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 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.

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

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.

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.

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

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.

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.

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.

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

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.

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.

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.