July 26, 2022

What is Affiliate Marketing?

Alisa Crowley
An affiliate marketing agency

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, 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.

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.

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!

How does affiliate marketing work for advertisers

How Does Affiliate Marketing Work?

There are five key players in affiliate marketing:

The Advertiser 

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.

The Affiliate

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

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 usThink 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.

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 over 60,000 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.

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

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.

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:

  1. Affiliate Marketing for Advertisers: What it is, How it works, and What to consider before getting started
  2. Navigating the technology
  3. The anatomy of a launch
  4. What to do after your program is live

Complete the form below to download the guide.

Affiliate Marketing 101 Ebook