What Is Affiliate Marketing?
Affiliate marketing is a process in which an affiliate will promote a business’s products and services and receives a commission if the affiliate achieves a sale.
An affiliate is a person that utilizes its networks and online marketing capabilities to promote products and services.
Affiliate marketing and the use of affiliate marketers is a sales and performance-based advertising method that offers many benefits to both the business and the marketer.
When a product is excellent, and the marketers’ online marketing skills match, both will achieve higher sales and brand awareness.
Affiliate marketing is a beneficial method for any business that wants to grow. It’s sales without spending on a traditional advertising budget.
Growing your affiliate marketing strategy is a long process that involves individuals and giving them the right tools and incentives to promote your brand and products.
Most commonly, companies and marketers use affiliate marketing in the online marketing world. It can also include the contribution of offline and physical sales if that’s what the company desires.
Business spending on affiliate marketing is growing fast, and spending is estimated to grow up to $8.2 Billion in 2022, a growth of ~52% from 2017.
If your business isn’t on par with the growth of affiliate marketing, your might be losing on valuable online real estate that is only achievable through the use of affiliate marketers.
In this article, we will cover the benefits of affiliate marketing benefits for businesses and also how affiliate partnerships help every party involved in the process.
The combined benefits to both parties make affiliate marketing an essential part of any digital marketing strategy.
But first, let’s look at how affiliate marketing works.
How Does Affiliate Marketing Work In A Nutshell?
At its core affiliate marketing is simple, and here it is in six simple steps:
- The affiliate and the business get into a relationship either through a third-party (an affiliate network) or directly.
- An Affiliate shares the product and service to their network of choice (typically a link or a coupon)
- Potential customer engages with the link.
- Customer lands on the businesses landing page
- The customer makes a purchase.
- The business gets the sales, and the affiliate marketer receives a commission.
Affiliate marketing, therefore, consists of three (four if you’re utilizing a network) stakeholders: The marketer (also called a publisher), the product provider (or the one who distributes the products and the services), and the customer.
The relationship between the marketer and product producer depends on the nature of the deals in place between them. A customer will purchase from a business, and the customer’s first interaction will be with the marketer.
A business can streamline its affiliate process and won’t need to manage the process themselves, using an affiliate network, although increased costs are something to consider.
A perfect affiliate marketing campaign is beneficial for every stakeholder. The business and the marketer gains revenue, and customers get more personal recommendations from a trusted source.
Affiliate Marketing Benefits For Businesses
- A New Profitable Sales Channel
- Benefits A Variety Of Products
- Increase Competitive Advantage
- New Audiences Through Influencers
- Affiliate Marketers And Access To Their Channels
- Performance-Based Advertising
- Knowledge From Affiliates
- Analytics and Campaign Performance
- Easy To Start And Manage
A New Profitable Sales Channel
For a business, affiliate marketing offers a much-needed scale without accessing large advertising budgets. Even one successful affiliate can bring much more traffic, leads, and sales than a traditional marketing campaign or even a highly effective online advertising campaign.
When comparing the benefits of advertising with publishers, or allowing the publisher to become an affiliate, becoming an affiliate will create better and long-lasting relationships that benefit both parties.
When done correctly, affiliate marketing might become your most important and influential sales channel that can grow sales and brand awareness over time.
Unlike a sales team, affiliate marketing works for you 24/7, making money for both parties at all times. A passive sales funnel for a business is crucial if the company wants to expand and scale faster.
If an affiliate campaign has been built the proper way with great products and services with enticing opportunities for marketers, a business can enjoy the benefits of passive income and promotion.
By its core as affiliate marketing is result-based, and the cost for upkeep will be lower than managing your sales teams. In most cases, not having a sales team wouldn’t be entirely realistic, but it enables the specialization of your sales teams.
For example, affiliates would bring cold traffic or leads that your sales team can nurture further into customers. In a model like this, the compensation model might need readjustment. If your sales team is the one making the sales, then affiliates will require some other form of result-based compensation, like commission per lead.
The convenience factor for a business is the fact that you can diversify your revenue and promotional sources.
Benefits A Variety Of Products
Products that are perfect for affiliate marketing has a couple of the following characteristics:
- High end or high margin
- Online (or online distribution)
- Fits a niche
- Growing trend
- Social traction
- Shareability for virality
Amazon has shown that low margin products are still a viable option for affiliate marketing, but small percentages for affiliates might affect more extensive opportunities. But as customers would trust the supplying company and the affiliate, it’s a combination hard to miss.
Eventually, low commissions will drive the best affiliates into other venues, which means when optimizing commissions, you need to think ahead, what else is in the marketplace in your industry, how much they pay in commissions, and on which terms.
