Affiliate Marketing: What, Why and How
Unlike other forms of marketing such as social media marketing and search engine marketing, the term “affiliate marketing” isn’t exactly self-explanatory. As a strategy, it spans across several platforms and formats, but it is just as easy to set up—and equally, if not more, rewarding. Here’s a helpful guide to the ins and outs of affiliate marketing.
What is affiliate marketing?
Affiliate marketing is a marketing strategy in which individual advertisers (known as affiliates) promote products and services on behalf of a particular business or merchant. In return, affiliates are rewarded with commissions when their marketing efforts generate sales or bring in customers.
Sounds pretty straightforward? Just wait until you hear the numbers. According to Business Insider, affiliate marketing today accounts for 15% of all revenue generated through digital media and a whopping 16% of all online orders. With such a huge chunk of the quickly-expanding online market at stake, this is one strategy you can’t afford to ignore.
Caption: US spending on affiliate marketing is projected to rise 10% annually between 2015 and 2020
Luckily, due to the rise of several different online platforms tailored to a variety of business needs, getting started on this exciting new venture has never been easier. With just a few clicks, you too can claim your spot in the dynamic, ever-changing world of digital marketing.
How does affiliate marketing work? We give you the 3Ps
Three main parties are involved in the process of affiliate marketing: affiliates, businesses and customers. Businesses (also known as merchants, retailers or brands) are entities that wish to advertise or market their products and services. To do so, they seek out affiliates (also known as advertisers) who will promote them.
Individual affiliates include bloggers and social media influencers, while larger affiliates may take the form of advertising agencies. Affiliates usually have a defined personal brand and produce content relevant to their audience’s interests. Thus, it’s important to seek out affiliates whose content is most in line with the audience you want to reach—you wouldn’t work with a beauty blogger to advertise your auto repair shop!
Once a partnership has been established, affiliates will market the business’s products and services to their audience, in the hope of converting them into customers. This helps to generate publicity for the business as well as conversions and sales.
First, affiliates create and publish an ad, sponsored post or other promotional material to advertise the business’s product or service. (For example, a fashion blogger might run ads promoting a particular brand’s inventory.) This generates impressions and—more importantly—clicks, which bring consumers right to the business’s doorstep.
The process doesn’t end there, however. Once a customer has been directed to the business’s website, they’ll have to complete a conversion, and become full-fledged customers. The details of the transaction are tracked and recorded, before being validated and credited to the affiliate responsible.
Once this is done, affiliates will be granted a commission: essentially, a share of the profits made from the sale. However, as the definition of affiliate marketing becomes broader, affiliates don’t necessarily have to generate sales in order to be paid. There now exist several different payment models tailored to each individual business’s needs and goals, including:
- Pay per sale. This is the most common payment model in affiliate marketing, in which affiliates are paid a certain percentage of the value of the product or service only when the consumer has made a purchase.
- Pay per lead. As opposed to pushing sales, affiliates are paid when they successfully encourage consumers to perform other types of conversions that allow the business to retain them as a potential customer base: for example, subscribing to company emails or signing up for a free trial.
- Pay per click. With this model, affiliates only need to redirect consumers from their site (like a blog or social media profile) to the business’s website. They are paid based on the percentage increase in web traffic they generate.
When executed well, these partnerships forged through affiliate marketing can be highly beneficial—and lucrative—to both affiliates and businesses.
What platforms can I use to conduct affiliate marketing?
By far one of the most popular (and fastest growing) platforms among both affiliates and businesses alike, social media is a great way to get started. Affiliates on social media typically take the form of influencers, who are usually individuals with large followings on popular sites like Instagram and Snapchat.
Because their following is usually based around a particular set of interests, partnering with influencers is a convenient way to ensure a built-in audience for a business’s products and services. For example, a video game store can easily find an influencer who produces content related to gaming and sponsor a couple of posts.
Another popular platform where affiliate marketing can be conducted is blogs. Method-wise, they tend to be similar to social media (pay content creators to get sponsored posts), but they offer a much wider variety of formats including text posts, graphics and videos. Depending on the chosen blog, the intended audience may also be wider and less niche than that of social media, leading to more impressions.
Running ads on some of the Internet’s biggest websites is also a great way to get the word out about your business, or any sales and promotions currently on offer. Done well, ads don’t have to be a hindrance or an eyesore; instead, they can complement content already being produced, and make consumers more receptive to your message.
Company affiliate programmes
Some larger companies like Amazon have dedicated affiliate programmes to recruit affiliates, who then encourage consumers to buy from their website. Being a member of a company’s affiliate programme can be as simple as including a “Buy from Amazon” button on your website; but if you generate enough sales, it can be extremely rewarding.
What are the benefits of affiliate marketing?
Affiliate marketing as a strategy has enormous benefits for both affiliates and the businesses that partner with them. For affiliates, it can be a convenient way to earn some passive income that extends into the long term; a single social media post, for example, can generate returns long after its initial publication date, if consumers continue to purchase products based on it. (Plus, you won’t have to deal with the nightmare that is customer support!)
For businesses, affiliate marketing is a great way to ensure that your products and services are being promoted alongside content that is relevant to both your audience’s interests and your business’s offerings. A vinyl store can choose to advertise only on music blogs; a bank can choose to advertise its services on websites about personal finance. In addition, affiliate marketing can guarantee prime placement and specially tailored posts, in comparison to search engine marketing where the placement of your ad is dependent on your bid and ad quality.