What Is Affiliate Marketing?

Digital Marketing - Study Notes:

The role of affiliate marketing

Affiliate marketing is a commercial arrangement between sellers, and content producers or partner sites, who create content to help drive sales on behalf of the seller for a commission, or fee.

Affiliate marketing can be a low-risk, high return channel as publishers are usually only paid if there is a sale, not when there is only a click-through. Although paying for clicks is an option with affiliate marketing, for the most part it’s not the most cost-effective way to use the channel.

Paying commission to a partner only when they have directly driven a sale for you is a much more effective option. As you are only paying for sales, each cost has a guaranteed revenue figure associated with it. On the other hand, there is no guaranteed sale or revenue when you are paying for clicks.

Affiliate marketing is usually a smaller channel in the ecommerce marketing mix, but it can prove effective when deployed correctly.

The main parties

There are three main parties involved in affiliate marketing:

• The advertiser: This is the business that wishes to sell a product.
• The affiliate or publisher: This is the website or influencer who will create content and drive sales on behalf of the advertiser.
• The network or intermediary software: This is the tool used to track sales and pay commission or fees to the affiliate website or social influencer.

Getting started with affiliate marketing

You can choose from four types of affiliate marketing:

• Affiliate networks
• Direct partnerships
• Influencers, and…
• Creators

Affiliate networks

You can sign up to an affiliate network to find websites and influencers to partner with. These networks allow us to set commissions for successful sales, communicate with the influencer or website, provide creative assets, and manage revenue and fees.

Special affiliate links can be created within the network. When an affiliate website or influencer uses these links, all sales and revenue are tracked back to that influencer or partner. This enables us to verify their commissions and assess the value of influencer partnerships by allowing us to understand how many sales they are driving versus what we are paying for their services. The affiliate network will charge a fee for this service either as a flat monthly or yearly fee, or as a percentage of the sale price.

You can buy software, or use an ecommerce website plugin or integration, to manage affiliate sales and commissions if you want to create and manage the affiliate program yourself. This will allow you to create specific links in the network, which you can share with affiliate partners to track website traffic, sales, and revenue from their content. This also allows you to track and validate their commissions for sales.

Bear in mind that it is a lot of work to create and manage a whole affiliate program yourself, so using a network to do the heavy lifting can be a more time-efficient way of getting your program off the ground and scaling it in the medium to long term.

Direct partnerships

You can directly reach out and engage with specific websites to promote your products on your behalf, without the need for a third-party intermediary like an affiliate network. In doing this, you can create affiliate profiles and tracking links to manage commissions and track revenue through your affiliate software.

As you’re cutting out the affiliate network fees by going direct and using your own software and affiliate links, there are cost efficiencies in this approach. Bear in mind that managing the relationship directly can take time and effort, so it’s always worth evaluating if this is the best approach for your business based on the effort involved versus expected outcome.

Influencers

Influencers are individuals who leverage their social following and content to promote your product through video, social posts, and other content formats.

Depending on how the influencer prefers to engage with businesses, you can find and engage with them via affiliate networks, or to reach out directly to them to begin a direct partnership. Whatever your preferred way to find and engage influencers, you will need to provide unique affiliate tracking links to monitor their performance and commissions, which will also help you to understand the impact of their influence on sales. These links can be created in your affiliate network profile or in your affiliate software, depending on how you’d like to run your program.

When the influencer uses one of your affiliate tracking links in the social posts or in an email shot, all clicks on that specific link are tracked back to the influencer. Furthermore, if a sale occurs after someone clicks through on the link, this is also recorded. Therefore, you can see how many actual sales are being driven from influencer content and promotional activity for your business.

Note: You can engage with influencers for branding purposes, where they will promote your brand in their content for a flat fee, rather than a per-sale commission. How you engage with an influencer will depend on your campaign objective and what you are trying to achieve. Is it sales, or brand building?

Creators

Creators are individuals who produce original content across various mediums such as videos, blog posts, podcasts, art, music, and more. Their primary focus is on creating high-quality, engaging content that entertains, educates, or informs their audience.

Creators’ audiences may be much smaller than traditional influencers. However, they tend to have a specific niche or area of expertise in which they specialize. Also, they may have a dedicated following of fans who appreciate their work.

Creators typically monetize their content through various channels. These include:

• Advertising revenue
• Sponsorships
• Merchandise sales
• Crowdfunding, or…
• Direct support from their audience (such as Patreon or Instagram subscriptions)

Selling through affiliate marketing

Here is what a typical customer journey looks like when using affiliate marketing:

1. Customer discovers social content created by an affiliate (such as an influencer or creator). They then click a link to the product in a social commerce store, or brand website.
2. Customer buys the product. The transaction is logged and the value is counted in the affiliate program or affiliate network.
3. The brand validates all sales in the program or network tool. The brand is then charged by the network for the sales. This fee is given to affiliate as a commission.