April 20, 2018
What is Affiliate Marketing? Definition & Guide
Curious on affiliate marketing and how can it help build your business? We used to be surprised when the first question from a lot of our future clients is “what is affiliate marketing?” but not anymore. This is something we’re often asked by clients who are familiar with the term but don’t know exactly what it means. Perhaps you’ve heard it suggested as an effective marketing channel but aren’t quite sure what it is. Or you understand the concept of an affiliate marketing program but want to learn more about how it works.
As an online strategy, affiliate marketing is often misunderstood. In the past, it gained a poor reputation for spammy tactics, but modern affiliate marketing is something very different. These days the most savy internet marketer is leveraging affiliate marketing succes to turn more potential customers into clients. In this article, we break down exactly what affiliate marketing is and how it can benefit all types of businesses.
What is Affiliate Marketing?
Affiliate marketing is an online strategy where people are incentivized to promote your product or service. It’s defined as ‘a marketing arrangement by which an online retailer pays commission to an external website for traffic or sales generated from its referrals’. This can be through the search engines, social media, an email list or other means. All of the referrals are tracked using cookie technology so that commissions and affiliate payments can be automated. The power of affiliate channels is real as anyone that sells online can understand the need for qualified website visitors to grow an online business.
What Is it 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 will leverage their social network with facebook ads, facebook messenger, or leveraging their affiliate websites.
This online marketing strategy is suitable for lots of different business situations. If you want to launch a new product or service with a bang and generate buzz from the start, having an army of affiliates (that have an interest in revenue sharing) can help. Besides selling a physical product, affiliate marketing can also increase your website traffic and generate more leads, so you drive more sales of an existing offering to new audiences. To really drive an effective at this channel, working with a firm who specializes in affiliate management is a sure-fire way to bypass any learning curve, leverage existing relationships and turn up the heat on results.
What Is Affiliate Marketing from a Publisher’s Perspective?
From a publisher’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 to using it 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.
Affiliate marketing success can lead many to believe this is an easy way to make money online (passive income). However, It takes a lot more than an online course, a few domain names and Amazon products to become one of the real success stories. Although the internet is flooded with business models and marketing tips, it is simply pretty darn difficult to start leveraging this channel effectively.
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 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, pay per click powerhouses, leverage marketing automation and can recite the guide to affiliate marketing like clockwork.
Why Is the Affiliate Channel So Effective?
Affiliate marketing is a highly effective promotional and income generation channel. It’s one of the leading drivers of online sales and continues to grow in popularity.
- 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 passive income over time. It’s a low-risk marketing channel that benefits both advertisers and publishers.
Benefits & Drawbacks
Affiliate marketing has lots of business benefits but it’s also important to be aware of potential drawbacks too. From an advertiser perspective, it can be one of the most effective ways to drive traffic to your website. It’s a well-known concept that people need to know, like, and trust you before they’ll buy from you. In the case of affiliate marketing, they just need to know, like, and trust your affiliate. You benefit from their credibility and existing relationship with their audience. So, instead of having to go out and build something from scratch, you get a head start on sales.
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.
It’s also an incredibly low-risk marketing strategy with a high ROI. Most other promotional channels require some kind of payment upfront and there’s a chance that it may not work. In these cases, you’ve lost some precious marketing budget and not gained anything in return. However, with affiliate marketing, you’re only charged once a sale is confirmed. You can define the payment terms as 60 or 90 days to allow for refunds or processing issues. An affiliate agency will generally charge a nominal amount to cover overhead and then leverage their relationships to build your affiliate network. This format protects both parties cash flow and ensures you’ve already received the money from the customer before you have to pay the affiliate. It’s a performance-based method that rewards top-performing affiliates who refer genuine customers.
How Does Affiliate Marketing Work?
Affiliate marketing is quick and easy to set up since there’s a very low (or sometimes no) investment required to get started. 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).
- Publishers – the party that promotes the product or service and receives a commission on sales (e.g. bloggers, website owners, Instagram influencers, YouTubers).
- Networks – an affiliate network is the middleman who connects advertisers with publishers, provides the tracking technology, and processes commission payments (e.g. Commission Junction or Amazon Associates).
- Consumers – these are the end-customers who purchase the product or service.
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.
Best Uses for Affiliates
If you create a product or service then affiliate marketing can be used to generate buzz and ensure a successful launch. Successful affiliate products stand the test of time and business ideas span across several industries and verticals. It is also highly effective at generating leads, trials, and sales. Since you only pay commission after a genuine sale is made, there’s a minimal amount of risk involved. Once you set up your program and find affiliates, it’s a relatively self-sustaining channel that basically manages itself. This frees you up to pursue new marketing initiatives or focus on other areas of your business.
