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Referral marketing and affiliate marketing are both highly effective ways to help businesses drive sales and expand their audiences. While these marketing strategies work similarly, there are some key differences in how they’re structured, their target audiences, and the motivating factors that affect conversions. Below, I’ll compare referral marketing versus affiliate marketing to help you better understand which types of businesses, products, and goals these marketing strategies are best for.
12 Core Differences to Know Between Referral and Affiliate Marketing
| Referral Program | Affiliate Marketing | |
| 1. Who does the referring? | Content creators, influencers, or marketers who have an audience aligning with the business’, and who usually have a connection to the business, such as having been past customers. | Content creators who may not have connections with the business. |
| 2. Relationship with potential customer | Referral program participants often promote within their existing personal network, such as friends or family, as the personal connection helps establish trust. | Affiliates often have no direct connection to the potential customer, and they target anyone reading the content. |
| 3. Types of rewards | Cash rewards, coupons, gift cards, account credits, or other non-cash rewards. | Cash, as a percentage of sales generated or a flat fee. |
| 4. Incentive structure | Incentives are usually paid as a one-off. | Incentives are a percentage of sales and are usually paid out monthly. |
| 5. Promotion | Participants may promote products or services via email, social media, and text. | Marketers promote products or services via websites, blog posts, social media, ads, and videos. |
| 6. Tactics | Participants share a referral code within their networks. | Affiliate marketers share an affiliate code through content on their established platform. |
| 7. Trust and credibility | Referral programs are usually seen as more trustworthy, because the person doing the referring often has a personal connection with the business. | Affiliate marketing is sometimes seen as being less trustworthy, because the marketers don’t necessarily have personal connections to the business. |
| 8. Audience reach | The audience is limited to the participant’s network of friends or family. | Audiences can be larger, depending on the established marketing platform and its reach. |
| 9. Goals | Expand the business’ audience and reach customers who are likely to refer others. | Expand the business’ audience and drive sales volume. |
| 10. Costs | Costs are minimal, often including gift cards or discounts. | Costs are based on the number or value of goods and services sold, and are a flat fee or percentage. |
| 11. Tracking | Referral link with embedded referral code. | Affiliate link with an affiliate code. |
| 12. ROI | Dependent on product profits and incentive structure. | Dependent on product profits and commission structure. |
Differences Between Referral and Affiliate Marketing Explained
Through referral marketing and affiliate marketing, businesses can sell and promote their products or services to new audiences. Both of these strategies are effective ways to expand your marketing efforts, and since the individuals doing the promoting are outside of the business, they require minimal business staff time. Plus, since you only pay out incentives after sales are made, both of these marketing techniques are budget-friendly.
While referral marketing and affiliate marketing can both help expand audiences, the strategies work differently and are often best suited for certain industries or goals. Many businesses successfully use both marketing strategies simultaneously.
Referral
Referral marketing, which is sometimes called ambassador marketing or word-of-mouth marketing, is based heavily on trust. In referral marketing, a business partners with a participant, who is often a current or previous customer. The participant refers the business’ services or products to their existing network of friends and family.
Since the participant or marketer is reaching out to current connections and has firsthand experience with the business, there’s an element of trust that can help build confidence and drive sales. Friends and family can ask the participant about their personal experience with the business, and since they’re already warm leads, referral marketing can generate higher conversions.
Referral marketing incentives may include cash, but it’s more common for businesses to offer incentives like store credit, coupons and discounts, and free products. Program participants won’t necessarily receive incentives for every item or subscription sold — instead, the business may set an incentive structure, such as awarding a $20 gift card for every 10 products sold.
For example, a referral participant who has bought hair care products from a certain business would receive a referral link to track their sales. The participant might email friends and family about a special sale on those hair products, including the code for their network to make a purchase. When anyone from the network buys the hair care products using the code, the sale is logged, and once the sales reach the designated milestone, the participant will receive an incentive.
Referral marketing can be an excellent way to generate high-quality leads with a high conversion rate. Harvard Business Review found that customers who joined businesses through referrals made more purchases than customers who were acquired via other methods. Additionally, referred customers themselves end up referring 30% to 57% more new customers through referrals than other, non-referred customers. All in all, then, referrals can be a very valuable source of business.
Referrals often work well in industries like B2B SaaS, financial services, and online insurance. In these industries, new leads often need to have a good degree of trust in the products and services they’re buying, and that trust is provided through their personal connection with the referral. Have a look at some of the best referral programs by industry in 2025.