A product that has a considerable commission potential will drive more affiliates to you. Still, if the product also matches the other criteria of the perfect product, you’re more likely to drive more affiliates into your products and services and to your program.
If your company produces a range of products and services, it might be worthwhile to pick the best suitable one for affiliate marketing rather than a general link for everything. The benefit of the methods is that it’s easier to build more effective campaigns when you have a clear product for promotion.
General links can work (Like Amazon), though, but might require additional effort to create better marketing resources or affiliates need to create a more specific story around a company.
In general, a large variety of products is viable for affiliate marketing, which means most businesses can utilize it to grow their brand awareness and sales.
Sometimes it’s better to find your influencers first and work together with an affiliate deal with a product that matches the most to their audiences.
Access To Influencers And Their Networks
Affiliate marketing allows a business to target particular niches that match with a business’s core audience.
Every industry and customer segment has its influencers that can connect with your target audiences in a way that most commonly is almost impossible for a company selling products.
While not impossible to gain a natural following as a product company, not reaching out and utilizing influencers, you might be losing out on valuable customer data that is essential for scaling your business effectively.
In most cases, the audiences of influencers might bring new data that can widen your audience related opportunities.
For example, if we look at an online clothing company, through testing and targeting online advertising found a perfect audience for their products. Then the company would reach out to an influencer whose audience matches the description, only to find out that the influencer’s audience is broader than initially thought. And if the audience performs better than the average, the data leads to better decisions about data-driven audiences.
Another benefit is the discovery of entirely new audiences. In some industries, their target audiences might be harder to reach through traditional methods. In this case, offering an influencer an affiliate deal could potentially help you achieve this new audience.
Utilizing a vast network of influencers within your industry offers many more benefits than just the promotion of products and services. Learn more about the benefits of influencer marketing here.
How An Affiliate Can Grow Your Business
A great online marketer will have access to many sources of traffic within their networks, which they can utilize to boost your companies sales effectively.
Conversion rates are higher when promoting products through a network where trust has built up for a long time. Building new funnels and trust with new customers only through online advertising can take a lot more brand awareness to convert finally. Word of mouth is a powerful tool to utilize.
An affiliate can promote your products and services through their networks, increasing conversion rates as their network will trust the marketer more than indirect online advertising models.
Example of ways how an affiliate can grow your online business:
- Leveraging social media presence (social media marketing)
- Blogging with the power of search engine optimization and content marketing
- Search Engine Marketing
- Paid online advertising (Facebook, Pinterest, Youtube)
- Email Marketing
- Leveraging professional and personal networks
For example, let’s look at a marketer who has a substantial following on a niche blog, and you have given the right incentives, and your products are perfect for the said niche.
Now the marketer can utilize their following and the trust they’ve built to promote your products to their niche audience carefully. The niche audience will react better to this approach, and converting them will be easier for you.
By letting an affiliate promote your company, you’ve broadened your audience, and the best part is you also gained reputation and trust within the new audience.
Inbound links in SEO are crucial to gain more visibility on any search engines. Gaining affiliate links from a highly specialized and trusted source can increase your search engine visibility, which is an added benefit.
As conversions grow, your relations with the marketer grow as both will benefit, and you can expand the business together.
Because of the nature of affiliate marketing being performance-based, the way it can produce results compared to other online advertising channels can be drastically different.
For one, the use of affiliates to promote a business instead of buying ads creates a model that increases visibility and sales without spending any further on an advertising budget.
Online advertising does have a benefit over affiliate marketing, and that is speed and more control. Affiliate marketing can take time, and you might not achieve the wanted results.
With regular online advertising, say LinkedIn ads, you can have complete control of the flow of traffic and the amount of brand awareness you want. While it might cost more than affiliate marketing, the ability to increase awareness whenever needed is powerful.
While a great affiliate can make a massive difference in revenues, not having great affiliates signed up, might not bring enough results. The key is to know when to invest more into your affiliate program and when to increase advertising budgets.
Of course, these two should go hand in hand. For example, even if a great affiliate is perfect for bringing up your sales and traffic, if you use powerful retargeting advertising campaigns, you will increase those results by a large margin.
You also need to increase the attribution for the traffic you gain from the affiliates. Every affiliate deal will end eventually. Raising brand awareness to said traffic is essential to keep customers coming back.
An affiliate program shouldn’t be your only source of traffic. It’s never a good idea to rely only on one or a few sources, mainly, because in the end, you won’t have total control of your affiliates and their willingness to work with your business forever.
