities
Still, referral, influencer, and affiliate marketing have several similarities. Let’s examine the most vital ones.
- Affiliate marketing and influencer marketing are types of referral marketing. All three types of marketing are also forms of word-of-mouth
- All three of these types of marketing rely on outside individuals to deliver their own messages about a brand to others, on their own platforms.
- Affiliates and influencers use their blogs and social media, while referrers have a choice between using their social media accounts and other mediums (such as their emails).
- Although they may receive some guidance about what to say, affiliates, influencers, and referrers promote a brand from their own channels, and in their own voice. They don’t deliver a scripted message directly from a brand.
- All three of these types of marketing involve signing on to a formalized program.
- Affiliates register for a program so they can place affiliate links on their website or social media. Depending on the brand, they may be approved instantly, or their application may need to be approved by the brand.
- Customers register for a referral program to receive a link for easy sharing (and to earn rewards). Most of the time, their sign-up is approved instantly, but some brands limit who can sign up for their referral program, and approve or deny sign-ups manually.
- Influencers enter into an individual agreement, the most formal of the three. The brand will create a written contract, or lay out expectations for the influencer in conversation. Then, the influencer will agree to the terms verbally or in writing.
- All three of these types of marketing make word-of-mouth easier to track, assuming software is used.
- Affiliate marketing always tracks how many people click on an affiliate link, and how many people ultimately make purchases through the link.
- With referral software, referral programs track metrics like how many times a customer’s referral link is clicked on; how many new customers make purchases thanks to a single customer’s referral code or link; and how many new customers are acquired from all referrals.
- Influencer marketing software lets brands keep tabs on their influencers’ posts, and see how well they’re meeting goals.
- All three types of marketing involve a risk of social currency. Advocates put their reputation on the line when they recommend a product. And those listening to the recommendation trust the advocate’s word. If the product or service does not work for a lead or referral, the advocate loses social currency, as the trust others place in their recommendation drops.
- All three types of marketing deliver high ROI through the use of trust. The use of advocates drives growth and generates leads through the high trust people place in other individuals, compared to the lower trust people place in brands.
Influencer marketing, referral marketing, and affiliate marketing are all forms of word-of-mouth, which rely on the trust people place in the word of individuals to drive conversions.
However, they differ in the incentives they use, the primary motivations of the advocates, and whether the advocates are reaching people they know. But all three types of marketing can generate powerful ROI, and cause new customers to come rolling in, as long as you pick the type (or types) best suited for your business.