Although affiliate marketing is an incredibly effective online strategy, many businesses have yet to take full advantage. This presents a huge opportunity for you to gain an extra edge over the competition, but you’ll need to move quickly. As we saw in the statistics above, more and more companies are engaging with affiliate marketing to drive revenue. If you don’t incorporate an affiliate program into your marketing strategy, then you’re likely to be missing out on sales.
Types of Publishers
There are many different types of affiliate who use a variety of marketing tactics when promoting other people’s products. They will often earn money by combining a number of successful marketing channels to generate the best possible results. The types of publisher, channel, and tactics will vary by vertical, and audience type so there isn’t a one-size-fits-all approach. However, these are the most effective affiliates that we work with to promote products.
Bloggers run their own websites and have usually spent years building up a loyal following. The affiliate marketing strategy that bloggers use will usually include reviewing products or creating educational content that explains how to use it.
Influencers often use social media channels such as Instagram and YouTube to promote brands and persuade people into buying the product. Many influencers make good money with affiliate marketing because they’re able to generate strong sales for businesses.
Large Media Sites
These sites have incredibly high volumes of traffic with audience numbers in the millions. One mention of an ecommerce platform or online business in their articles can generate huge orders in a short amount of time.
Every publisher we work with can provide detailed statistical information on their audience demographics. They will also have a history of creating successful campaigns that generated strong ROI for other merchants. This helps us to match up your business with the perfect publisher to maximize revenue results.
Why Work with an Affiliate Agency?
Working with a top affiliate agency like Advertise Purple will multiply your results and generate an even stronger return on investment. If you run enterprise ecommerce then you can’t afford any mistakes to be made in the setup or wait for staff to learn the ropes. You need a partner who can help you to hit the ground running when you first start affiliate marketing and generate immediate results. If you have products to sell or new services to launch, then our team of industry experts can help.
- Generate the best possible results – our clients see an average of 131% growth in affiliate sales thanks to a strategic approach that increases the volume and quality of web visitors.
- Dedicated account manager – who understands your business needs and has established relationships with the best affiliate publishers in your niche.
- Gain efficiencies – outsource management of your affiliate marketing system to us so that your team can focus on other aspects of digital marketing and revenue generation.
- Benefit 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.
What Are the Steps Involved in Working with an Affiliate Agency?
Beyond understanding the answer to “What is affiliate marketing,” you may decide that working with a top affiliate marketing program is in your business’s best interests. After all, it’s hard to argue with the return on investment demonstrated by involved affiliate marketing programs at agencies such as Advertise Purple. And that’s not even taking into account the time, resources, and energy you and your team will save by outsourcing the management of your affiliate marketers.
However, it’s one thing to have a solid grasp on the affiliate marketing definition and another to begin integrating a full-blown program into your business’s digital advertising strategy. So what are the steps involved in the process? How will the agency you hire manage to set you up with your first affiliate marketer? And just how involved will you have to be in selecting and managing your business’s affiliate marketers?
The good news is you won’t really need to remember the affiliate marketing definition when you’re working with an expert agency. You can even turn to the experts and ask, “What is affiliate marketing, again?” and you won’t have to worry about them batting an eye. They’re there to handle everything.
While the specifics of the process are unique to each company and brand, working with an affiliate agency to set up your affiliate program usually involves the following four steps:
- Building and launching the affiliate marketing program
- Growing the program
- Refining the program based on the initial results you’re seeing, and
- Expanding the program to get the maximum ROI for your business without going above what you can afford to spend on affiliate marketers.
Wondering what each of these steps looks like in practice when you’re working with an agency? Don’t worry; we’ll go into detail, so you know exactly what to expect.
1. Building Your Involved Affiliate Marketing Program
Once you’ve partnered with a top-notch agency, the first order of business will be to build up and launch your new affiliate marketing program.
To start the process, the agency will research what strategies have worked well for brands or businesses that are similar to yours. This might include looking through the most popular platforms favored by top affiliate marketers, such as YouTube, Twitch, Instagram, and other major media sites. The agency will utilize its own competitive insights to come up with key tactics that are most likely to guarantee success once the program launches.
During this initial phase, it’s very important for you as the advertiser to keep your partners at the agency informed about how things are going at your company. For instance, if you’re planning to hold a huge promotional sale or launch an exciting new project, that information could prove vital in helping the agency develop a profitable strategy that will attract top affiliate marketers to your brand and result in a higher short-term ROI for your new affiliate marketing program.