Affiliate
Affiliate marketing can also help a business expand their audience and drive sales. Affiliate marketers have built a platform with a large audience, and they can promote a business’ products on that site or through video, social media, and email. The marketer doesn’t necessarily have an established connection with the business or the products, though some marketers perform product testing and write product reviews to help build audience trust and drive sales.
Compared to referral marketing, affiliate marketing tends to have a greater reach. While referral marketers reach out to their current personal networks, affiliate marketers can develop a much larger audience. They can also leverage the power of organic search, social media marketing, and more to help their content reach a larger audience, potentially increasing sales.
Due to its success, affiliate marketing is rapidly growing. According to Business Research Insights, the global affiliate marketing industry reached $17.33 billion in 2024, and is predicted to reach $63.87 billion by 2033.
Affiliate marketing can be a source of valuable data. By choosing a trusted affiliate network, your business can access a dashboard including detailed sales reports and statistics to help you better understand your audience and the affiliate program’s performance.
Affiliate marketing incentives are cash-based, but businesses may structure them as a flat fee or a percentage of a product’s sale price. An affiliate marketer who has developed a platform, like a website specializing in smartphone advice, can sign up for an affiliate marketing program. The marketer will receive an affiliate marketing link to use for each recommended product, and they can embed that link into their website content. When consumers buy products using the links, each sale is tracked, and the marketer will receive the appropriate incentive.
Affiliate programs often work well when selling individual products, as well as subscriptions. It’s excellent for the commerce industry, and it’s also effective for B2C subscriptions and online education courses. Since consumers may research high-value purchases, like when buying electronics or an appliance, affiliate marketing content that includes recommendations as well as detailed research and information on the products can help drive sales.
Which Is Better?
Both referral and affiliate marketing have advantages and disadvantages, and neither option is definitively better than the other. If you want to get started with referral or affiliate marketing, then consider which is right for your existing business and goals.
Referral and affiliate marketing sometimes work better in certain industries: Affiliate marketing can work well for subscription-based products, while referral marketing can be a good fit when you’re promoting a purchase that relies heavily on trust, like when promoting a service provider such as a financial advisor or a performance advertising platform. Referral marketing can also work well for niche businesses, particularly if you have a network with a shared interest in that niche.
Refer and Earn $1,000 with Realize Advertisers Referral Program
Key Takeaways
Referral marketing and affiliate marketing are both highly effective strategies that can increase your business’ reach and help build your audience while driving sales. Businesses may use these techniques independently or together, depending on their goals. If trust is a major element in driving sales or you’re selling a niche product, you may find more success through referral marketing. Alternatively, if you’re running an e-commerce business or want to reach a broader audience, affiliate marketing may be the better choice. Both of these techniques can be a low-cost way to help build your audience, without requiring a significant time investment on your team’s part.
Frequently Asked Questions (FAQs)
Does referral marketing typically have a smaller but more engaged audience reach, compared to the potentially wider reach of affiliate marketing?
Yes — since referral marketing is based on a marketer’s established network of connections, like friends and family, its audience reach tends to be smaller than the audience an established affiliate marketing platform could reach. Since a referral audience has an established connection with the marketer, though, that audience tends to naturally have more trust in the marketer. Additionally, since the marketer has usually purchased from the business or used the product they’re marketing, that experience and their connection with their audience can help build further trust and drive sales.
How does the tracking of referrals differ from the tracking of affiliate sales?
Businesses track referrals and affiliate sales using referral or affiliate links that are generated to be unique for each participant or marketer. The links include a code that signals the number of times each link has been used, as well as how many purchases or subscriptions the code was used to create.
While the codes and links are very similar, referral and affiliate sale tracking differs in how the sales are monitored and counted. In affiliate marketing, marketers receive a commission for every sale generated, so every individual sale is counted. In referral marketing, participants may receive an incentive for a certain number of sales. For example, they might need to make 10 sales to qualify for an incentive. All of the sales are counted, but the business tracks how many incentive milestones are reached and then awards incentives accordingly.
What types of rewards are typically offered in referral programs compared to affiliate programs?
Referral program rewards can include cash, as well as other incentives like store credit, free products, discounts, or gift cards. Affiliate programs focus more on cash incentives, whether the cash is a percentage of the sales or a flat fee.
