Affiliate marketing 1 is a commission-based arrangement where referring sites (publishers) receive a commission on sales or leads by merchants (retailers). MThink reports that 90 percent of advertisers indicated in a survey that affiliate programs were important to their marketing strategy. The majority of publishers also revealed that affiliate partnerships drove more than 20 percent of annual revenue. Let take a closer look at Affiliate Marketing (AM).
What is Affiliate Marketing?
AM enables you to expand your brand’s online presence by working with affiliates who operate niche sites that attract a specific market. In other words, you let other people market your products and send you website traffic. In return, you pay them a percentage of any sales that are made that originate from their efforts (Shopify.co.za). The main advantages and disadvantages 1 of affiliate marketing are as follows:
Advantages of affiliate marketing:
- The retailer gain more visibility in the paid and natural listings of the result pages;
- Retailers can use different affiliates to target different audiences, product categories and related phrases;
- Affiliates may be more responsive to marketplace changes;
- Affiliates allow retailers to reach customers through generic phrases;
- The reach of the retailer’s brand can be increased by using affiliates;
- Greater awareness can be generated, especially if the retailer is not well known;
- Pay-per-performance – the costs of acquisition can be controlled well.
Disadvantages of affiliate marketing:
- Incremental profit or sales may be limited;
- Affiliates may exploit your brand name;
- The retailer’s brand reputation may be damaged;
- The programme management fees may be high;
- It may take a lot of time to form and maintain good affiliate relationships.
How does Affiliate Marketing works?
The basic premise with AM is that you let other people market your products and send you website traffic. In return, you pay them a percentage of any sales that are made that originate from their efforts. Subsequently this is done by giving them special hyperlinks that they can post on their website. These hyperlinks usually contain an ID code which helps to track their efforts.
Further, when we talk about AM, it is important to note that there are different types 2 of affiliates. Each affiliate type fulfills a different role in terms of value, volume and reach.
The digital platforms that affiliates can use are as follow:
- Reward sites – drives sales by rewarding its members through a share of commission it earns from an advertiser.
- Content sites and blogs – are often focused on a niche interest and feature unique content. Since content affiliates form part of an Affiliate Program’s long-tail strategy they rarely are large volume drivers. Nevertheless, unique content suggests editorial credibility and often has a positive impact on an advertiser’s search engine optimization (SEO) efforts.
- Email affiliate – sends emails to its own (or 3rd party) data base to drive brand conversions.
- Comparison websites – offer consumers the opportunity to compare products of different advertisers. Although comparison websites can generate large sales volumes, they vary a lot on how they structure their rankings. This ranking is not always based on best product but often earnings per click (EPC).
- Retargeting Affiliates – affiliates retarget most commonly through tags that they place on the advertiser’s site and try to re-engage with consumers who have not completed their purchase. The advertiser has full control over traffic source and targeting options.
- PPC Affiliate – A PPC (pay-per-click) affiliate is a search specialist who drives traffic to an advertiser’s site by bidding on relevant keywords via a custom-built landing page. The key to a successful trial with a PPC Affiliate is to set up strict guidelines which help ensure affiliates are compliant.
- Voucher and deal sites – generate sales by offering their users a discount code that can be redeemed online against their purchase.
- Social Affiliates – works via highly targeted posts on social networks or sponsored tweets, which can help to drive awareness and assist in generating need. It is important to keep the creative relevant, with a strong call to action.
Measuring the success of Affiliate Marketing
Retailers must determine what they want to achieve with their AM program before starting with it. Therefore knowing what you want to accomplish is fundamental to determining the key performance indicators (KPIs) that go along with your program objectives says John Lawrence, Senior Analyst at Visual IQ. The most commonly adopted KPIs for affiliate marketing are leads, conversions, conversion rate, cost per acquisition (CPA), revenue, and return on ad spend (ROAS). Once you’ve identified your KPIs, you need the right tools to measure against them. Traditionally in affiliate marketing, the sale is credited to the last click prior to a conversion. The affiliate partner responsible for driving a user to an advertiser’s website receives a commission for the purchase.
Optimizing your Affiliate Marketing campaign
Retailers need to use their budget for the digital marketing campaigns effectively. Therefore you should ask questions such as “Where should I put my money to make the most of my affiliate marketing program? Which channels work best? What strategies should I employ to get the most out of my spend” according to Greg Bayer in Target Marketing. Greg offers the following advice:
- Test, test again and then test some more. Keep optimizing the campaign — there are always more tweaks to make while it’s in motion.
- Differentiate yourself from the pack. Changing up your creatives can keep things fresh for consumers and boost your revenue.
- Email marketers: CYA (Clean Your Addresses). It’s vital to scrub your list of inactive or closed addresses that will inevitably result in bounced emails.
Looking back at 2016, Rae Hoffman (MarketingLand) asked whether Affiliate Marketing will be a viable business model in 2016? She suggests: “As affiliate marketing emerges as a viable native advertising alternative for traditionally display-funded larger publishers, the competition in obtaining affiliate sales will increase.” Markus Taylor writing in VentureHarbour concurs that the challengers for affiliate marketing revenue will be stronger in terms of technology and resources.
Sadly, from tighter legislation for affiliates, to Google cracking down on thin affiliate content, and a general increase in competition on the web, it’s becoming increasingly difficult for affiliate marketers to get ahead in the game.
However, Rea gave the following assurance (pondering on the ongoing growth of Affiliate marketing): “One thing is for sure: Affiliate marketing is still a viable business model.”
Remember, you need a well researched and written Marketing Plan to get your business off to a good start!
- The Big Challenge: How to Increase your Website Traffic
- The Ultimate Guide to Affiliate Marketing in 2019 (STEP-BY-STEP)
1 Chaffey, D. and Ellis-Chadwick, F. 2012. Digital Marketing: Strategy, Implementation and Practice, Pearsons Education Limited, Edinburgh Gate, Harlow, Essex CM20 2JE, England.
2 Vijay Solanki, 2016. IAB Australia Affiliate Marketing Handbook.