What is Affiliate Marketing?
February 17, 2021
What is Affiliate Marketing?
Affiliate marketing is a form of digital advertising. Advertisers pay third-party publishers a commission for promoting and selling products or services on their behalf.
It may be helpful to think of affiliate marketing as a modern take on the traditional concept of offering a ‘finder’s fee’ to help generate leads and sales.
In this case, the publisher agrees to take on the work of marketing a company, product or service by producing and promoting content and, in return, the advertiser pays them a commission each time their work successfully generates a lead or a sale.
Accordingly, affiliate marketing is a low-risk, low-cost digital advertising strategy because it allows advertisers to promote products or services without having to pay for impressions and clicks. They are only required to pay publishers for successful leads and/or sales.
Publishers like affiliate marketing because it allows them to generate passive income, selling products or services that they don’t need to purchase, stock or ship. This allows them to avoid the logistical difficulties involved in selling a physical product of their own.
Advertisers like affiliate marketing because it allows them to outsource the marketing and advertising of their products or services to third-party publishers, who can usually do a much better job of promoting products or services on their behalf and who they only have to pay for successful conversions.
This makes affiliate marketing a win-win scenario for both publishers and advertisers, who each reap significant benefits from choosing to work together to increase leads and sales.
How Does Affiliate Marketing Work?
While affiliate marketing existed before the internet, modern digital advertising technology has made it not only more efficient but also far more effective.
Companies running affiliate campaigns are able to run hundreds or even thousands of affiliates at once, with all of the logistics almost fully automated, and in some cases, requiring very little oversight or maintenance.
To run an affiliate campaign, the advertiser needs to track the traffic a publisher delivers to their site, monitor the behavior of that traffic and attribute any leads and sales that traffic generates back to the publisher so they can be compensated for their role in the marketing initiative.
Fortunately, modern digital analytics has simplified this process, making it relatively easy for both advertisers and publishers to monitor performance. This ensures that everyone understands and agrees on just how well the campaign is performing and how much the publisher is due to be compensated for their work.
To be clear, publishers don’t necessarily work on third-party platforms. But they may post promotional content and links to social media sites such as Facebook, Instagram, Twitter, YouTube, Reddit, or even in the ‘Comments’ that appear below news articles and on popular Web forums.
Again, it’s the affiliate’s job to present the advertiser’s products or services to their audience, wherever that audience may be, and to encourage the audience to visit the advertiser’s website and purchase their products or services.
The advertiser is able to simply sit back and reap the rewards of allowing affiliates to do their marketing on their behalf—without having to risk a significant financial outlay because there are no upfront costs for running an affiliate campaign.
The fact that affiliate strategies are low-cost and low-risk is what has made them so attractive to so many businesses, and it’s also the reason the industry has expanded at a rapid pace in recent years.
Is Affiliate Marketing Right for My Business?
Affiliate marketing presents an excellent opportunity for virtually any business that sells products or services online, but it’s especially effective for products or services that people choose to buy based on input from others via social validation.
If your company has found third-party user reviews to be of value in helping to stimulate sales, there’s a good chance that affiliate marketing strategies will be particularly effective for you because affiliates become your brand advocates, serving as unbiased users promoting your products or services.
You should consider testing affiliate marketing strategies because it’s a low-cost, low-risk digital strategy that may significantly improve your sales.
Remember, you won’t need to pay affiliates for their work unless they successfully generate leads and/or sales on your behalf, and you’ll only pay them whatever rate you’ve negotiated in your affiliate contract, so there’s no risk of costs ballooning as they might with riskier digital marketing strategies.
Simply put, affiliate marketing is an excellent strategy for any business looking to increase its online exposure.
Is Affiliate Marketing Scalable?
Affiliate Marketing is infinitely scalable because you don’t have to increase budgets or sign new contracts in order to increase impressions, clicks and sales.
Again, because of the nature of the way that affiliate marketing works and the fact that you only need to pay publishers for their successful conversions, leads and/or sales, there’s very little reason to hold back on pursuing an affiliate marketing strategy.