Affiliate Marketing Increases Your Competitiveness
As affiliate marketing has grown to be a staple in marketing in recent years, many companies still neglect it, which leads to many opportunities for businesses.
The competition for the best affiliates is getting tighter, mostly bigger and more established brands can utilize the best marketers and publishers to their advantage. A smaller or a new brand has to look outside of the box to entice marketers to their side.
On the brighter side, affiliate marketing still has a lot to grow, and you can quickly increase your competitiveness through affiliates.
How established affiliate marketing nowadays depends widely on the industries themselves. Many sectors still do not use affiliate marketing to their benefit in any meaningful way. Yet, in others such as software as a service business, it is a more prevalent marketing strategy.
An essential note is that you must understand how your industry works and who are the most important influencers and how to make deals with them.
It takes time to build great relationships and word-of-mouth about your brand to marketers to find your affiliate program. But building a solid base to start from, you can begin extracting the benefits of affiliate marketing into your marketing strategy.
When affiliates promote your business, whether they convert or not, the positive effects on your brand awareness are vast. The more a potential customer can see and engage with a company, the more likely it increases sales due to enhanced attribution.
Learning From Your Affiliates
Affiliate marketers provide new marketing strategies that, if they work, you can implement them as well. Affiliate marketer’s skillsets range between professional marketers or even large companies that have massive audiences that you can leverage for affiliate marketing.
You can always and should try to learn from your affiliates’ audience data. A converting audience is still highly profitable and can improve your other marketing channels results significantly. For example, an improved target audience can vastly enhance your other online advertising campaigns.
Learning from your affiliate’s style of communicating with their audience, you can learn how to improve your messaging to target your core audiences better.
In a relationship, you should learn from the best of your affiliates and bring that knowledge into your company’s workflows. It can also expand your affiliate marketing campaigns by introducing newly acquired methods to improve every affiliate earning potential, thus increasing your promotional power.
The more you help your affiliates succeed, the more you can enjoy the results they bring.
The power of utilizing gained data and provided methods from affiliates to your company is that you can use these methods and data to improve your products and services and especially improve your other customer acquisition channels.
Importantly is to understand that affiliate marketing is all about building and maintaining relationships. An affiliate marketer is a business venture in itself, and by respecting its audiences with relevant and excellent products, you maximize results for both parties.
Easy To Start & Manage
For both parties, affiliate marketing is easy to start and manage. You can begin using an affiliate network in the beginning as a company wanting to launch an affiliate program.
The benefits of an affiliate network are plenty:
- Access to verified marketers and publishers
- More comfortable to control multiple affiliates at a time
- Doesn’t require additional resources
- Ease of starting and managing campaigns, including payouts and commissions.
- Precise analytics to track the success of campaigns
- Access to affiliate tracking technologies
- Data dashboard for campaign optimization
- Access to audience data
- Security (Fraud detection, Compliances)
Some available affiliate networks to choose from:
- Commission Junction
- eBay Partners
For most businesses and affiliates themselves, joining a network will be a practical choice to make.
Research the different networks listed and find one that best aligns with your business goals of either sales, brand awareness, leads, and more.
If joining a network is not suitable for your business, you can always consider managing it on your own with many available tools.
Managing Your Affiliate Program
The other route of building an affiliate program from the ground up might not be worth it for many businesses. However, it offers a great deal of control over how you manage your affiliate relationships.
Building a proper channel might be worth it when you want to achieve more with affiliate marketing.
For example, if we look at Shopify, who built a robust independent affiliate program around their online store platform, they can achieve much more from their affiliates by offering them more resources and more guidance.
The Shopify route is not viable for many businesses, but it’s worth considering if your business is at a scale and the industry is right, where more control can give you more results.
For example, a small business can start by leveraging the connection it already has. People like the most loyal customer and people that have some connection to the company. You can begin by offering them a cut of sales or some other incentives to start.
For example, a small online store could offer a refer-a-friend program with enticing coupons for later use in the store. While a simple start, it’s hard to scale, as typically, the potential of a customer reach is not that high.
Investing more time and resources into your program, whether through a network or not, you will see an increase in results. The key to note is to keep developing your program to its maximum potential at all times with new data from affiliates.
Affiliate Marketing Costs
As affiliate marketing is all about providing a cut of sales for results, it can become a very cost-effective method to promote your business with affiliates. Compared to other online advertising methods, affiliate marketing is a profitable advertising strategy and a low-risk endeavor.
The most crucial element of affiliate marketing is that if you can enable it properly, you need to have a product or service, which allows for a sizable commission to attract affiliates.
The costs are not always black and white, though, as running campaigns at a net loss, can yield more results overtime and expanded exposure might be worth more than short term gains.
