Reseller vs Referral: How To Choose the Right Partnership

Partnership strategy is important in any business to help drive revenue growth and new customers. As such, it is important to choose partners wisely. While there are different partnership channels to choose from, our focus today is on reseller vs. referral partners. When choosing between these two, keep in mind that partner onboarding is an ongoing process. 

So, to know what works best for your business, it's important to understand the difference between reseller vs. referral partners. After understanding the difference, you can then discuss the brand's incorporation reseller or referral program with your stakeholders.

But before that, read through this article to get a clearer picture of everything you need to know about reseller vs. referral partnership.

Though reseller and referral partners differ in terms of what they do and how they work, people still confuse one with the other. 

Do you want to learn more about reseller vs referral partners? Read on as we discuss below how both partnerships work. 

Reseller partners buy goods and services from a company with the intent to resell as though they were their own. A purchases products in bulk and at a discount. Therefore, they can sell at a higher price to make a profit.

For this reason, the brand's incorporation reseller program can generate revenue quicker because they sell their products and services faster, with innovative strategies and a nothing-to-lose mindset.

For example, let's say you want to begin your own web hosting company. Starting from scratch will cost you more than you can imagine. But you can save costs by signing up for a brand's incorporation reseller program. With the program, you can buy hosts in bulk at a cheaper price and resell as your own with additional services.

Referral partners refer customers to a business and get paid a percentage commission when they make a purchase. Oftentimes, the commission is a one-time cash commission, recurring commission, gift card, etc. A referral partner will send leads to you and then your sales team needs to close the agreement.

A referral partner can be seen as a business-to-customer (B2C) affiliate program. This is because the key participant in a referral partnership is the customer. 

For instance, you want to be a referral partner for a web hosting company. After registering on the website as a referral partner, you can use a lead form, special referral links or unique code to submit new leads. When a lead is converted to customer, you get rewarded.

Are you still confused? Well, below we elaborate on some of the key differences between marketing through reseller vs. referral partners.

While both resellers vs. referral partners are valued by any business, their links to your business differ. A reseller partner is treated as a business owner, while a referral partner can be a business owner or a customer. A reseller needs to have the capital to buy products and services from the business.

But a referral partner doesn't. In addition, a referral partner simply needs to put out the good words to make others buy products and services, whereas a reseller partner needs to employ intense business strategies.

Reseller partners’ commission is based on the discount they get from the products they purchase. Whereas referral partners’ commission is based on the percentage of the purchases the customer they refer make.

Another way to differentiate between reseller vs referral partners is with the contracts they have with the business. For reseller partners to profit, they have to purchase a minimum set amount of products or services from the business.

However, for referral partners to profit, they have to refer new customers who will make a purchase.

We created a table below summarizing all the important differences between reseller vs. referral partners.

As a business owner, would you choose a reseller partnership over a referral partnership or vice versa? While both have their fair share of advantages, you also need to know they have disadvantages as well. Our advice is to choose a partner you feel comfortable with weighing in both the advantages and disadvantages.

For example, reseller partners may generate revenue faster for your business because resellers will sell for you. However, they sell the product as their own with their own added services.

Similarly, you know referral partners bring in loyal customers as will send leads to you abd then your sales team needs to close the agreement. However, growth will be dependent on how serious the partner is with referring new customers. So, it's best to always weigh the pros and cons of reseller as well as that of referral partners before choosing one.

In conclusion, if you can incorporate both reseller and referral partnership, by all means, go for it. But if you are struggling with managing partnerships (affiliates, referrals, and reseller partners), you can trust Kiflo PRM.

Kiflo PRM is a modern partner platform that can help small-to-medium businesses (SMBs) drive sales and growth with partnerships.