Affiliate marketing is a thriving approach to generating word-of-mouth referrals among a particular target audience. In this day and age, affiliates increasingly take advantage of online tools to connect with prospective customers and introduce them to affiliate brand partners.
What is affiliate marketing?
Affiliate marketing is leveraging third-party relationships to generate brand awareness and sales on behalf of a brand, business, or organization.
Brands partner with affiliates to expedite their word-of-mouth and partially outsource their sales process. Most brands that use affiliate marketing today compensate their affiliates through commission payments in exchange for customers that are either ready to buy or have already completed their purchase with the help of an affiliate.
What is the brand’s role in affiliate marketing?
Typically, the brand is responsible for product and/or service delivery (or fulfillment). The brand also designates who may or may not be an affiliate and what the affiliate program rules are.
In some cases, brands may supply a certain amount of marketing tools, such as asset folders, affiliate links, discount codes, etc. When the brand decides to provide proprietary information to an affiliate (such as logos, price sheets, onboarding materials, productivity software access, etc.), the brand oversees and enforces confidentiality agreements with that affiliate.
What is the affiliate’s role in affiliate marketing?
Affiliates are tasked with two things: conversions and compliance.
While affiliates often do a great job building brand awareness and nurturing warm leads, most are concerned with converting clients on behalf of a brand and collecting a commission. To do this well, affiliates must assume some kind of expert role within their industry.
Within eCommerce, affiliates usually publish promotional content on blogs, websites, and blogs to inform and convert customers. This approach is most common in DTC or B2C industries.
Top-performing B2B affiliates often research available solutions and inform their audience about those solutions. That said, B2B affiliates generally favor the brands from which they are able to earn commissions. But if that affiliate demonstrates their trustworthiness or expertise, there doesn’t have to be a conflict of interest.
When it comes to compliance, affiliates must disclose their affiliate relationships so that they do not violate the FCC or mislead prospects. Additionally, affiliates must adhere to the brand’s rules and regulations if they want to maintain that relationship. Successful affiliates do their utmost to promote their brands with accuracy and only reach out to consumers that give their consent.
What is the consumer’s role in affiliate marketing?
As consumers, affiliates create opportunities for industry information and product/service discounts. However, it’s important that consumers recognize when they are working with an affiliate versus working with a consultant.
Consultants are typically less concerned with promoting a brand and more concerned about creating a unique, personalized experience for the client. But consultants are usually more expensive than affiliates. Knowledgeable affiliates don’t typically charge for their “consultative” services since they receive a commission from the consumer’s purchase.
And in light of recent consumer privacy laws, a critical role of consumers is knowing their rights. For example, the CCPA dictates that organizations may not collect or sell consumer information without that consumer’s express consent. Additionally, consumers reserve the right to have that organization delete their personal information within their database, as well as among databases for every third-party affiliate.
Consumers that know their privacy rights and claim them when necessary actually make the affiliate marketing industry better, since agents will only ever contact those consumers that truly want help.
Affiliate Marketing with Influencers
Affiliate marketing is a broad industry, and many marketers insist that influencer marketing falls within affiliate marketing. While this may not always be the case, there is some overlap between the two. Additionally, many influencers become brand affiliates and earn a commission on top of their role as social media influencer.
What’s the difference between affiliate and influencer marketing?
“While the affiliate marketer is most interested in generating demand for their affiliate products, an influencer is most interested in creating demand for their own content. And while some influencers are affiliates, not all affiliates are influencers.” – GRIN, How To Avoid The 5 Biggest Affiliate Marketing Mistakes
Influencers are people who through nurturing their online communities have gained their community’s trust. They are engagement experts and leverage compelling content to consistently generate that engagement.
Because influencers are generally better than brands at creating authentic content that resonates with consumers, brands have learned how to build relationships with influencers and partner with them to connect with audiences. That said, successful influencers prioritize authentic content over sponsorships and customer conversions.
By comparison, affiliates may or may not be concerned with producing authentic content. Their goal is to attract buyers and convert them into paying customers.
