What is Affiliate Marketing?
Affiliate marketing is a global multibillion-dollar industry with advertisers collectively investing an estimated $13 billion in affiliate marketing, according to Awin. More and more brands see the value that affiliate marketing has to offer. If you are among the few that haven’t joined this high ROI digital marketing channel and want to know more, this is for you. In this post, we will walk you through what affiliate marketing is, how it works, the different models, tools to track performance and what to consider before your program goes live.
What is Affiliate Marketing?
At its core, affiliate marketing is about partnerships. Websites promoting offers (or "affiliates") want to work with merchants to promote their products and services. In return, the affiliate gets a commission for the value they drive for the advertiser.
The right affiliate will have a large following of the merchant's desired target audience; to the merchant, this audience is an untapped consumer base. This becomes an opportunity for both the merchant and affiliate, creating a win-win scenario. In fact, you could say that the affiliate is an outsourced sales team for the merchant because they are connecting them with new customers and that leads to more sales, more signups and other actions the merchant deems valuable.
The affiliate gets paid, the merchant receives a new lead or sale, and the customer makes a purchase or completes an action that benefits the merchant. The affiliate invests upfront, and the merchant only pays when there is a conversion. And that is the beauty of performance marketing!
PartnerCentric has been managing programs for advertisers in all verticals for almost 20 years and we have been successful at finding the right affiliates to drive value for our clients.
How Does Affiliate Marketing Work?
If an advertiser wants to start an affiliate marketing program, they must first find a tracking platform that is right for them. There are many networks and platforms out there that can allow affiliates to apply for an advertiser’s program and then report on the success of those partnerships all in one interface. Our team works with all of the major affiliate networks and is network agnostic in the sense that we provide recommendations to our clients based on which network will be the right fit for them to succeed and reach their goals the fastest.
After a network is chosen, the advertiser can choose to manage the program in-house or work with an outsourced agency. There are many benefits to choosing agency management and we cover some of them in this blog post on why an outsourced affiliate marketing agency might be your best option for reaching fast ROI.
Affiliate Marketing Models
Within affiliate marketing, there are many different compensation models because affiliate marketing is a compensation method more than a channel. Advertisers pay out on performance. There is Cost Per Action (CPA) where the affiliate receives their commission when the customer performs a specific action that the advertiser deems valuable, like making a purchase.
The Cost Per Lead (CPL) method is extremely popular and effective for B2B businesses because they often want to capture new customers. In this model, the affiliate receives a fixed amount for each lead generated. A good example of a vertical that might use this model is an insurance company that wants more policy subscribers. They would pay the affiliate a flat rate for each new subscriber.
Cost Per Install or CPI is a model where the affiliate is paid when they drive installs for a mobile app. The user doesn’t even need to use the app, they just need to install it and the affiliate will get paid.
Another model is Cost Per Engagement (CPE) where an affiliate is incentivized to drive a user to reach a certain level of an online game or subscribe for a certain level of music subscription.
Key Players in Affiliate Marketing
There are five key players in affiliate marketing:
Also known as a merchant, retailer, nor brand. This is you. Advertisers manage their program and partnerships in-house or work with an affiliate marketing agency also known as an outsourced program management agency (OPM), like PartnerCentric. Some networks offer a certain degree of managed services, but an OPM agency will give you the most strategic, hands-on, tailored approach to grow your business.
Also known as a publisher or influencer. Anyone who can reach new or returning customers on behalf of an advertiser to drive the desired action. This is achieved through youtube videos, blogging, social media, reviews, email campaigns, mobile, loyalty programs, discounts, special offers, and more. Affiliates then earn a commission from the advertiser to compensate them for their part in earning the sale or generating a lead.
The customer sees the affiliate's advertisement, clicks the referral link and makes a purchase, fills out a form, or completes the desired action. The affiliate then gets paid once the action is completed.
The Networks and SaaS Solutions
How do these partnerships work? They have to be tracked, reported on, and then paid. A network or a tracking SaaS solution is the foundation of an affiliate program. Relevant affiliates are recruited to an advertiser's program and receive an invitation from their network/platform to join. The managing team lives and breathes in these technology solutions, updating links, banner ads, text ads and creative, product catalogs, and everything affiliates need to promote you successfully.
In addition to being a management portal, these technologies track the consumer journey, offer affiliate and advertiser reporting, and disperse the commissions to all affiliate partners.
The Outsourced Program Management (OPM) Agency
This is us. Think strategy, expertise, and execution.
Agencies offer a strategic approach to program management. They set up and leverage the network technology, recruit and optimize the right affiliate partnerships, and ensure your affiliate program is successful. The OPM agency works directly with an advertiser's team or manages the affiliate program process entirely.
Additionally, agencies can work with multiple networks, which gives them a higher reach and ensures that the advertiser's program is successful.
