Affiliate marketing has a plethora of benefits, as is obvious from the great results reported by those who implement it into their marketing strategies. Hayley Lambert from Acceleration Partners is here to provide a rundown of affiliate marketing – an ‘affiliate marketing for dummies’ if you like.

For those wanting to show off the benefits of affiliate marketing to their CEO or CMO, this introduction and guide will outline exactly what it is, who the key players are, and how to get started.

What is affiliate marketing?

The Oxford English Dictionary definition of affiliate marketing is as follows:

“A marketing arrangement by which an online retailer pays commission to an external website for traffic or sales generated from its referrals.”

Affiliate marketing is a performance-based model that allows an advertiser to partner with individuals or companies to promote their products and or services. 

It involves three key parties, an advertiser, an affiliate and a customer. 

Whatever the partner does –  drive sales, leads, new customers, etc. – you only pay them after they’ve delivered on that desired action. The performance model is outcomes-based. 

A successful affiliate programme has a win-win framework for both advertisers and their affiliate partners. And, when set up and managed successfully, the affiliate model can contribute to a significant percentage of your online revenue.

Here’s an example of how the affiliate model can be used to drive a sale:

Who are the key players?

Advertisers – Companies who sell their products and/or services through the affiliate marketing channel. (Also known as Brands and Merchants)

Affiliates – A person or company that promotes an advertisers’ offering and is paid on a performance basis for driving a predefined desired action, such as a sale or a lead. Affiliates are an advertiser’s marketing partner. (Also known as Publishers and Partners). 

Affiliate Marketing Agencies – An independent company that offers affiliate marketing services to advertisers. The agency works directly with affiliates and with the affiliate network or SaaS platform that services the technological needs of the programme. Some affiliate marketing agencies also offer consultancy services. 

Affiliate Networks – An affiliate network acts as an intermediary between affiliates and advertisers. They typically track, report and pay affiliates. Affiliate networks offer either full-service management or self-service management to advertisers.

Customers – The audience that affiliates influence. Actions can include making a purchase, submitting a lead gen form, a newsletter sign-up, etc.

Media Agencies – Typically a full-service digital agency that has an affiliate department. They can manage an advertiser’s entire digital strategy or just the affiliate channel.

SaaS Platforms (Software as a Service) – SaaS platforms provide advertisers with tracking, reporting, and payment; however, they do not generally offer an account managed service, which differentiates them from affiliate networks.

How does an advertiser get started?

To become an advertiser, the key requirement is that your website is transactional, and the “desired action” such as a sale or a lead generated from a form fill can be completed by the customer online. It’s also essential to ensure that you have a compelling product or service that affiliates will want to promote to their audience.

Why use affiliate marketing?

The popularity of affiliate marketing is thanks to the flexibility, transparency and measurability of the model. Benefits for advertisers include:

  1. Low risk. The affiliate model means that advertisers pay on performance rather than clicks making it a low-risk form of marketing. Whether that be the sale of goods, a new lead, even down to targeting new customers only, the affiliate channel can deliver. 
  1. Flexible. The affiliate model is incredibly flexible. You can find the solution that’s right for your business, whether it’s building an in-house team, partnering with a network or outsourcing the management to a specialist agency. You are in control of how you run your programme and which partners promote your brand.
  1. Low cost. While some initial investments are required, payments are then made based purely on performance metrics, once the initial set up is complete.
  1. Increase brand awareness.  The affiliate channel provides an excellent springboard to get your business seen; there are hundreds of thousands of affiliates across different channels with a range of promotion methods. By working with affiliates, you can raise brand awareness with new audiences and grow brand loyalty with existing customers. You have control of who you work with, selecting the partners who are the best brand fit. 
  1. Data insights. The affiliate channel is measurable and transparent. Detailed data insights allow you to manage your overall ROI or campaigns with specific partners. Decisions can be made based on real-time performance, making the channel scalable and flexible. 
  1. Grow into new markets. Affiliate marketing is a low-risk, cost-effective way to launch into new markets. Many affiliates have global audiences, which can be a good way to test consumer interest in a new market. 
  1. Scale quickly. Affiliate marketing allows you to scale your business with minimal costs and is low risk. You can test out new markets, new messaging and work with various partners whilst monitoring spend and ROI.

Affiliate marketing is a staple part of many brands marketing strategies. The channel is ever-evolving, flexible and low risk, allowing you to reach a disparate customer base at scale cost-effectively.

A well-managed affiliate programme will allow you to target not only the right customers but also the products and spending behaviour to drive profitable, incremental growth. Essentially, you can build out an efficient sales force that is truly flexible to your needs.