HOW AFFILIATE MARKETING WORKS
Understanding a complex channel.
Affiliate Marketing is a type of performance-based marketing where a company compensates an affiliate partner for customers they generate through their own marketing efforts.
The Parties Involved
In the affiliate eco-system, a company who is looking to acquire new customers or leads, is known as the advertiser. An advertiser can be a company selling clothing, software, electronics, accesories, etc., or a company generating leads for their insurance, mortgage, legal or other services based business.
Affiliates, also known as publishers, are individuals or companies that promote an advertiser’s product or service in exchange for a commission. This is how they monetize their marketing efforts. These marketing efforts can include a blog, content, review, or shopping comparison website, or an affiliate who is generating traffic from paid search, email marketing, display advertising, social media presence, etc.
The most important party to both the advertiser and affiliate is the consumer. The consumer is the clicks on an affiliate’s ad, reaches the advertiser’s website and makes a purchase or completes a lead, thus generating revenue for the advertiser and affiliate.
Network or Platform?
In order to facilitate the relationship between an Advertiser, Affiliate and Consumer an Affiliate Network or Affiliate Tracking Platform must be leveraged. The primary responsibility of these networks or platforms is to track clicks and conversions and attribute them to the appropriate affiliate. This is done through the use of tracking links, cookies and conversion pixels. In additional to the technical benefits a network or platform provides, they are also used for media hosting, commission payment processing, program reporting and/or other affiliate program elements.
An ADVERTISER acquires a CONSUMER and the AFFILIATE is rewarded!
Things to Consider
When launching a new affiliate program or reviewing your current program, it’s important to review and consider the components that affect your success in the channel.
Goals for the channel
Consumer promotion strategy
CPA network partnerships
Cost per customer acquisition budget
Internal reporting needs
Lifetime value (LTV) of your customer
Affiliate vetting process
Conversion rate and EPC
Approved content usage
Direction program options
Affiliate recruiting strategy
Affiliate bonus structure
Product review component
Affiliate payment processing
Tracking integration methodology
Attendance at affiliate conferences
Traffic funnel process
Competitor’s affiliate programs
Lead quality management
Program management resources
Affiliate network selection
Number of occurrences