Of course, one of the major benefits of working with an agency versus trying to build an affiliate program all by yourself is that top agencies already have an affiliate marketer pool to draw from. They’ll be able to match your brand with high-quality publisher sites that will not only bring traffic to your company’s page but will also provide client conversions that will drive up your sales.
After the strategy has been set in place, it’s time for the program to launch!
2. Growing Your New Affiliate Program
Another top benefit of partnering with an agency to launch your involved affiliate marketing program is the fact that the partnership doesn’t stop with the acquisition of your first affiliate marketer. The agency will continue to assist in nurturing and optimizing your affiliate program over the months to come.
One of the key facets of this process is measuring the incremental growth in your business’s returns, as well as managing and monitoring the influx of new affiliate marketers in the program’s early stages. If you’re the type of person who keeps typing “What is affiliate marketing” into your search bar, this step might make your head spin a little. After all, if you’re not sure you have a solid grasp on the affiliate marketing definition to begin with, how are you supposed to keep track of all of your affiliate marketers or figure out how well your new program is performing?
Your main role during this phase is not to panic, and to trust the agency you’re working with to handle the day-to-day operations of your involved affiliate marketing program. This includes communicating with advertising partners to ensure a steady influx of new marketers promoting your brand or business.
Another important step during the growth phase is collaborating with top-performing affiliate marketers to ensure your business stays at the forefront of consumers’ minds. This includes examining the data to see which affiliate marketer or marketers are providing your brand with the highest conversions and perhaps choosing to deepen or expand those relationships to benefit all parties involved.
3. Refining Your Program
Once your program has been running for a year or so, you’ll probably find yourself more confident in your understanding of the affiliate marketing definition. Your days of constantly asking, “What is affiliate marketing?” will likely be long behind you. So what comes next?
At the two-year mark, when your program has more or less reached maturity, your agency should still be focusing a significant chunk of resources and energy on growing and expanding your program to suit your business’s goals. The catch is that, in most cases, the number of high-quality affiliate marketers available to hire onto your program will likely be noticeably lower than during the growth phase. This means the program management agency you’re working with will need to get creative to continue meeting your business’s growth goals.
Here are some of the strategies your agency might implement to maintain growth during the refining stage:
- Optimizing and assisting top-tier and mid-level affiliate marketers
- Coming up with new partnership offers to incentivize people to join your program
- Monitoring the efficiency and profitability of the program and using the data gathered to hone in on specific strategies for increasing both
Even if you now understand the affiliate marketing definition by this stage in the program, you’ll still be glad to have your agency around. After all, optimization has to go beyond the basics of what is affiliate marketing and get to the top strategies.
It’s easy to run out of steam and find yourself with no new ideas after a year or two of running this kind of program. That’s why your program management agency will be on hand with multiple creative refining strategies to guide your business in the right direction to meet its goals.
4. Expanding Your Program
Thanks to the strategies implemented by you and your program management agency, your affiliate marketing program should see a healthy rate of growth as your business matures and expands. Along with this expansion, you and your agency will likely discover new ways to potentially draw more customers into your business, including customers that would have been difficult or impossible to reach before expanding.
For instance, you may find that the next logical step in expanding your business is to seek out new markets in other countries. Working with a program management agency that has experience in global markets will be vital to ensuring the success of bringing your affiliate marketing program to other countries.
Think about it: if managing a team of domestic digital marketers is difficult, liaising with and managing marketers in other countries is a whole new ball game. There are new sets of rules to learn, language barriers to cross, and a whole slew of cultural and political influences that might be totally different from those that affect your domestic customer base. If you try to take on all that responsibility and management on your own shoulders, only knowing the very basics of “what is affiliate marketing” won’t get you far.
Going global is as nerve-wracking a prospect as it is enticing for many business owners. As recently as 2015, only 40% of businesses saw a 3% or higher return on their investment after expanding into worldwide markets. And that’s after ten years of patiently growing their global programs.
However, with an experienced global affiliate marketing agency on your side, you’ll be able to fearlessly expand your program into new markets with the confidence that your team of experts will know precisely how to tailor and present your program to each potential pool of marketers in a way that will appeal to them and make them excited to introduce new clients to your brand.
The meteoric rise of affiliate marketing in the past few years has really changed the game regarding expanding and broadening the client base for businesses and brands. Even going global is less intimidating when you have an experienced program management agency in your corner, armed with digital marketing strategies tailored to each new frontier.
So, there you have a comprehensive answer to the question – what is affiliate marketing? It can benefit a wide range of businesses and delivers 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 passive 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, then our team can help. Our digital marketing team are specialists 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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