Referral vs Reseller Agreement: What`s the Difference?
When it comes to business partnerships, referral and reseller agreements are two commonly used arrangements that can both be beneficial for parties involved. However, it`s important to understand the differences between the two to determine which option is best suited for your specific needs.
Referral Agreement:
A referral agreement is a business partnership where one party refers potential customers to another party`s business in exchange for a commission or other type of compensation. In this type of agreement, the referring party typically doesn`t have any involvement in the sales process or customer service beyond the initial referral.
For example, a marketing agency may have a referral agreement with a website design company. If the marketing agency refers a client to the website design company and the client ends up purchasing a website, the marketing agency would receive a commission for the referral. However, the marketing agency wouldn`t have any involvement in the actual website design process or customer service.
Reseller Agreement:
A reseller agreement is a business partnership where one party purchases products or services from another party at a wholesale price and resells them to customers at a higher price to earn a profit. In this type of agreement, the reseller typically has more involvement in the sales process and may handle customer service as well.
For example, a tech company may have a reseller agreement with a retailer. The tech company would sell its products to the retailer at a wholesale price, and the retailer would then sell the products to customers at a higher price. The retailer would handle the sales process and customer service, but the tech company would still be responsible for product support and warranties.
Which is Right for You?
When deciding between a referral agreement and a reseller agreement, it`s important to consider your business goals and resources. Referral agreements can be a good option for businesses that want to generate leads without the additional costs of sales or customer service. Reseller agreements can be a good option for businesses that want to expand their distribution channels but may require more resources to manage.
In the end, both referral and reseller agreements can lead to successful business partnerships and increased revenue. By understanding the differences between the two, you can make an informed decision on which option is best suited for your specific needs.