For example, you need to consider what types of products and services you can promote with affiliate marketing. A product with low margins, to begin with, will not be ideal, as the more sales you gain, the more lose, and if the commission isn’t large enough, no one will be interested in the promotion of the product.
You have to include in the budget the following costs:
- Network fees
- Marketing resources
- Advertising costs
- Acquisition of affiliates
- Affiliate commissions
- Product development (Optimized products will work best)
A benefit of affiliate marketing is that it can save money spent on a sales team. It depends on the nature of your business, but many companies can keep from not using a sales team thoroughly after developing a proper and functioning affiliate program.
Branching into new markets can be hard and costly at times. With the use of established affiliates of any industry to start your advertising journey in a new market will be a great asset to acquire.
Rewarding Affiliates And Commission Structures
The best affiliates out there require good commissions and marketing resources before they’re willing to work with a business. The easier and profitable you make it for your future affiliates, inherently better the results will be.
Figuring out a complete and motivating commission structure will be essential in your program. For example, having a tiered – system, more one sells, sends traffic, gathers leads, and more they will gain, percent-wise. One time rewards for best affiliates are something to consider.
Some large affiliate programs have seen the benefits of rewarding their affiliates with events and other culture-based rewards that can entail loyalty to your company.
The key is to understand the nature of an affiliate. An affiliate, in the end, is a business as well, and treating the relationship as such, is the only healthy way to make your program even better.
You want to reward your best affiliates, or they will find better deals. You also want to keep your program beginner-friendly as only through onboarding newcomers will you lower the overall cost of affiliate marketing and give new opportunities to new marketers.
Combining the knowledge gained from all affiliates to benefit the whole program can drastically motivate your affiliate to stay and to promote your business.
Affiliate Marketing Analytics
Affiliate marketing analytics starts with defining business goals and the proper KPIs for measuring the success of the affiliate program as a whole.
Affiliate marketing analytics consists of measuring data, management of KPIs, Optimization, and data analysis.
Example of key metrics that you should track in your affiliate program:
- Orders & avg. order value
- Conversion rates
- Return on Investment (ROI)
- Cost Per Acquisition (CPA) of customers and the affiliates
- Onboarding length customers and affiliates
- Customer lifetime value (LTV)
Using web analytics to improve your affiliate program results is essential to keep growing and making a better program overall. Tracking critical metrics of a campaign and the target landing pages helps you optimize every aspect of your affiliate marketing process.
If you join a network, they will provide easy-to-follow dashboards to evaluate the campaign performance and affiliate’s performance.
With the right URL parameters, you can track campaign performance on Google Analytics. It’s essential to have multiple sources of performance data to have a complete picture of how you’re doing.
The more data you can extract from your affiliate program, the more you can optimize it for better results. Every stakeholder in your process will benefit from increased optimization and data extraction.
Tips For Optimizing Affiliate Marketing Campaign Performance
Track every piece that makes your campaign and breakdown the campaign performance into individual sections. The key is to isolate the winning parts for replication.
Analyze through average performance. When you achieve enough data, gather sufficient performance averages to keep track of what is required and to pinpoint a winning campaign at any given time.
Combine customer behavior data with affiliate marketing data. You want to understand how a new customer behaves in your sales funnel. The relation between a new customer and a returning customer is crucial for optimizing campaigns. It will lead to a more in-depth understanding and gaining more results without increasing the number of customers or cold traffic.
Look for the best converting sources of traffic. For example, it’s essential to know which channel brings the most converting customers in any period.
Improve your funnels. Are you seeing that it takes a customer too long to convert after they come to you from the affiliate source? It would be wise to optimize the time it takes a customer to reach the end of a funnel.
As every affiliate’s audience is different, you need to analyze the effects of different audiences and build a more efficient target audience based on that data. A specified target audience has many other benefits to your business.
Use these tips to improve your overall affiliate program. Share the knowledge and data with your affiliates so they can optimize their campaigns to maximize their returns.
The benefits of affiliate marketing for businesses is vast, and most companies can utilize the benefits to their advantage. Creating a new sales channel or expanding your online marketing opportunities through affiliates is a strategy that can have a significant impact on your business.
Affiliate marketing offers a cost-effective way to promote a brand, and it’s products across multiple channels while not spending huge sums without results.
The rise of affiliate networks makes it easy for companies to start, manage, and importantly attract new affiliates to promote a brand.
Regardless of your approach, it’s an addition to a marketing strategy that is only beneficial for increasing sales, diversifying advertising methods, or gaining brand awareness from new audiences.
Building and maintaining good relationships with affiliates is vital for a successful campaign.