Updated June 7, 2023
Introduction to Affiliate Marketing
“Affiliate Marketing has made businesses millions and ordinary people millionaires.” ― Bo Bennet
Affiliate marketing sets up an online revenue-earning system while engaging in selling and advertising. This is the final form of the marketing and communications process because of its payment-on-performance feature. This system engages web traffic on third-party sites and creates leads to the merchant or business sites producing the goods and services. Affiliate marketing involves creating a business while investing less time and toil to sell a product. Here, the business pays the affiliates for each visitor or online traffic earned by marketing attempts of the affiliates. Here, the retailers prize the influencers for every customer who comes because of the affiliate’s marketing struggles. Affiliate marketing companies reward publishers for each new purchase they drive, making it a lucrative opportunity for publishers.
Four Partners are Involved here
- The producing business or the merchant or the retailer or the advertiser,
- The affiliate or the publisher or Associate (they advertise mostly, in the form of banner ads, use text links, searches, etc., the products and services of brands in lieu of commission on every sale),
- The affiliate network (the mediator between affiliates and the merchant, such as Google Affiliate Network, ClickBank, etc. The network tracks technology and tools and manages the payments), and
- The potential customers.
And the market has grown leaps and bounds, hovering around agencies managing affiliates, super-affiliates, and dedicated vendors. These parties use SEO (search engine optimization), SEM (search engine marketing), content marketing, e-mail marketing, and display advertising. In some cases, they use reviews on products and services.
Three different ways affiliate marketing employs digital marketing tactics:
- Reach: Tactics to make a firm brand building that includes SEO, PPC, social media marketing, and Online Public Relations
- Act and alter: Steps to measure the online business strategies, such as generating the leads, and effective e-commerce applications (e.g., home page or index page optimization)
- Involve: This tactics majorly convert one-time users to repeaters through mobile marketing, various promotional, content marketing methods (newsletters, press releases, white papers, blogging, infographics, etc.), and giving proper customer support
Most often, affiliate marketing is puzzled with referral marketing since both these marketing techniques use other partners to steer sales to the merchant. Still, both these concepts are different: while affiliate marketing depends solely on the financial incentives to promote sales, referral marketing purely depends on faith and special rapport.
How does Affiliate Marketing Work?
- Affiliate registers with the merchant/brands/retailer/advertiser in the affiliate bonding
- The publisher puts an affiliate link every time he makes a note to the advertiser on his website
- Any potential customer drops in at the affiliate website
- The customer clicks on the targeted affiliate link to navigate to the merchant’s website
- Backend a cookie was left in the consumer computer
- The potential customer purchases the products from the company’s webpage
- When the customer is on his exit steps, the advertiser tracks the affiliate cookie on his PC
- The advertiser arranges for the sale commission to be credited to the affiliate as per the affiliate terms and conditions upon receiving an affiliate cookie.
- The advertiser then prepares for the affiliate or publisher a report presenting the traffic details and sales history
- On a monthly basis, the advertiser pays the affiliate for all the matured sales
Reasons to Develop into an Affiliate
- Setting up an affiliate business requires minimal investment.
- Affiliate marketing provides an open avenue to a new marketing channel.
- No need for employees to run the business, as outsourcing is possible when the business grows.
- Simple content creation can attract visitors to the business.
- No specific product or service is required to start an affiliate business.
- An expert understanding of a specific topic is unnecessary; a willingness to learn and connect with the right people is enough.
- Opportunity to earn spontaneous income for the effort put in.
- Flexibility to work from anywhere with flexible working hours.
Affiliate Marketing Payments
Two major payment modes are followed – PPC (pay per click wherein payment is based on each click by the customers; this is the low-paying option) and PPA (pay per action done or the cost per acquisition/CPA; this method is very useful as compared to the PPC used more for traditional online ads). Gradually, CPA tends to swap the CPC/PPC as the merchant has raised the interference control on the percentage settled. The CPA is calculated as CPA= 100 / conversion rate% X CPC.
In addition to commission percentage, affiliate marketers consider costs such as network and placement charges and affiliate marketing agency fees while striving to achieve revenue goals and maintain the desired ROAS (return on ad spend) target. Sometimes, people set aside a portion of the calculated budget for future publicity.
The metric used to calculate performance improvements is earnings per click (EPC), which measures earnings generated for every 100 clicks created.
History of Affiliate Marketing
Affiliate marketing may be a very old marketing school; contemporary believers should not think the World Wide Web started these marketing activities. It existed long back when one brand rewarded its clients for referring another new customer. Though tracking offline was tough, affiliate marketing was very much there. Then, the advent of the internet paved the way for a successful affiliate marketing set-up through product information, reviews, and recommendations. In such cases, the internet became the sole means for several marketing strategies of brands. The introduction of Web 2.0 and the cookie tracking system made the objectives much simpler on the purchase channel. Thereafter came the invention of e-commerce in the late ’70s, and at the outset of 2000, blogging, and thereby user-generated content, boosted affiliate marketing.
