Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts.
The industry has four core players:
- The merchant (also known as ‘advertiser’ or ‘retailer’ or ‘brand’)
- The network (that contains offers for the affiliate to choose from and also takes care of the payments)
- The publisher (also known as ‘the affiliate’)
- The customer
The market has grown in complexity, resulting in the emergence of a secondary tier of players, including affiliate management agencies, super-affiliates, and specialized third party vendors.
Affiliate marketing overlaps with other Internet marketing methods to some degree because affiliates often use regular advertising methods. Those methods include organic search engine optimization (SEO), paid search engine marketing (PPC – Pay per Click), e-mail marketing, content marketing, and (in some sense) display advertising. On the other hand, affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner.
Affiliate marketing is commonly confused with referral marketing, as both forms of marketing use third parties to drive sales to the retailer. The two forms of marketing are differentiated, however, in how they drive sales, where affiliate marketing relies purely on financial motivations, while referral marketing relies more on trust and personal relationships.
Affiliate marketing is frequently overlooked by advertisers. While search engines, e-mail, and web site syndication capture much of the attention of online retailers, affiliate marketing carries a much lower profile. Still, affiliates continue to play a significant role in e-retailers’ marketing strategies.
In the case of cost per mille/click, the publisher is not concerned about whether a visitor is a member of the audience that the advertiser tries to attract and is able to convert because at this point the publisher has already earned his commission. This leaves the greater, and, in case of cost per mille, the full risk and loss (if the visitor cannot be converted) to the advertiser.
Cost per action/sale methods require that referred visitors do more than visit the advertiser’s website before the affiliate receives a commission. The advertiser must convert that visitor first. It is in the best interest of the affiliate to send the most closely targeted traffic to the advertiser as possible to increase the chance of a conversion. The risk and loss are shared between the affiliate and the advertiser.
Affiliate marketing is also called “performance marketing”, in reference to how sales employees are typically being compensated. Such employees are typically paid a commission for each sale they close, and sometimes are paid performance incentives for exceeding objectives. Affiliates are not employed by the advertiser whose products or services they promote, but the compensation models applied to affiliate marketing are very similar to the ones used for people in the advertisers’ internal sales department.
The phrase, “Affiliates are an extended sales force for your business”, which is often used to explain affiliate marketing, is not completely accurate. The primary difference between the two is that affiliate marketers provide little if any influence on a possible prospect in the conversion process once that prospect is directed to the advertiser’s website. The sales team of the advertiser, however, does have the control and influence up to the point where the prospect either a) signs the contract, or b) completes the purchase.
Low cost of start-up
An affiliate program does not require that you have an advertising team for ad visuals or purchase ad space.
Rather than that, you’ll have to depend on your affiliates to come up with their marketing content. Other than the initial effort of selecting and vetting affiliates, there’s little effort required from you to market your products, which is one of the reasons it’s become such a popular method of marketing.
Lost cost means low risk. There’s little risk of loss since payments are only made when there’s an actual conversion; perfect for businesses on a tight budget.
Low ongoing costs
Since most of your marketing activities are done by affiliates, they’ll also bear the chunk of the cost attached. And since it’s a commission-based program, it means that you’ll only pay affiliates from sales they bring in.
This marketing model makes cost easy to manage and does not interrupt your cash flow, unlike other marketing models such as PPC advertising that requires you to pay for every click leading to your website. But affiliate marketing ensures that you only part ways with your money when sales are made.
Since the affiliates are handpicked by you, it can ensure that the traffic that comes to your site is from individuals that find your product or service useful. This is because affiliates that resonate with your brand will most likely have individuals with their area of influence that’ll find your brand useful.
You can easily make your affiliate program smaller or bigger at little or no cost. It also offers you a great way to scale up your business without breaking the bank.