Still, influencer marketing and affiliate marketing often look very similar. They are so similar, in fact, that many influencers are highly effective in their additional role as a brand affiliate.
How does traditional affiliate marketing compare to influencer affiliate marketing?
In traditional affiliate marketing, affiliates may never even use the products that they choose to promote. Their value lies solely in their ability to generate commissions, and an affiliate’s relationship to their audience is primarily transactional.
Contrary to the traditional affiliate model, influencer affiliate marketing puts great content first and brand conversions second.
For an influencer to be successful, they must achieve authenticity with their audience. That’s why influencer affiliates promote products and services that they use. Because of this, affiliate partners are more picky about their brand partnerships than are most professionals within the traditional affiliate marketing industry.
What are the pros and cons of influencer affiliate marketing?
The differences described above don’t necessarily make one affiliate strategy better than the other. What’s most important is whether traditional or influencer affiliate marketing is best for your brand. Each has their pros and cons.
Some influencer affiliate pros are:
- Influencer audiences are more engaged.
- Conversion rates tend to be higher than traditional affiliates.
- Fewer frequent product/service recommendations in influencer audience timelines can make your brand stand out better.
- Compelling lifestyle content accompanies product/service recommendations.
- Influencers make only genuine product/service recommendations.
But influencer affiliates also pose some unique challenges, such as:
- Influencer relationships require more attention than traditional affiliate relationships.
- Conversions may take a back seat to authentic content from time to time.
- Influencer affiliates are more particular about brand partnerships than are traditional affiliates.
The 4 Core Pillars of Traditional Affiliate Marketing
The core pillars of affiliate marketing aren’t just helpful suggestions, they are time-tested standards that can make or break your program. If you’ve ever been a part of an affiliate marketing program, you’ll quickly recognize why these pillars exist and how following them can transform your affiliate marketing for good.
Pillar #1: Everyone must know their role and the rules.
Professional affiliates are among the most proactive marketing and sales agents (or organizations) you’ll ever meet. But without clear guidelines, they may “go rogue,” even when they don’t mean to do so.
You’ve worked hard to build your brand. As such, you should clearly define your expectations. Taking the time to explain roles and rules helps your affiliates become valuable team members rather than vigilante sales agents.
Additionally, each of your affiliates needs to know who their point of contact is, how to send referrals, and when they can expect to receive commissions.
Ideally, your affiliate roles and rules are contained within a formal and legally-binding affiliate agreement. This approach leaves no room for assumption or misunderstanding. Everyone within and without your organization knows what’s expected of them.
Pillar #2: The better your affiliate attribution, the more lucrative your affiliate program will be.
At the end of the day, knowing exactly where each lead and customer comes from is your responsibility. If your process effectively empowers your affiliates to track their own leads, then there’s no need to fix something that isn’t broken.
However, one of the biggest reasons why brand-affiliate relationships sour is due to commission disputes. Either the brand fails to give an affiliate credit at all, or more than one affiliate feels that they deserve credit.
If you have the tools in place to track how and where your customers come from, there is no need for these disputes. There are a number of methods to track attribution, from IRM automation software to customized coupon codes and affiliate links.
Pillar #3: Discounts lower profit margins but typically increase overall sales.
Most affiliate programs make heavy use of product/service discounts to incentivize affiliate sales. But if you’ve not set your initial prices correctly, you will lose profitability fast.
That’s why price point is so critical to an affiliate program. If you offer no discounts at all, then you might make it more difficult for your affiliates to convert customers. But setting your discounts too high can put you in a precarious cash flow position.
Once you’ve properly crunched the numbers and found a good balance of price, discount rate, and commission structure, you won’t run into these cash flow issues. More importantly, you’ll demonstrate to your affiliates that you run a stable and reliable brand that can properly manage affiliate relationships.
Pillar #4: Technology empowers affiliate success.
Affiliate marketing is not new. In fact, it’s been around long before the age of social media and data analytics. As such, many companies maintain “old school” style affiliate programs to focus on manual recordkeeping, phone calls, and hard paper copies.