Tools to Track Performance
PartnerCentric has an internal technology suite called “Control Suite” that allows advertisers to gain transparency and control over their affiliate investment. The tools allow advertisers to trust their own source of truth while mitigating fraud and finding new affiliate opportunities for growth across the affiliate marketing landscape.
And that’s just part of what Control Suite can do:
Opportunity Discovery–This powerful tool allows us to uncover new and unique publisher opportunities no one else can find to grow your incremental revenue by reaching new audiences.
Top Rank–This placement and position technology monitors brand and competitive ranking activity across a set of publishers. Top Rank gathers the necessary intel for our clients to earn the coveted top spots and leave their competition in the dust.
Fuse–This patented PartnerCentric technology aligns affiliate network tracking data with your source of truth (typically Google Analytics, but integration with other technologies is available), eliminating the risk of an expensive margin of error.
Block and Filter–We deploy this fraud detection and redirection technology to help tackle the $23 billion lost annually by advertisers globally due to ad fraud.
Content Monitoring: Monitoring all your content across the affiliate landscape 24/7 to ensure that there are no issues with outdated content, false claims, etc.
The Benefits of Affiliate Marketing
There are many benefits to utilizing affiliate marketing. The largest one is the beauty of pay-for-performance. You pay out affiliate partners only when they drive traffic, leads, purchases that you deem valuable. It’s a high-ROI driving channel because once you are working with the right affiliates for your goals, you will see a strong return on ad spend (ROAS).
Additionally, affiliate marketing works well for all verticals because there are thousands of affiliates out there who serve different markets, products and services. The key is to recruit the right partnerships who will help advertisers reach their unique business goals.
Additionally, because it’s a performance channel, there are fairly low startup costs, especially if an affiliate marketing program is managed in-house. All you need is to track through an affiliate network or platform and you can technically have an operational program. That being said, if you want your affiliate marketing program to grow strategically and stay successful, it’s good to consider outsourcing management to an affiliate marketing agency that has established relationships and special rates with top affiliates and can use in-house tools to find advertisers the right opportunities.
Building The Right Relationships
If you want to have a successful affiliate marketing program, you must work with the right affiliates for growth. Affiliate is not a numbers game and the more affiliates you have doesn’t translate to higher growth and more sales.
Rather, it takes finding the right affiliate partnerships to see and benefit from true growth. So what is a good affiliate? There are
How to Get Started with Affiliate Marketing
These are the basics to consider when starting an affiliate marketing program. Other than having a strong product or service, it’s also important to consider other variables like your website, your niche, your business goals and the different types of affiliates.
Other than actually having a product or service, the next most crucial element of a successful affiliate marketing program is having a clear website that already drives a decent amount of traffic. Affiliates will not want to work with you if you don’t have a fully functioning website where a user can make purchases seamlessly (if applicable) or sign up for what you are offering. Websites must be easy to navigate with clear CTAs throughout.
Setting Goals and Finding the Right Affiliate Partners
Before looking for affiliates to join your program, it’s necessary to establish your goals and what you will deem successful. If your goal is to get more sales or increase revenue, you might want to consider coupon and loyalty publishers such as Rakuten or Honey that provide coupons to users when they are far into their purchasing journey. If it’s brand awareness you are after, content and influencer partners will be most helpful since they will open up your product or service to new audiences. It’s important to remember that brand awareness does not equal new sales because it is further up in the funnel so a well-rounded affiliate marketing program composed of different types of affiliates will help you reach your goals.
Strategies for a Successful Affiliate Marketing Program
Below we cover some tips and tricks of the trade to help you grow a successful affiliate program that continues to deliver year after year.
Diversify Your Publisher Mix for Success
Over the last few years, a big trend in affiliate marketing has been to focus on full funnel opportunities–and for good reason. Not only will a diverse affiliate portfolio help you maximize results at every stage of the customer journey, but it will also help you reach a broader audience and broaden your revenue streams. Hanging your hat on content-only affiliates will not only hinder your reach but also increases your risk of losing a potential buyer in the purchasing funnel. Make sure your affiliate portfolio has a good mix of anything from content, deal and coupon affiliates to loyalty, search and conversion optimization partners.
Provide a Budget with Options
As with any marketing program, an affiliate program requires a budget, and different affiliates have different payment structures. For instance, flat-rate programs pay a flat-rate for each lead, sale, or click an affiliate generates for a brand. Performance-based programs, on the other hand, reward affiliate partners for conversions only. The better an affiliate converts, the more they earn. But payout models aren’t the only thing to budget against. Most content verticals, for example, require a flat fee to participate–and that’s on top of the affiliate payout. It’s helpful to discuss all opportunities with payout options up front. This way, the affiliate partner can customize a variety of packages that best suit your budget.
Define Your Goals with Affiliates
Any affiliate partner worth your time (and money) is as invested in your success as they are in their own. It’s pretty straightforward, really. If you don’t reach your goals, they won’t reach theirs either–and they’ll likely lose their shot at becoming a repeat partner, too. When goals are clearly defined and communicated, everyone wins.
