June 8, 2016
A Beginner’s Guide to Affiliate Marketing
A special guest post from Ashley Howe from Commission Factory. If you find this post helpful, please feel free to ‘tip’ Ashley with a share on your preferred social network!
Many advertisers miss a trick when it comes to affiliate marketing – a lack of knowledge and understanding often means they don’t know where to begin.
However, there are growing number of household names (like The Iconic, SurfStitch, ASOS, Vision Direct and Menulog) that are working extensively with ‘affiliates’ to achieve their unique business goals.
There are several benefits to starting and managing your own affiliate program, such as:
- Increasing your traffic and sales
- Increasing your brand awareness
- Performance based remuneration – only pay commission for the sales that are generated
- Transparency – see the specific website traffic and sales that have been referred via your affiliate network
- Risk mitigation – Affiliate marketing gives you the opportunity to work with a wide range of sites and technology partners, varying your digital channel mix and key revenue sources.
So with that in mind, here is a brief overview on exactly how affiliate marketing works.
What is ‘affiliate marketing’ and how does it work?
Affiliate marketing is when an advertiser rewards website owners or technology partners with a commission when they send website traffic that converts into sales.
Check out the image below to see how it all works:
What is an affiliate?
Affiliates come in many shapes and forms, but the most common categories of affiliates include cashback or loyalty, content and bloggers, coupons, price comparison, paid search partners and onsite conversion partners. The affiliate can choose which advertisers to promote.
- Cashback or loyalty websites offer their users cashback or points to redeem on a future purchase. A good example of this is Fly Buys. They offer their users points for purchases (often triple or 5x points). These points can be redeemed in-store or online.
- Coupon code websites offer their users discounts on purchases. VoucherCloud is a great example of this.
- Content sites have banners and can also choose to write content on their site to get people to buy. A great example of this is SheShopped.
- Paid search: There are specialised affiliates that conduct pay per click activity via search engines such as Google and Bing outlaying the cost and being remunerated on a CPA basis. The advantage to the client can be a specialised affiliate working on a CPA basis where the advertiser would normally have the upfront cost of cost per click.
- Onsite conversion: Includes techniques such as email remarketing, display retargeting and onsite overlays. These affiliates greatly assist the advertiser to gain sales by increasing conversions.
All these affiliates have different methods of promotion, and they are not all limited to just one promotion method. For example, they may have an e-mail database, extra homepage positions for their best advertisers, or a page dedicated to your brand.
It is always a good idea to ask your prospective affiliate partner for a ‘media deck’ if you are looking to do some extra promotion with them.
How do affiliates get paid?
There are several ways you can choose to pay your affiliates.
Percentage per sale is the most popular payment method – this is where you pay a percentage of the total sale value (excluding shipping). This is called CPA, or cost per acquisition.
For example, if you decided that you wanted to give your affiliates 10% commission, and one of your affiliates created a sale worth $100, they would get $10 from you.
Other methods of rewarding affiliates include:
- $ per sale – this is a set dollar amount per sale, regardless of amount
- $ per install – if you have an app, and you want to pay your affiliates every time someone installs the software
- $ per lead – This means you would pay your affiliate based on someone entering their details into your website (subject to validation of those leads)
- $ per signup – a set dollar amount for every signup.
The method which you reward your affiliates is set by you, and should fit within your margins and works best for your brand.
What is the role of an affiliate network?
An affiliate network acts as an intermediary between you and your affiliates. Your network has several roles:
- Technology: Affiliate network management platforms provide robust and transparent third party tracking and reporting
- An interface: for viewing the programs, reports and affiliates
- A network of affiliates: Commission Factory has thousands of affiliates on the network that advertisers can work with
- Advice and guidance on affiliate best practise
- Support for affiliates and advertisers
- Hosting and serving your ads
Some affiliate networks even offer program management, which means they will manage your program for you to ensure growth. Alternatively, you can choose to manage your network yourself if you have the resources and time available.
Affiliate marketing is low risk, high reward marketing channel; both for brands who are just starting out and for established household names as well. Unfortunately, in Australia it’s still a channel that many brands are missing some big opportunities on.
Whether it is due to the perceived management complexity, a lack of awareness and education about the channel or just not knowing where to start, affiliate marketing presents a fantastic opportunity for Australian businesses who are ready to diversify their digital marketing channels and take their marketing mix to the next level.
Remember, if you enjoyed this post, please ‘tip’ Ashley with a share on your preferred social network or leave your comments below!