October 04, 2021

Reseller vs Referral: How to Choose the Right Partnership

It´s essential to select the right partnership for the growth of your business. Learn the difference between reseller vs referral partners.

reseller-vs-referral-partner

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 various partnership channels to choose from, our focus today is on the differences between reseller and referral partners. When choosing between these two, keep in mind that, while onboarding is an ongoing process for any type of partner, the process will look different depending on the type you choose.

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

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. 

What is a Reseller Partner? 

Reseller partners buy goods and services from a company with the intent to resell as though they were their own. A purchases goods in bulk at a discounted price. They can then sell the products/services 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. The reseller is responsible for the entire sales cycle, meaning that you won't need to worry about nurturing the leads or closing deals.

For example, let's say you want to create 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. By joining the program, you can buy hosts in bulk at a cheaper price and resell them as your own with additional services.

What is a reseller partner?
An infographic 2:1 explaining "What is a reseller partner?"

What is a Referral Partner? 

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 a unique code to submit new leads. When a lead is converted to a customer, you get rewarded.

What is a referral partner?

Key Difference: Reseller vs. Referral Partner 

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

Key Difference #1:  Link to the Business 

While both resellers and referral partners are valuable, 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. A referral partner simply needs to share good words to make others buy products and services, whereas a reseller partner needs to employ intense business and sales strategies.

Key Difference #2: Types of Commission

Reseller partners’ commission is based on the discount they get from the products they purchase. Referral partners’ commission, on the other hand, is based on the percentage of the purchases the customers they refer make.

Key Difference #3: Contracts

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

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

Why Choose Reseller or Referral Partners?

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

reseller vs referral partners table
Reseller vs referral table comparison

So, how do you know whether you should choose a reseller partnership over a referral partnership, or vice versa? To best do this, you need to know the disadvantages, as well. Our advice is to choose a partner you feel comfortable with, weighing 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--services that will be out of your control.

Kiflo Reseller Partner Program
Build up your reseller partner program

Similarly, you know referral partners bring in customers by sending qualified leads that your sales team will need to close. However, growth will be dependent on how serious the partner is with referring new customers. Be sure to weigh the pros and cons of resellers and referral partners before choosing one.

Kiflo Referral Partner Program
Scale your referral partner program with kiflo

Select the Right Partnership Program for Your Business in 2021

If you can incorporate both reseller and referral partnerships, 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-sized businesses (SMBs) drive sales and growth with partnerships.

See how Kiflo PRM helps SaaS SMBs to scale, manage and grow partner revenue.

Get a free demo

Frequently Asked Questions (FAQ)

What is the Difference between a Reseller and a Partner?

Resellers purchase products and services from a business and resell them to end-users for a profit. Whereas partners have an alliance with a business where they work together to expand the products and services.

What are Referral Partners?

Referral partners are people who refer new customers to a business and get rewarded when they make purchases. Referral partners are trusted entities, hence they are one of the best ways to get loyal customers.

What is a Resale Partner?

A resale partner is a type of channel partner that acts as an intermediary between customers and your business. As such, they buy products and services from your business and sell them to end-users for a profit.

What Makes a Good Referral Partner?

Communication, by all means, makes a good referral partner. A referral's ability to effectively communicate success stories, values and processes to new customers will determine the conversion rate.

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