However, most brands find that technology is one of their best friends when it comes to driving affiliate sales and managing those affiliate and customer relationships. Among the most helpful tech solutions for successful affiliate marketing are:
- Marketing automation tools
- Website analytics
- eCommerce integration
- Social media engagement tracking tools
- Automated payments
- Tags and cookies
- Digital signatures
Not only will the automation tools listed above help you adhere to each of the pillars of affiliate marketing, but it will also free up your team to accomplish more with less. Streamlined processes nearly always lower your operating costs so that you can increase our ROI.
Challenges of Affiliate Marketing
Like any business model, affiliate marketing can be confusing and tedious, depending on the nature of your product and affiliate program. Here are some of the leading challenges.
Consumer privacy continues to be a hot-button issue within the affiliate industry. For example, many affiliates publish content that invites readers to share their personal information. If at any time a consumer thinks that they are providing their information to one organization (but are actually giving their information to someone else), then the party that took the consumer’s information may be violating federal or state privacy laws.
Consumer privacy law according to the CCPA, for example, holds all involved parties responsible for the mismanagement of consumer data. In other words, a security breach and/or information mismanagement with any third party affiliate could result in negative consequences for your brand.
Inauthentic Brand Promotions
Some affiliates can be spammy and promote multiple brands at once (including competing brands). In other words, some affiliates do anything that they can to get a commission.
To address this challenge, you should partner with affiliates that are better aligned with your brand product. Technically, most exclusivity and non-compete agreements are unenforceable. But you can vet your affiliates for only those that will promote your brand as authentically as possible.
In affiliate marketing, you must consider more than the cost of goods sold (COGS). You should also take into account commissions and discounts. When partnering with affiliates, you need to plan your price point carefully so that you do not unintentionally sacrifice profit margin for affiliate sales.
That said, one of the great benefits of affiliate marketing is that you don’t have to pay affiliates up front. It’s a 100% performance-based system. Still, costs can add up quickly if your prices do not sufficiently account for the cost of an affiliate program.
Enforcing Affiliate Program Rules
Your affiliate program guidelines ensure that affiliates don’t harm your brand reputation. Additionally, program compliance makes sure that affiliates onboard or introduce clients correctly.
It’s critical that your affiliates respect your process so that your program adds value to your business.
Consistent, Accurate Attribution
Attribution is usually an ongoing challenge in affiliate marketing. As such, it’s important that you establish a reliable system for tracking prospects and customers.
Discount counts, tags, and affiliate links are great ways to track attribution. For more advanced affiliate programs, you should consider investing in an automation platform built to manage influencer and affiliate relationships.
What do you need to do to run an effective affiliate marketing program?
The first step is to decide what you want your affiliate program to do. Most affiliate programs focus on conversions and sales, but you may also want to leverage affiliates to increase brand awareness and website traffic.
Because affiliate marketing is performance-based, you will need to incentivize your affiliates to do what you want them to do. As such, you should decide how you will measure performance, as well as how much you will pay for each conversion or achievement.
Strong communication between you and your affiliates prevents misunderstandings about your process. Your affiliates must know:
- Who your target audience is
- Approved methods for engaging and converting members of that audience
- How to process prospects, warm leads, and/or referrals
- (If applicable) How to transition client onboarding from the affiliate to the brand
Your commission structure is central to your affiliate program. Before you launch your affiliate program, you must reach a compensation agreement with your affiliates and have your agreement in writing.
Your affiliates should know:
- What they are being compensated for (i.e., warm leads, paying customers, etc.)
- What their commission structure is
- Dos and Don’ts for acquiring customers
- How and when they will receive compensation
Measuring Success for Your Affiliate Program
Tracking affiliate performance helps you know how well your program is doing. It also ensures that you properly attribute conversions to the right affiliate.
Influencer and affiliate marketing can help you increase your sales and lower your upfront marketing costs. Focusing on the four pillars of affiliate marketing will ensure that you capitalize on the best that affiliate marketing has to offer your brand and your customers.