Affiliate Marketing for Dummies — What It Is, How it Works, and Why it Will Help Grow Your Business
So you want to grow your product sales but are having trouble ramping up your marketing to facilitate the results that you want? Sales growth can be a painstaking and aggravating process. Much of your growth will be through word-of-mouth marketing. Affiliate marketing is simply the practice of embracing that fully.
Affiliate marketing provides a new, third-party channel for growth where your brand advocates promote your products for you and earn commission on each sale that they generate. Sounds, great right? Well, it is — which isn’t to say that it is a completely hands-off strategy. There is a lot of administrative work that goes along with running an effective affiliate campaign. However, an effectively run program can put you in a position to drastically grow your sales and reach new audiences that would otherwise be unattainable.
Affiliate marketing has become increasingly common in recent years. 81% of brands and 84% of publishers use affiliate marketing in some form. Affiliate marketing spending is growing at a clip of more than 10% each year. Even huge brands like Amazon leverage affiliate marketing to their benefit.
The strategy is receiving increased interest across the board. Just take a look at the Google Search trend for the term “Affiliate Marketing” in recent years:
Interested in learning more? Let’s start by diving into what affiliate marketing is and how it works:
What is Affiliate Marketing?
In short, affiliate marketing is a profit-sharing system. Affiliate marketing is a tactic that is used by companies where they can outsource a portion of their marketing to third-party affiliates who promote their products for them in exchange for a commission. Despite the complex-sounding definition, affiliate marketing is pretty straight-forward.
People and companies sign up to promote your products. They receive a special link for each product that tracks the sales that they generate. Then, they receive a commission on each of those sales.
How Does It Work?
Typically, affiliates will fall into one of a few different categories:
- Publishers.
- Solo Marketers.
- Influencers.
Each uses their reach to promote your product. Typically, the best affiliates will garner a certain audience that will be interested in your product. For instance, if you sold gym equipment, a fitness Instagram influencer might be a good choice for an affiliate partnership.
By that same token, a fitness magazine would be another excellent choice. They can promote your products in a variety of ways, as defined by your program rules. They could promote through advertisements, social media updates, or links within content.
Solo marketer affiliates are a bit of a different breed. They don’t have the followings that publishers and influencers have and instead rely on traffic through advertisements to generate interest in your products.
In any sort of affiliate transaction, there are typically three parties involved:
1)The Seller
For the purposes of this article, this is you. You might be a solo entrepreneur or be a large enterprise. You own the product and you are looking for help selling it. The product can be a physical or a digital object. Typically as the seller, you are not engaged in the marketing that affiliates are doing on your behalf, other than monitoring it to make sure that they are falling within your rules.
2) The Affiliate
The affiliate is the company that promotes your product. Also known as the publisher or advertiser. They present your product to their customers, within a context that leads to sales. Their goal is to convince their readers/customers to buy your product. The affiliate is responsible for all marketing costs incurred in this process.
3) The Customer
Whether they are aware of it or not, the customer is responsible for driving the affiliate marketing strategy. Affiliates share products with them through advertisements, social media, or content and sales are tracked by placing cookies on the customer’s system. Most customers are unaware that someone is earning commissions off of their sales, even though advertisers do disclose all affiliate links.
Affiliates often target specific customers within their audience for each product. Usually, the customer is engaging with the affiliate because they have a specific subject-related interest that is at least tangentially related to your product.
How Do Affiliates Earn Commissions?
Affiliates can earn commissions in a number of ways. The type of commission that you choose will depend on your product and how you plan on using your affiliates.
The typical commission structures include:
Pay Per Sale
For eCommerce companies, the most common form of commission is a simple per-sale commission amount. Amazon, for instance, offers commissions between 1% and 10% for their affiliates, with tiers that their affiliates can climb to earn higher commissions levels.
Pay Per Lead
Pay per lead is a bit more complex of a system. Affiliates are compensated based on how readily you can turn those leads into sales. The affiliate is responsible for convincing the consumer to visit the brand’s website and taking an action. This action is typically filling out a contact form, signing up for a free trial of their product, or subscribing to their mailing list. Once the lead is confirmed, the affiliate is credited with the commission from the lead.
Pay Per Click
Pay per click programs are the most complex of the three. Typically, these programs incentivize the affiliate to redirect customers to the brand’s website. The affiliate is responsible for engaging the customer up until that point. These programs can be difficult to manage and require a detailed understanding of your earnings per click for them to be reliably profitable.
Most Common Affiliate Marketing Channels
There are many different channels that affiliates can use to promote products. There are, however, a few that stand out above the rest. Most affiliates will follow a few common methods to ensure that their affiliate links reach the widest, most-engaged audience that they can. While there will always be affiliates that use creative methods for promoting products the common promotional channels include:
Social Media Influencers
A social media influencer is someone with a large following on a social media platform (or several platforms). They reach a wide audience and share affiliate products with that audience to generate commissions. Influencers are a great choice for an affiliate partnership because they already have an audience that trusts their opinions on subjects that are related to your product.
Bloggers
Like influencers, bloggers also reach a wide audience that trusts their brand. They have the ability to rank content that promotes your product in search engines, which boosts traffic and exposes your product to new audiences. A blogger might review or sample the product in question and provide that content to their following. They find compelling ways to promote your products through content, which provides more than just sales benefits to your company, it provides exposure as well.
Email Lists
Companies and publishers that collect email addresses may promote your product through email marketing campaigns. Email marketing is particularly effective because your affiliates will have typically built a reputation with their audience and they will trust their opinions when they share new products.
Large Publishers
Some of the largest publishers in the world act as affiliates. They are able to generate huge amounts of traffic and often have audiences of millions. For obvious reasons, they make excellent affiliate partners if the product is a good fit for their audience. They provide huge levels of exposure to your products.
Finding the Right Affiliate Marketing Solution
If all of this sounds like something that you might be interested in, the next step in the process is to find the right affiliate marketing solution to help you manage your affiliates and deliver commissions. LinkTrust’s Affiliate Marketing Platform is designed to help companies of all sizes leverage relationships with affiliates to grow their sales and industry awareness.