The revenue sharing system or the commission for referred leads took place just four years after the invention of the World Wide Web. William J. Tobin invented, patented, and implemented affiliate marketing in 1996. And this practically garnered extensive worldwide interest, especially from the retailers who by now believed they could rely on these marketing efforts.
Different Models of Affiliate Marketing
Payment is generated from the affiliates’ websites by one of the models described below:
- PPC (Pay per click system) – The affiliate advertises products or services on its website and receives payment when a user clicks on the advertisements.
- RSS feeds or Blogging – This system stands for publishing reviews on the products or services of the merchants. Blogging helps spread relevant, useful, and consistent content among the users who would be informed about the product features, and they would revert with leads. The content would have targeted keywords meant for potential customers. Also, in the form of online citations or brand mentions, these keywords would implicitly link to the relevant product information sites, finally leading to promote
- Shopping Directories or Review Sites – These sites function the same way as personal blogs, giving enough information about the products sought.
- Loyalty Rewardz Sites – In the case of a cashback or points back system, the loyalty rewards sites do take place.
- Coupons – As part of marketing and promotions, the coupon sites operate, giving enough mileage to the affiliate marketing.
- E-mail Marketing – Through e-mail marketing, the product features are targeted to the users of specific demography.
- Registration – When a person registers with a site for any purpose, such as subscribing to newsletters or seeking information, other companies display or advertise their offers.
- Network – Multi-tier or Multi-level formats are used in the case of different affiliate marketing networks.
Advantages and Disadvantages of Affiliate Marketing
The following are advantages and disadvantages:
Affiliate Marketers are Nothing but Expert Digital Marketers
Some well-known digital marketers have roots in affiliate marketing. Affiliate marketing has technology, plans, and principles similar to today’s digital marketing. Aspiring online marketers today utilize improvised tools and techniques, such as tracking scripts, CMS scripts, Spy tools, and split testing scripts, which are developed based on their old counterparts due to the influence of affiliate marketing. Let’s find what makes affiliate marketers the best:
Affiliate Marketers are the Lean Marketers
- Through the advertising methods and well-structured home/index pages, the affiliate earns well
- Affiliates always believe in continuously improving their advertising methods and strategies to earn properly
- Constantly, they split-test the index pages and advertisements to improve the click-through rate (CTR)
- Most applicable metrics and hard data are used to see the popularity
- The affiliate marketers know when to pivot the offers, traffic sources, and messaging
The Affiliates are Well-versed in the Technicalities
The Knowledge of Marketing Basics
Digital marketers simply lack the skills to be conversant in enhancing the percentage of unique visitors to a webpage that switches to potential customers, building good relationships with the customers at every phase of sales channel, retargeting, and marketing automation. So, they have to rely on their team members to tackle. On the other hand, affiliate marketers have already exercised all these effective marketing tools.
Attention to Small Areas will Ultimately Increase the Revenue
Affiliate marketers prioritize increased revenue and customer acquisition, focusing on ROI (return on investment). In contrast, digital marketers may get caught up in analyzing smaller details such as ad appeal and split testing for marketing effectiveness. Giving attention to the smaller details is good only when these are able to make a massive effect on the broader business goal.
Affiliate Marketers are the Experts
When you go for a critical heart operation, would you rely on a doctor who is a general surgeon or on a cardiac specialist? You would take advice from a specialized doctor. Similarly, in case of so many intricate matters in digital marketing, an affiliate marketing specialist is a running encyclopedia who has deep knowledge in at least 1 or 2 areas, such as PPC, SEO, Display advertising, referral marketing, contextual marketing, retargeting, content marketing, or social media marketing. They have invested large sums of money and time, so they are very concerned about getting the ROI back as much as possible. They always surpass digital marketers or any other start-ups.
Moreover, affiliate marketers have good networks and industry contacts that would help them alleviate the process of setting up digital marketing platforms. This a digital marketer is not able to achieve.
As the big players, such as Facebook, Google, Bing, Yahoo, MSN, etc., have several PhDs in their run to outsmart the affiliate marketers lose continuously, you might think you are no good to perform uniquely on your own. But when an affiliate or publisher starts something, he/she is interested in ROI and the period to attain it. They are not bothered about office politics or other hindrances (e.g., the Friday party or micro-managing of human resources). When big companies hire more marketing professionals, an affiliate ardently works days and weekends to track and raise ROI.
