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December 3, 2020

Demystifying Affiliate Marketing

I’m here to tell you affiliate marketing is not as complicated as you may think.

In fact, the core philosophy is really pretty simple. It can be applied, though, in robust and layered ways that can get a little complex. Especially when you’re working with an agency like ours here at Advertise Purple and fully optimizing your program.

If interested, we’ve already written about how a full-service ad agency won’t be able to help you develop an effective affiliate program the way a specialized agency such as Advertise Purple can. There’s simply no way they have the data and insight to maximize your output.

But I digress.

Regardless of how intricate your program is, the ultimate goal is to drive new streams of revenue, positively affecting your bottom line. Sounds interesting? It should, because a better understanding of this fast-growing marketing method could unlock serious profit for your brand.

What I’m going to do in this article is break down the simplest elements of the affiliate channel – another term for the practice of affiliate marketing in what we call a “program” (the more you understand the terminology, the easier it will be to understand the core concepts).

Let’s dive right into the basics of affiliate marketing:

There are three main parties in an affiliate transaction.

Sellers (sometimes referred to as merchants, retailers, advertisers, or brands) can range from individual entrepreneurs to global enterprises. They are the creators of the products or services being promoted and sold.

Affiliates (also referred to as publishers) promote the seller’s products to their audiences by using affiliate links and ads. If their promotion or referral leads to a sale, they earn a commission from the seller.

Customers purchase the product or service from the seller based on the affiliate’s referral.

While this article is aimed at sellers, there are certainly also benefits to operating as an affiliate. The three parties all “win” in the process of an affiliate transaction: sellers move units, affiliates get a commission, and customers find the best product for their needs.

The best affiliates work with networks. So what are affiliate networks, and what do you need to know about them? Glad you asked.

What the heck is an affiliate network?

They are intermediaries between affiliates (or publishers) and merchant affiliate programs. They allow publishers to more easily find and participate in affiliate programs that would work on their website. The end goal being to generate income from said programs.

They allow websites offering affiliate programs – typically online merchants – to reach a larger audience by promoting their affiliate programs to all of the publishers participating in the affiliate network.

Networks also have the ability to track all of the data for both the affiliate and the merchant. They act as moderators in the transaction process and “keep score”, so to speak, and how that affects the entire affiliate landscape. They also pay out the affiliate.

Wait, so I understand networks now, but how do affiliate marketing programs work?

When you sign up for a merchant’s affiliate marketing program, you’re issued a unique ID and a trackable URL to use in your content promoting the merchant’s product(s). When a user clicks on your affiliate link or banner ad, it adds a cookie to the user’s browser.

If you click on an affiliate link or ad, you might notice the referral code or identifier within the URL. Generally, the link looks longer than it would if you were to visit the merchant’s page directly.

So, that information is tracked and connected to the links ultimately included in the campaign and clicked on by the customer. So, the unique ID is what makes the magic happen. Without it, there’d be no way to track the purchase and gauge success of the advertisement(s).

As an affiliate program manager, you would use these special IDs to verify the referral source of a customer. In other words, these codes are critical for confirming and crediting affiliate partners.

Cool, but how do the commissions work? How much do you have to pay affiliates?

Not all affiliate programs operate the same way, of course. Some common commission models include:

Pay Per Click (PPC): Affiliates earn commission any time a consumer clicks on their affiliate links.

Pay Per Sale (PPS): An affiliate earns a percentage of the referred sale.

Pay Per Lead (PPL): If an affiliate’s link results in a qualified lead, they receive a fixed commission.

Ultimately, the structure and terms depend on whether you’re using a self-hosted program or an affiliate marketing network. Networks such as Commission Junction and ShareASale are popular places to get started.

The case for affiliate marketing

Essentially, when it comes down to it, as I said affiliate marketing is simple. It hinges on good products, an affiliate with strong content, and an engaged customer. This is the future of how we will find products online.

The more nuanced a seller’s program gets, the more products and services they’ll be able to sell. The better a publisher covers the products who’s affiliate links they serve up, the more they’ll make in commissions. And the customer in the end is the decision maker.

The affiliate channel provides agency for all three parts of the transaction. And again, it’s a win-win-win.

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If you’re interested in talking more about affiliate marketing, please reach out at [email protected].

Are you getting started in affiliate marketing or looking to improve your current program?

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