Affiliate marketing is one of the most efficient and effective ways to generate leads, sales, and revenue for an e-commerce business of any size. Affiliate marketing entails working with a network of affiliates (individuals or businesses) who promote products or services in exchange for commissions on sales.
In this guide, we will define affiliate marketing and give a brief history of the industry, plus explain how to run effective affiliate marketing programs as well as measure their success. Whether you are just starting out in affiliate marketing or looking to add these skills to what you already know, this guide has everything you need. Let’s get started!
A brief history of affiliate marketing
Affiliate marketing is a form of performance-based marketing in which companies reward their affiliates for driving sales or other desired actions on their behalf. This can be done through various methods, such as paying them a commission when they successfully refer customers to the company’s website or by paying them for every click that they generate. With cookie tracking, many affiliates earn tiered commissions based on sales.
The history of affiliate marketing dates back to the early days of online shopping when publishers (aka website owners) would place affiliate links on their websites and get paid for every click that resulted in a sale. Over time, other methods, such as pay-per-sale (PPS) and cost-per-action (CPA) were introduced to make these affiliates eligible for commissions on sales or actions taken by the customers they referred.
Since then, affiliate marketing has evolved into a full-fledged industry with its own best practices, tools, and platforms. Today’s marketers use affiliate programs to generate leads and increase brand awareness while also generating revenue streams from website traffic. It’s generally a win-win for both parties involved!
Running an effective affiliate marketing program
So how do you run an affiliate marketing program that is effective and profitable? First, you need to understand your target audience. Who are the people or businesses who will be interested in promoting your products or services as an affiliate marketer?
Next, you need to come up with a plan for how you will manage your affiliates. This includes setting goals for how many affiliates you want to work with, creating contracts outlining the terms of their commissions (plus any other expectations), and developing strategies for working with them to increase sales.
Finally, it is important to measure the success of your affiliate marketing campaigns so that you can optimize them over time. This can include tracking key metrics like click-through rate (CTR), conversion rate, and revenue generated from sales from each campaign.
Affiliate marketing terminology
In order to successfully run an affiliate marketing program, it helps to have a basic understanding of some common terms and phrases used in the industry. Here are some examples:
Affiliate network: A centralized platform that connects brands with affiliates by providing various tracking services, reporting, and payment processing.
Affiliate commission: The amount of money paid to an affiliate for driving a sale or other action on behalf of a brand. This can be a flat rate or tiered based on the volume of sales or actions generated.
Pay-per-sale (PPS): An affiliate commission model where the advertiser pays out a certain percentage (e.g. 20%) of each sale made by an affiliate when they refer a customer who purchases products on their website.
Cost-per-action (CPA): An affiliate commission model where the advertiser pays out a certain amount of money for every desired action taken by an affiliate (e.g. $5 per signup to a newsletter).
Commissions: The percentage paid out as affiliate commissions, typically between 5% and 20%, depending on the product or service being sold.
Click-through rate (CTR): The ratio of clicks to impressions on an ad campaign. For example, if an ad is shown 1,000 times and clicked 30 times, the CTR is 3%.
Conversion rate: The ratio of customers converting into sales or other actions, like signing up for a mailing list after clicking on an affiliate link. Conversion rates vary by industry and promotion.
Tips for success in affiliate marketing
Here are some important tips to remember if you want to be successful in affiliate marketing:
1. Understand your target audience and what they are looking for. If you represent a company like Canva, you’d likely want to work with affiliates in creative markets whose audience would also be interested in a tool like Canva.
2. Research the various tools and platforms available to help you run your program, including tracking services and payment processors.
3. Set goals for how many affiliates you want to work with and create clear expectations in terms of commission rates, timeframes, and other requirements.
4. Stay on top of industry trends and evolving strategies so that you can optimize your affiliate marketing campaigns over time by adapting them as needed.
5. Build relationships with your affiliates so that they trust you and are more likely to refer customers who buy products or take action through their referrals. This can be done through regular communication, thanking affiliates for their work, and providing helpful resources or marketing materials.
Popular tools and resources
Whether you’re just starting out or looking to take your affiliate marketing experience to the next level, there are a number of tools and resources at your disposal that can help ensure your success. The tools affiliate networks and companies use often have a lot of overlap. Here are a few:
1. Affiliate networks, such as Commission Junction or FlexOffers, connect brands with affiliates who have established audiences via an online presence. They provide tracking services, payment processing, and other key functions.
2. Affiliate marketing software platforms, such as Post Affiliate Pro or ClickBank, provide a variety of tools for managing affiliates and measuring campaign performance.
3. Affiliate forums or communities are where affiliate managers can connect with each other to share best practices and ask for advice about running their programs more effectively.
4. Tracking services like TUNE (formerly HasOffers) or Impact Radius help you measure and optimize your affiliate marketing campaigns based on data from actual customers.
5. Influencer marketing platforms, such as Influence.co or TapInfluence, can be used to recruit and track influencers for affiliate marketing campaigns in a variety of channels like social media and email newsletters, as well as other channels where influencers can reach your target audience.
With careful planning, discipline, and hard work, you can build a long-lasting career in affiliate marketing. To learn more about this exciting field, check out our in-depth guide on careers in affiliate marketing!