A CEO’s Guide to Affiliate Marketing – Part 1
What is Affiliate Marketing?
Affiliate Marketing is a cost per action marketing program that leverages other websites and their marketing efforts (the Affiliates), to drive traffic to your site and create a desired action, be it a sale, download or other measurableaction. It is also referred to as Performance Marketing as the Affiliates are only paid on performance.
Despite being around for more than a decade, there are still many companies that don’t use this very important marketing channel or greatly under-utilize it. Managed correctly, Affilate marketing can be an important part of your overall Internet stratety.
What are the key benefits of Affiliate Marketing?
- You only pay the Affiliate if the desired action is completed
- Your product or service could be on thousands of sites within weeks
- Relatively low cost to entry
- Can help your Social Media program
- Can give you greater insights into your end-user customers
How does an Affiliate Program Work?
Affiliate marketing programs are simple to understand. Affiliates will try and drive qualified traffic to your site that results in a sale or other desired activity.
1. Shoppers go to the Affiliate site and see a link or banner for your product.
2.They click on the link and go to your site.
3. If the customer purchases the product, you pay the Affiliate a commission on the sale.
Setting up a program – In-house vs. Affiliate Network
Technical Considerations for Managing Your Own Affiliate Program
To manage an Affiliate program your website will need a back-end tracking system to capture the incoming link from the Affiliate site and the action, or sale as it occurs. Many e-Commerce systems allow you to manage your own Affiliate program from within the e-Commerce administration panel.
Using an Affiliate Network to Manage Your Affiliate Program
Many companies rely on Affiliate Networks to track, get reporting and administer payments for their Affiliate programs. This works differently from making payments yourself.
1. Shopper visits the Affiliate site
2. The link goes to the Affiliate network instead of your site
3. The affiliate network forwards the link to your site
4. All actions including sales are then forwarded back to the Affiliate network for tracking and reporting
5. The Affiliate network makes the commission payment to the Affiliate
If a sale is made the Affiliate Network makes their money by charging a percentage based fee on the commission you pay to your affiliates.
There are pros and cons to each method of managing an Affiliate program, but in general if you can afford it, a network has some significant advantages.
|Cost||Can be controlled internally but requires you to pay out multiple checks||Need to pay Affiliate network a per transaction fee, but you only make one payment to the network and they pay Affiliates|
|Security & Disputes||You will need to manage all disputes and manage fraud protection||Network handles all security and fraud protection as well as facilitates disputes|
|Marketing||You have to rely on your own marketing efforts to make you Affiliate program known to potential affiliates||Affiliate networks already have a large stable of diverse Affiliates that you can have immediately sign up for your program|
|Support||You can be more creative with your program but need to supply all technical support||The network usually supplies all technical support to Affiliates|
|Quality||You have to screen all your Affiliate applications to insure your brand gets quality representation||Screening Affiliates is highly recommended though the Network may do some initial screening for you.|
Who are the Major Affiliate Networks?
The biggest advantage of using an Affiliate network is thousands of websites that are waiting for the opportunity to sell your product or service. Here is a list of some of the biggest players.
- LinkShare is the oldest and one of the largest Affiliate networks with a large number of Affiliates and a full feature set for both merchants and Affiliates alike.
- Comission Junction is also one of the largest networks and is full featured with a large number of Affiliates.
- Google’s Affiliate program is one of the youngest networks being only a few years old.
- ShareASale is a fast growing relatively low cost network.
You can also find lists of dozens of smaller and boutique Affiliate programs at the following links.
Note: The above sites are Affiliate sites for the Affiliate networks, I have no relationship with them. I highly recommend researching which Affiliate network best meets your needs before signing up.
Next: Part II Understanding Successful Affiliate Programs and Metrics