3 Things to Consider Before You Launch an Affiliate Program
Now that you know the basic architecture of affiliate marketing, here are three things to consider as you plan your program.
1. Select the Right Tech
You'll need a solution to track, manage and grow your program. Networks typically charge a percentage of revenue or commissions paid to affiliates. SaaS solutions charge a flat fee based on the volume that goes through the solution. To learn more about the technical aspects of selecting the right tools, read Navigating the Technology.
2. Determine Commission Rates
As discussed earlier in this article, you are paying affiliates based on performance. Build a cost-effective program with a strategic commission structure based on competitive Intel, publisher benchmarking, and proactive technology. Commissions vary based on the value a partner drives for you. For example, you'd want to pay a content partner differently than a coupon partner.
Invest in attribution technology that allows you to only pay partners for sales that are correctly attributed to the affiliate channel. There is, on average, a 30% margin of error between attribution systems, which can be a high cost to you.
3. Investment in Agency Expertise
Think of this like an in-house hire, except instead of one junior "head," you get a team of seasoned industry experts with no ramp-up or training required. Our team never learns on your dime. We are the trusted advisor, the confidante, and the extension of your team you've been looking for to help you meet and exceed goals.
Common Affiliate Marketing Mistakes to Avoid
Focusing on Quantity More than Quality
Spoiler alert: All partners are not created equal, and the ones who publish subpar content or don’t truly understand your business aren’t doing you any favors. Instead, you’ve got to strategically evaluate potential affiliates and build a foundation (and commission incentives!) only with those who have established credibility and are consistently getting your brand in front of your target audiences. You’ll end up with higher quality leads that actually convert instead of fishing for those valuable leads in a sea of unqualified traffic. Remember, affiliate marketing is so much more than just a numbers game. All the traffic in the world doesn’t mean anything without conversions from the right people.
Being Reactive, Not Proactive, Against Fraud
Did you know that activity from fraudulent sources reduces your return on ad spend by an average of about 22%? In the last year, fraud cost brands like yours more than $23 billion globally. That’s a lot of wasted marketing dollars. Not to mention, a real risk to the integrity of your brand. One of the best ways to stay ahead of fraudsters is to constantly be on the lookout for anomalies in your data like high click counts without the conversions to match. Set up a consistent schedule for proactively reviewing affiliate traffic and sales for inconsistencies so you can stop a problem before it escalates. Here’s the thing, though. Fraudster tools will continue to become more sophisticated so new forms of fraud are inevitable. You can’t afford to let your guard down for a second.
Setting and Forgetting an Affiliate Marketing Program
If your affiliate marketing goal is growth and ROI (and really, what’s the point otherwise?), you have to regularly track, optimize and monitor your affiliate program. Performance metrics allow you to see what is working, and just as importantly, what isn’t so you can make adjustments accordingly. Our motto? Always be optimizing. There’s no such thing as a set-it-and-forget-it solution in affiliate marketing–period.
Attempting to DIY a Program without Expertise
There’s a pretty widespread misconception that affiliate marketing is simple to implement, which explains why it may be tempting to hire someone with limited experience or tap someone in-house to manage your affiliate marketing. Cold hard truth? You might be setting yourself up to fail. Not everybody has the breadth of industry knowledge and, most importantly, the relationships needed to navigate the nuances and regulations of affiliate marketing.
Why Work with an Affiliate OPM Agency?
Initially, an in-house team may be enough to oversee your program, but as it grows so does the need to call in reinforcements. An OPM agency aims to be the affiliate marketing extension of your company. We take a hands-on approach with our full-service clients. From day one, our tenured account managers work to maximize your program.
PartnerCentric has cultivated thousands of affiliate relationships. We take a network and platform agnostic approach, which means our clients are getting strategic support to grow their programs without the need to play favorites. If one technology is more successful, we will always choose the best option for our clients.
Benefits of Full-Service Solutions
Our full-service clients get an entire team of dedicated experts in compliance, account management, and technical services. At least five team members touch the program daily, with your lead account manager spearheading the strategy.
Is Affiliate Marketing Right for You?
If you are an established brand in almost any industry that is looking for new customers, more sales and has robust growth goals, affiliate marketing is a high-ROI driving channel that you should be considering.
At PartnerCentric, we believe experience matters. Our account managers have the highest experience level in the industry. That’s a big deal, especially in today’s world where fast ROI and results are paramount. Our team has the experience and relationships they need to find the right partner opportunities for you and, if necessary, to quickly make strategic changes. They know their stuff, and they deliver real, measurable results.
Download the Affiliate Marketing 101 Guide
Save this information for later and learn more with our four-part Affiliate Marketing 101 ebook. You've already covered part 1, so you're nearly there. In this ebook guide, we cover:
- Affiliate Marketing for Advertisers: What it is, How it works, and What to consider before getting started
- Navigating the technology
- The anatomy of a launch
- What to do after your program is live
Complete the form below to download the guide.