Affiliate Marketing 101
For companies looking to generate new revenue streams and increase sales, affiliate marketing can be an effective new channel. Affiliate marketing is a popular and increasingly lucrative. Affiliate partners can promote your company’s products or services to their audiences of potential buyers, enabling your company to tap into new market segments. Therefore, choosing the right affiliate partners is important. Here’s a concise breakdown of how affiliate marketing works and how you can succeed in it.
How Affiliate Marketing Works
There are generally 2 types of partners in the affiliate marketing ecosystem:
Online Store
The Online Store is the company that sells products or services. They typically set up an affiliate program to allow third parties (affiliates) to promote their products in exchange for a commission. An example of this is the Amazon Marketplace. Unlike a distribution partner, an affiliate does not purchase your product for resale, and does not stock your product in its warehouse. It may take the sales order for your company to fulfill, or it may direct the buyer to purchase from your company’s online store via a web link with an associated affiliate code.Affiliate or Publisher
A Publisher is the marketer who promotes the seller's product, typically through a website, blog, social media, or email list. Publishers use affiliate links to track sales or actions that result from their promotions. Some affiliate marketing companies manage a large network of publishers. An example of this is Commission Junction.
Types of Affiliate Marketing Models
Affiliates generally operate in 1 of 3 models, which are classified based on the level of involvement with the product:
Unattached: The affiliate has no personal connection or authority with the product and typically uses Pay-Per-Click (PPC) ads to drive traffic.
Related: The affiliate has some influence or authority within a niche, even if they haven't personally used the product.
Involved: The affiliate has personal experience with the product and uses that to create authentic, trusted content promoting the product.
How Affiliate Marketers Get Paid
Affiliate marketers can earn money in different ways, depending on the program:
Pay per Sale (PPS): The affiliate earns a percentage of the sale price when the consumer makes a purchase.
Pay per Lead (PPL): The affiliate earns money when a lead (such as a form submission or sign-up) is generated.
Pay per Click (PPC): The affiliate earns a commission for driving traffic to the merchant’s website, regardless of whether a sale occurs.
Pay per Install: The affiliate earns money when a user installs a product (e.g., a mobile app or software).
Pre-Requisites
Before you start down this path, you need to have an infrastructure to properly support this channel:
Pricing and Product Margin: Your price-point needs to build-in sufficient margin to compensate your affiliate partner, and still have adequate margin for your company.
Messaging and Simple, Compelling Offers: You need to provide your affiliate partners with messaging and offers that are proven to convert. Although some may simply be publishing a link to buy your product, some Publishers may describe their experience with your product and promote it to their followers. You want their description of customer value (value proposition) to be consistent with your brand’s messaging and offers. Also note that if your company hasn’t already developed messaging and offers that are proven to convert, your success with this channel will be compromised.
Demand Generation and Pull-Through: Some affiliates, like Amazon Marketplace, will expect you to generate demand and “pull-through”. They will expect you to help drive traffic (buyers) to its site. Other affiliates are experts at marketing, already have a loyal following, and will not have an expectation that you will drive pull-through. You need to understand your affiliate partner’s business well enough to make the relationship mutually successful.
Commitment: Once you have the business goals and expectations of the partnership agreed upon, you need to give the relationship time to get established. It may take several months to reach the desired results.
Common Affiliate Marketing Channels
Affiliates often use various platforms to promote products:
Influencers: Content creators with large followings on social media platforms (Instagram, YouTube, etc.) who promote products to their audience.
Bloggers: Bloggers write in-depth reviews and content about products, incorporating affiliate links within their posts.
Email Marketing: Affiliates use email newsletters to send product recommendations to their subscriber lists.
Paid Media: Affiliates may also create paid ads or microsites to drive traffic to their affiliate links.
Conclusion
Affiliate marketing is an effective way to generate revenue with very little effort. By understanding the how this channel operates, the potential market segments they reach, and by having a product offering that is aligned with the affiliate marketing channel, your company can build a successful affiliate marketing program.