Affiliate Marketing Strategy from an Affiliate’s Side
The following are the affiliate marketing strategies:
1. First Impression is the Last Impression
The first impression marks the stepping stone to affiliate marketing success in terms of visitors’ whole understanding of the website. You can tell your visitors to click on the first visit, which would undoubtedly put you in trouble; the website with advertisements (online banners and text links) would be like this. Chances are the visitors will skip to another site outright. It is always desirable to build a website, keeping in mind that visitors come to your website not to click first but with a query to know something, and that customer sojourn will accompany relevant ads for them to click. Now, you know what your visitors want and give them something per their needs. This will work for sure.
2. Promote if you are a User of a Product or Know to Start from Scratch
It will always be good to promote a product if you are its user; you can realistically add some personalized features you experience from using that product. This will be great – you can give an original touch to the advertisements. Visitors can easily relate to those links and ads. But sometimes you cannot use any and every product. In such cases, acquaint with the products as far as possible. This will also help you structure the campaign.
3. Describe an Affiliate Link
A banner ad or a text link beneath a post without any description will not help sate the visitors. Once you promote a product, you must know something about it and describe it as long as possible. Always, a brief narration works rather than a mere link.
4. Proper Use of Relevant and Contemporary Content
You should explain the product that you endorse. Also, the content you describe should be consistent, relevant, and valuable. It should be current and aligned with the promotions. The affiliate manager must monitor content and design in that respect. The merchant often uses the current product feeds to keep promotions and pricing up-to-date.
5. Cookie Expiry Period
For tracking affiliate sales, a cookie is set in the buyer’s browser whenever a buyer clicks an affiliate link. This cookie lasted 90 days and was configured on the Account Affiliate page. This period determines earnings per click (EPC); if the sale occurred within this period, the affiliate would get the sales commission, but if it happened after, the cookie would have expired. There would be no sales commission to be credited to the affiliates. Suppose another affiliate uses the same link after this period. In that case, the cookie period will be reset with the new affiliate details, and the old counterparts will never get any commission on the sale.
6. Focus on One or Two of the Same Types of Products
You should not promote more than two of the same kinds of products for the following reasons:
- As visitors will not believe you
- It would be difficult to choose the right one among the promoted ones.
- When you promote the same product time after time, your visitor will realize the potential of the product you are talking of
7. Promote the Products that Pay You, not the Ones that don’t
You will often have banners of the products you know well, and those will pay you. But sometimes, so many other product banners don’t pay you. There may be several reasons for this. You should forget them and focus on the ones that pay you.
Affiliate Marketing Strategy from a Merchant’s Side
It will be incomplete if we don’t highlight the affiliate marketing strategy from the angle of the merchant.
Maintaining a sound relationship with key affiliates is crucial for successful affiliate marketing initiatives. The retailer must inform the affiliates about the new product information and promotions.
2. Utmost Planning
A retailer or advertiser must source all relevant information from the affiliates regarding forthcoming affiliate openings regarding the corresponding marketing plan.
3. Well-crafted Commercials
The merchants should create commercials regarding commission rates, PPC guidelines, cookie time, and rules on voucher codes.
4. Hire new Affiliates to Search for Prospects
In times of launching an affiliate program, it is imperative to hire as many affiliates to seek fresh business opportunities as possible.
5. Authenticate Sales and Delight the Affiliates
The merchant should build an auto-validating system to track the sales record and make sure to send the affiliate commission on time after each sale through them takes place. One thing must be considered the merchant must motivate the affiliates by crediting them their dues on time.
6. Current Product Information
The merchant should be careful to send live product updates and feeds to the affiliates to help them promote the products and services as per the existing information.
7. A dedicated Page for Your Affiliate Program on the Website
The affiliate program should have a dedicated page on the merchant’s website. This page will house information on commission rates, cookie period, feeds on products and banner details, and FAQs for affiliates to join the affiliate program.
8. The Role of Incentives and Promotions
The incentives help persuade affiliates to endorse the affiliate program. The merchants can give voucher codes to affiliates who, in turn, incentivize the customers to purchase the products. Companies can offer implicit bonuses to increase the sales of certain brands and products. Companies can increase affiliate commissions to boost affiliate effectiveness and may also offer cash rewards or bonuses for achieving sales targets. So, incentives are important aspects of affiliates’ programs.
Affiliate marketing, as discussed above, deals mainly with human’s basic needs to spread the use of products and services through referrals of others. Here, financial incentives are the prime concern behind popularising any product. Primitive marketing activities got a systematic shape with the advent of the internet. Tracking, analyzing, and closing sales reps are done in a timely manner. More and more people will have trust in this marketing dynamism. This open marketing spectrum has added a sales funnel, easing the sales process. The affiliates need labor, time, intelligence, and energy to succeed, while the retailers require a good sustainable relationship with the affiliates. And all these would require a firm tackling and strategizing the affiliate program. There is no shortcut to success. When there is no such demand for typical official protocols, it should surely require a basic thing, which is a hardship to augment the ROI.
Here are some articles that will help you get more details about Affiliate Marketing, so just go through the link.