Digital word-of-mouth happens across all consumer types. One tried-and-true word-of-mouth technique is affiliate marketing. In affiliate marketing, brands can rely on the advertising and sales skills of fellow consumers. Here’s a quick guide to how it works.
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Understanding affiliate marketing
Affiliate marketing gives consumers or third party professionals the opportunity to sell your products or services in exchange for a commission.
Brands can work with affiliate networks or directly with affiliates. To qualify, affiliates usually have to apply or submit an affiliate request. Most affiliates have to meet a certain set of criteria and agree to terms and conditions before they can start selling.
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What is a typical affiliate program workflow?
There are different types of affiliate programs. For example, an eCommerce affiliate program allows an affiliate to direct consumers to a product page on the brand’s website. For every store transaction that that affiliate generates, the affiliate gets a “cut” from the sale as their commission.
B2B affiliate programs sometimes present a more formal set of expectations for affiliates. For example, some online lenders often empower qualified affiliates to act as account managers and build a loan package for the borrower in exchange for a higher commission.
Regardless of what kind of affiliate program it is, there are common milestones (or stages) that every program demands.
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First, brands must build their affiliate team with individuals that meet a brands basic requirements.
Next, affiliates must agree to terms and conditions so that they advertise and sell in a way that complements the brand rather than detracts from it.
Third, the affiliate publishes their affiliate materials (such as an affiliate link) on their own channels (usually a website or social channel). As that affiliate attracts consumers and converts them, the brand processes those transactions, fulfills the order, and then pays the affiliate their commission.
Is affiliate marketing the same as influencer marketing?
There is some confusion about the terms “affiliate” and “influencer.” While it is true that some influencers are also affiliates and that some affiliates are also influencers, these two roles are not the same.
Influencers have large followings online due to the quality of their content. Additionally, influencers are not always selling products. Their priority is to build and maintain an online community through compelling content.
Affiliates, on the other hand, may or may not have large followings online. Additionally, many affiliates are not interested in building online communities. Their chief goal is to convert customers and collect a commission. That said, many affiliates are highly knowledgeable about their industry and function as consultants that don’t charge their consumer clients (since they get paid by the brand for converting customers).
Setting Up the Right Foundation to Run an Affiliate Marketing Program
If you’re interested in creating an affiliate program, there are a few things that you should have in place before launch.
Affiliate Terms and Conditions
You don’t want just any individual promoting your brand. There are many affiliate spammers out there that harass consumers, violate privacy laws, and damage brand reputation.
Additionally, your affiliates will want to know what they can and cannot do to bring you customers. As such, you need standards and rules. In your terms and conditions, you should state clearly all the dos and don’ts of your program.
These terms and conditions should be in writing, and you should make sure that every affiliate agrees to these standards before selling your products or services.
Accurate Price Point
In most affiliate programs, you have the cost of goods sold (COGS), discounts, and commissions. After subtracting all of these costs, you still need a profit.
Some brands get into trouble by launching an affiliate program before they’ve taken a closer look at their price point. And then they find out too late that each affiliate sale is actually costing money rather than making money.
To prevent this, make sure that your price point is where it needs to be to sustain a healthy profit margin after taking all costs into consideration.
Platform for Performance Tracking and Attribution
Manually tracking your affiliate sales will overwhelm your staff and likely result in mistakes. Instead, you need a platform that automatically keeps track of your affiliate relationships and sales.
For smaller affiliate programs, there are affiliate program plugins, coupon code generators, and more. But for larger affiliate programs, you will need a platform that integrates with your payment system or eCommerce platform and can keep track of affiliate performance, sales, communication, terms, and more.
Attribution is critical to an affiliate program. If you fail to credit your affiliates with a hard-earned sale, then you will sour your relationships and build a reputation for mistreating affiliates.
Your commission structure needs to be high enough to incentivize affiliates and low enough to maintain a reasonable price point.
Additionally, you will need to define when an affiliate qualifies to receive a commission (that is, define commission-worthy conversions), as well as when you issue affiliate payouts.
Top 17 Affiliate Marketing Terms (in alphabetical order)
EPC, or earnings per click, is a PPC term that measures the value of each ad click (i.e., when an average of 5 clicks results in a $50 sale, then each click is valued at $10). In affiliate marketing, this metric tracks the value of each affiliate link click. You can track EPC across your entire program or for each affiliate.
If you’re using affiliate marketing to grow your business, you don’t want just any individual to join your team. Filtering is the process by which you select which people can qualify as your affiliate.
An affiliate network is a type of “middleman” agency that helps brands connect with prospective affiliates and vice versa. These networks can help bring both sides together to form a long-term partnership.
Based on the terms of your affiliate partner agreement, you pay your affiliates once they have achieved a conversion. You should track your payouts carefully for attribution and budgetary purposes.
Affiliate Program Plug-in
A plug-in is a platform-compatible tool or add-on that provides a specific service to your website or eCommerce platform. In the case of an affiliate program plug-in (such as ReferralCandy on WordPress), the service exists to create affiliate links, track performance/payouts, and provide your affiliates with a dashboard from which to do the same.
In most affiliate programs, each affiliate receives a short code or user ID. That code or ID forms the end of that affiliate’s referral URL or landing page link.
Some affiliates do not use their creative efforts to nurture audiences and convert them according to your terms and conditions. They are more intrusive on consumers and aim to share their affiliate link and coupon code on every discount site that they can find. This is affiliate spamming and can harm your brand reputation.
Amazon Associates is the world’s largest eCommerce affiliate program. Affiliates can sign-up and maintain an affiliate relationship by meeting certain performance minimums.
For some affiliate partnerships, it works better if affiliates have brand logos, price sheets, and other collateral to drive conversions. Brands can provide those tools in an asset folder. All branded materials within that asset folder are referred to as assets. Many of the assets in that folder are proprietary, and as such, affiliates should agree to use those assets in accordance with the partnership terms and conditions.
A conversion occurs when a customer does what you want them to do. In an affiliate program, the job of affiliates is to convert customers on your behalf.
Most eCommerce platforms allow brands to create and customize coupon codes to discount a customer’s price at checkout. Brands sometimes provide affiliate-specific coupon codes to incentivize conversions and attribute sales.
Direct Link Tracking
Direct link tracking helps brands attribute conversions without the use of affiliate links. To do this properly, most brands have to create a database (affiliate area) of approved websites from which web traffic automatically receives conversion credit.
Not all affiliate programs rely solely on customer sales. Some programs reward “warm” leads (prospects that have received a pitch, basic client onboarding, and/or are ready to work with the brand to complete a transaction). Lead generation refers to the number of quality leads that a particular marketing tactic produces and is a common objective for B2B affiliate programs.
The publisher is the online tool that an affiliate uses to attract and convert audiences. Examples include a blog and/or a social media channel.
The referral is the customer or prospect that an affiliate sends to your brand. The referrer is the affiliate that sends referrals to your brand.
Sometimes referred to as an affiliate link or slug, the referral URL is the affiliate’s custom link that they can use to publish content and refer leads or customers.