Reseller vs Referral: How to Choose the Right Partnership

Introduction

In today's business landscape, driving revenue growth and attracting new customers requires a smart partnership strategy. And when it comes to choosing partners, it's crucial to make informed decisions.

That's why we're digging into the two primary partnership channels: referral and reseller partners.

Choosing between these two types of partners means considering the unique onboarding processes for each. While onboarding is an ongoing process for any partnership, it's essential to understand the nuances and tailor your approach accordingly.

Before making any decisions, let's take a closer look at the difference between referral and reseller partners. Understanding the distinction allows you to make informed choices and build a successful program that drives brand growth with the right stakeholders.

Let's dive in.

Difference: Reseller vs. Referral:

It's easy to confuse resellers and referral partners, but they indeed have differences in operating.  

Reseller partners purchase goods and services from a company intending to resell them as their own. They buy in bulk at a discounted price and sell at a higher price to make a profit. This program can generate revenue quickly as resellers employ innovative strategies and a nothing-to-lose mindset.

Plus, they handle the entire sales cycle, so you don't have to worry about nurturing leads or closing deals.  

On the other hand, referral partners refer customers to a business and get paid a percentage commission when they purchase.

They submit new leads using lead forms, referral links, or unique codes. When a lead converts to a customer, the referral partner gets rewarded. While both are valuable, their links to your business differ.

Reseller partners are treated as business owners, while referral partners can be business owners or customers. Resellers need capital to buy products and services from the business, but referral partners don't.

Resellers need to employ intense business and sales strategies, whereas referral partners need to share good words.  

Reseller partners earn commission based on the discount they get from the products they purchase, while referral partners earn commission based on the percentage of purchases their referred customers make.

Lastly, reseller partners have a minimum purchase requirement to profit, while referral partners need to refer new customers who will make purchases.

Still confused? Below, we elaborate on some key marketing differences between resellers and referral partners.

Reseller Partner vs. Referral Partner Table Comparison

So, how do you know whether you should choose a reseller partnership over a referral partnership or vice versa? To make the right choice, you need to know the disadvantages, as well.

We advise choosing 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 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 depend 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.

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Build up your reseller partner program.

Now, you might be wondering, "How do I get started with my reseller partner program?" Let us help.

Step 1: Define Your Reseller Strategy

Ask yourself: What are your goals for this program? Do you want to expand into new markets? Increase brand visibility? Boost sales? Once you have a clear vision, you can shape your strategy accordingly. Remember, clarity is the key to success!

Step 2: Find the Perfect Reseller Partners

Identify potential resellers who align with your brand's values and have a network of eager customers at their disposal. Seek out those who share your passion and are eager to champion your products.

Keep in mind that finding the right reseller is like finding the perfect sidekick - they need to complement your strengths and fill in the gaps.

Step 3: Provide Stellar Support

Once you've assembled your mighty squad of resellers, it's time to arm them with the tools they need to succeed.

Provide them with comprehensive and extensive training and resources, equipping them with the knowledge and skills to showcase your products in all their glory. Support them like a superhero mentor, guiding them through the intricacies of your offerings and arming them with persuasive arguments.

Step 4: Develop Irresistible Incentives

But wait, there's more! Don't forget the power of incentives.

Offer your resellers enticing commission structures, bonuses, and rewards for their outstanding efforts. A little extra incentive can go a long way in boosting their enthusiasm and driving those sales through the roof!

Step 5: Foster Communication and Collaboration

Lastly, never underestimate the power of communication. Maintain open lines of dialogue with your resellers.

Regular check-ins, sharing success stories, and addressing their concerns will foster a strong and loyal reseller network. Remember, a united front is always stronger than going it alone!

Referral vs. reseller agreement

Now that we've cleared up the difference between these two types of partnerships, let's talk about the partner agreements involved in each one.

Referral agreements are typically less formal and less complex than reseller agreements. They can be as simple as a verbal agreement between two parties, or they can be more formal and include a written contract outlining the terms of the agreement.

Reseller agreements, on the other hand, are more complex and require more documentation. These agreements typically include details about pricing, payment terms, exclusivity, and other essential factors that need to be ironed out before the partnership can begin.

What is the Difference Between a Reseller and an Affiliate Program?

When it comes to promoting your products or services, referral and reseller agreements are just the tip of the iceberg. There's another option that can take your marketing efforts to the next level: the affiliate program.

Now, you might think, "Wait, aren't reseller and affiliate programs the same?" Well, not exactly.

Let's dive into the nuances and uncover the key distinctions between the two.

Affiliates: Active Promotion, Generous Rewards

In an affiliate program, the active promotion of the product or service is the name of the game. Affiliate partners are not just satisfied with spreading the word or rather saying word of mouth; they go the extra mile to market the offerings actively. Think of them as brand advocates on steroids!

Affiliates earn commissions or rewards for each successful referral they make. The more referrals they bring in, the more they stand to gain. It's a win-win situation: they help drive sales, and in return, they receive a piece of the profit pie.

Example: Imagine you have a blog about fitness and wellness. You become an affiliate for a popular athleisure brand. You write engaging content, share personalized discount codes with your audience, and even create captivating videos showcasing their latest collection.

For every purchase made using your unique link or code, you earn a commission. It's like having your own mini fitness apparel store without any inventory!

Resellers: Purchase, Markup, Profit

Reseller programs, on the other hand, involve purchasing products or services from a business and reselling them at a higher price to your own customers. As a reseller, you act as an intermediary, connecting customers with desired products.

The profit lies in the markup. By setting a price higher than the cost you incurred, you create a margin that contributes to your bottom line. Resellers often have more control over the pricing and can leverage their own customer base to drive sales.

Example: Suppose you have a thriving e-commerce platform specializing in vintage vinyl records. You strike a reseller deal with a music distributor, purchasing albums at a wholesale price and selling them on your website at a retail price. Customers come to your online store, browse through the diverse collection, and make their purchases. You handle the fulfillment, while the distributor focuses on the production and logistics behind the scenes.

So, whether you're considering an affiliate program or a reseller agreement, understanding the differences is crucial. Both methods can be effective, so choose the one that aligns with your business goals and resources.

Reseller Programs or Affiliate Programs: How to Decide

When deciding between a reseller program and an affiliate program, it's essential to consider the goals and resources of your business. If you have the resources and infrastructure to purchase and resell a product or service, then a reseller program may be the better option for you.

This allows you to control the pricing and branding of the product or service and earn higher profits.

However, an affiliate program may be the better option if your goal is simply to earn referral commissions.

This allows you to promote another business's product or service without the responsibility of purchasing and reselling it yourself. Ultimately, deciding between a reseller and an affiliate program will depend on your business's specific needs and goals.

Scale your Referral Partner Program with Kiflo.

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.