Instead, this channel works best when you construct a proper affiliate strategy, set attribution rules, commission rates and establish creative guidelines per industry best practices. Then, you simply allow publishers to do their thing promoting your products or services.
Keep in mind that you can and should compile a detailed list of regulations specifying what sorts of claims, creative assets and marketing statements affiliates are allowed to use on your behalf as you’ll need to provide them with some guidelines about what they can and cannot say about your brand, products and services.
Once those rules are established, however, one of the beautiful things about affiliate strategies is that you won’t have to continue holding your affiliate’s hand. Instead, you can leave specific marketing decisions, strategies and tactics up to them.
Remember, your affiliates are likely to know their audiences better than you do and, if you make a sufficiently attractive offer, they’ll bend over backwards to find ways to convince their audience to purchase your products or services.
If you’re still concerned that affiliate marketing is too new, too niche or too small to be of value to your company, you may be surprised to learn that most of the Web’s biggest spenders rely on affiliate strategies. Google and Amazon, for example, run enormous affiliate marketing campaigns.
Super Metrics reports that annual affiliate spending is predicted to hit $8.2 billion by 2022, making this a huge digital advertising channel and one that continues to grow at a brisk pace.
Can Affiliate Marketing Replace My Current Marketing Strategy?
We do not recommend replacing existing marketing efforts with affiliate marketing strategies. Instead, consider affiliate marketing as an opportunity to supplement your existing digital strategies.
Affiliate marketing tends to work best when it’s used as an incremental or additive strategy, layered on top of your other digital advertising efforts.
In some cases, affiliate campaigns have performed so well that advertisers were able to reduce or even pause other advertising initiatives, but that is relatively rare, and we do not recommend approaching this channel with that goal in mind.
The best way to look at affiliate marketing is to consider it to be a low-cost, low-risk opportunity worth testing to see if it can be used to improve your brand’s impressions, traffic and sales.
What Do You Need to Get Started in Affiliate Marketing?
Affiliate marketing is especially attractive to so many brands because of its simplicity.
Running an affiliate campaign is relatively simple. All that is truly required to get a campaign going is a website where you market and sell your products or services with a shopping cart, a checkout page and an analytics system in place that is capable of attributing sales to traffic sources.
If you are already measuring performance via one of the common, industry-standard analytics platforms such as Google Analytics—and your team already knows how to build URLs with unique identifiers such as those constructed via Google’s URL Builder—you are well on your way toward running your own affiliate marketing campaign.
If this is your first time operating in the affiliate space, however, we recommend reaching out to an affiliate consulting agency to ensure that your campaign is constructed and configured correctly and effectively. Be sure the proper stipulations and limitations are in place to encourage publishers to take you up on your offer but without allowing them to take advantage of your brand.
There are some potential risks to running an affiliate campaign, but we’ll save those for a future post on the pros and cons of affiliate marketing.
As an example of why you should consider reaching out for assistance, you may need help determining just how much commission to offer publishers. Offering a payout that’s too low can fail to generate enough interest from them while paying too much is an inefficient waste of company profits.
Launch Your Affiliate Strategy with USIM
USIM combines the art of human sense with the scale, speed and sophistication of the latest digital marketing technology to create incredibly effective affiliate marketing campaigns.
Our data-driven approach utilizes ongoing, real-time optimizations to ensure a robust, long-tail strategy that promises long-term success, while our active recruitment and auditing of your publishers ensures you’ll receive optimal placement, value and performance.
USIM’s proprietary affiliate strategy is based on more than a decade of industry knowledge and experience, and our dedication to complete transparency includes accurate and timely performance reports—and a real-time performance dashboard.
Bringing USIM on board to design, build and optimize your affiliate marketing strategy will allow your team to remain focused on the marketing channels they know best, ensuring optimal performance across all of your digital marketing initiatives.
For details on how we can help, please call us at (310) 482-6700, or fill out our Contact Form.