May 9, 2019
Affiliate Marketing 101
Curious about affiliate marketing and how it can help build your business? You’ve come to the right place. But to understand affiliate marketing, one must first understand all the components that go into it. We’ve mapped them out here:
There are usually four parties involved: advertisers, publishers, networks, and consumers.
- Advertisers – the party that sells a product or service (sometimes referred to as merchants).
- Affiliates – aka publishers, or the parties that promote the product or service for a commission of sales (e.g. bloggers, editorials, shopping sites, social influencers, YouTubers, coupon sites, etc.).
- Networks – an affiliate network is the middleman who connects advertisers with publishers, provides the tracking technology, and processes commission payments (e.g. Commission Junction, Rakuten, IMPACT, Pepperjam, ShareASale, etc.).
- Consumers – these are the end-customers who purchase the product or service.
The textbook definition of affiliate marketing is “an arrangement by which an online retailer pays commission to an external website for traffic or sales generated from its referrals”, or in other words, where outside entities are incentivized to promote a product or service.
Affiliate marketing allows the retailer to extend its brand through association with the affiliate or influencer. Both sides profit in this relationship: The retailer generates revenue via customer acquisition, and the influencer/affiliate generates revenue via referrals and a commission fee. Because it plays in three phases of the customer life cycle (discover, explore, and buy), affiliate marketing can be a useful mechanism for extending marketing acquisition tactics and extending reach.
Successful affiliate marketing leverages the relationships between these parties to generate revenue. Publishers promote a product or service using their own unique affiliate link and consumers make purchases as a result. Tracking cookie technology is used to record consumer activity so that sales can be attributed back to the publisher. The network and advertiser use the cookie data to quantify results and calculate commission payments.
eMarketer has predicted affiliate marketing spend will hit $6.8 Billion in 2020. Predictive analytics e-commerce firm, Custora, says affiliate marketing will affect 14% of all e-commerce purchases in the United States. And Forrester’s prediction is that by 2020, US e-commerce sales will hit $500 billion and affiliate marketing will impact $70 billion in sales.
What Is Affiliate Marketing from an Advertiser’s Perspective?
Affiliate marketing enables you to generate more sales by tapping into other people’s audiences. These people or ‘affiliates’ earn a commission for referring customers, so it’s in their interest to write positive reviews and spread word of mouth. They’ll often write blog posts, promote your product on social media, and share it with their email list, in order to earn higher commissions. The best affiliates will leverage their social network with facebook ads, facebook messenger, or their own affiliate websites.
Affiliate marketing also enables you to reach a much wider geographic audience. If you’re a business that sells internationally, then you can recruit affiliates from all over the world to promote your products and services. Instead of having to invest in local agencies and translation of traditional marketing materials, your affiliates will produce localized promotional content on your behalf. They’ll know the best keyword terms to target search engines in their own language without you having to source expensive translators or local marketing companies.
Affiliate marketing is an incredibly low-risk strategy with a high ROI. Most other promotional channels require some kind of payment up front and there’s a chance that it may not work. In these cases, you’ve lost some precious marketing budget and gained nothing in return. However, with affiliate marketing, you’re only charged once a sale is confirmed. With this performance-based method, both parties’ cash flows are protected and it ensures you’ve already received the money from the customer before you have to pay the affiliate.
So, if you want to launch a new product or service with a bang and generate buzz from the start, having an army of relevant affiliates (that have an interest in revenue sharing) can help. Affiliate marketing can increase your website traffic and generate more leads, so you drive more sales to reach new audiences. To fully utilize the affiliate space and what it has to offer, your best bet is to work with a firm who specializes in affiliate management, ensuring that you bypass any learning curve and turn up the heat on results quickly.
What Is Affiliate Marketing from a Publisher’s Perspective?
From a publisher/affiliate’s perspective, affiliate marketing involves the promotion of a product or service that your audience is likely to purchase. To do this, you might create detailed blog posts, infographics, or step-by-step video guides for viewing on YouTube. You may choose to host a resource page on your blog that lists all of your favorite products or send an email to your list with your top shopping picks for the week. You might even invest in pay-per-click campaigns to drive visitors to a landing page that includes your affiliate links.
Whichever way you choose to promote something, you’ll include a trackable link that’s unique to your affiliate account so that any sales can be attributed back to you. If you’re a blogger who wants to monetize your platform, then becoming an affiliate can provide that steady source of passive income as you earn commissions. An associate program gives you the opportunity to provide solutions to your audience who may need a product to solve a problem. The savviest publishers are content marketers and pay per click powerhouses, though there are many other mediums as well.
Is the Affiliate Channel Effective?
Affiliate marketing is a highly effective promotional channel for generating income. It’s one of the leading drivers of online sales and continues to grow in popularity.
Did you know that:
- 90% of advertisers consider affiliate programs to be important or very important in their overall marketing strategy.
- The majority of publishers reported that affiliates drove over 20% of their revenue.
- 46% of marketers consider affiliate marketing to be very cost effective in acquiring customers (second only to email).
- Affiliate marketing drives 16% of e-commerce sales, which is on par with email marketing and ahead of both social commerce and display advertising.
- 53% of advertisers have seen a YOY sales increase as a result of affiliate marketing efforts
- 83% expect revenue to continue to increase over the next two years.
- 61% of advertisers plan to devote more of their budget to affiliate marketing next year.
- Affiliate commissions are the fastest-growing income source for publishers, comprising 15% of their revenues.
Affiliate marketing works because it creates a win-win situation for everyone involved. Companies only pay commissions on sales that are generated which guarantees a strong return on investment. Affiliates get to earn more money which can eventually turn into lucrative passive income over time. This generally low-risk venture benefits both advertisers and publishers.
Why Work with an Affiliate Agency?
Working with a top affiliate agency like Advertise Purple will multiply your results faster than you would without any assistance. Having a partner who can help you to hit the ground running when you first launch your affiliate marketing campaign is much more likely to generate immediate results for your brand and business. If you have products to sell or new services to launch, then our team of industry experts can help you by:
- Curating the best possible results – our clients see an average of 131% growth in affiliate sales within their first six months with us thanks to a strategic approach that increases the volume and quality of web visitors.
- Assigning a dedicated account manager who understands your business needs and has established relationships with the best affiliate publishers in your vertical.
- Gaining efficiencies – by outsourcing the management of your affiliate marketing system to us, your team can focus on other aspects of digital marketing and revenue generation.
- Benefitting from the latest industry knowledge – our team of data scientists, media buyers, and account managers are always at the forefront of affiliate marketing trends and best practice.
So, there you have a comprehensive answer to the question – what is affiliate marketing? It can benefit a wide range of businesses by delivering a strong return on investment. The setup requires some initial work to define program terms and create promotional content for affiliates to use. However, once this is completed, affiliate marketing can be a relatively steady source of revenue.
So, if you’re still wondering – what is affiliate marketing, or have other questions related to how it works and the first steps to get started, our team can help. Our digital marketing team specializes in this area and always up-to-date with the latest affiliate management technologies. These program managers can advise you on the best approach for your business, whether you’re a small start-up or large enterprise.
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