The basics of affiliate marketing
Are you setting up your own affiliate network, or are you just interested in what affiliate marketing is? This blog covers all the essential basics.
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Affiliate marketing. You’ve probably heard about it before. You might even have considered starting with affiliate marketing and why not? Affiliate marketing is trending. The pay-per-performance basis on which affiliate marketing is based is very tempting for companies right now since they don’t have to invest in big marketing campaigns, but only pay out when one of their affiliates makes a sale. In this article, we clearly explain what affiliate marketing is, so if you’re curious about affiliate marketing, but not experienced in it, this article is for you.
Table of Contents
What is Affiliate Marketing?The general idea of affiliate marketing is this: A publisher that has media (blog, email registry, comparison site, etc.) promotes an offer of an advertiser to their audience. When a consumer purchases the promoted product and/or service, the advertiser pays a commission to the publisher. Important to note here is that no sale means no pay. With affiliate marketing, the branding and marketing of products and services are spread out between different parties. This allows a brand to utilise the talents of individual publishers in their marketing while providing these individuals with a share of the profit. To make affiliate marketing work, three parties need to be involved. Here you can find some of our advertisers and publishers and hear their stories!
- Publisher or Affiliate
AdvertiserThe advertiser is the owner of the product or service that is going to be sold through affiliate marketing. This can be a large enterprise or a solo entrepreneur. The product or service can be anything from kitchen utensils to magazine subscriptions or online classes.
The advertiser promotes their product or service through the affiliates. Affiliate marketing can be their only marketing tool, but mostly they also use more traditional marketing channels as well. When someone buys a product or service from the advertiser, the advertiser gets paid. In turn, the advertiser then pays a commission to the affiliate who sent them the converting consumer.
Publisher or AffiliateThe affiliate marketer, or publisher, is the person (or sometimes company) that markets the advertisers’ products or services to potential customers. They will receive a commission for successfully promoting the goods through their own network and online presence. For every sale they make, the advertiser pays them a commission.
Let’s say a certain affiliate marketer has an Instagram account with 100.000 followers where they mainly talk about beauty products. This means it is interesting for companies who sell beauty products to work with them since there is a fit between the goods sold (advertiser) and audience reached (publisher). So beauty company X asks them to promote beauty product Y. This fits the profile, so they accept. They then use their Instagram account to talk about product Y to their fans who are interested in beauty products. Sometimes the affiliates get a discount code they can use. Every time a follower buys beauty product Y through the publisher’s links, beauty company X pays them the commission they agreed on.
The advertiser gets more sales, the affiliate gets paid, and the consumer gets interesting content. That’s the beauty of affiliate marketing, it’s a win-win-win.
ConsumerThe consumers may not be aware of it, but they are the driving force behind affiliate marketing. Without consumers there’s no audience to share the products with.
When the consumer buys a service or product via the affiliate, the advertiser shares a portion of the profit with the affiliate. A lot of affiliates these days choose to share that they are affiliate marketers. You may have seen this via social media posts that say #affiliate, #partnership, or #ad. Some publishers do not disclose that they are an affiliate marketer, in which case the consumer doesn’t know that their purchase is part of an affiliate marketing program. There are, however, strict regulations regarding this in many countries where the affiliate needs to make clear that they are promoting something via an ad.
The affiliate marketers share of the profit is usually already included in the retail price so the price for the consumer is seldom affected by affiliate marketing. One could argue that all costs are ultimately paid by the consumer, which is correct, but affiliate marketing is one of the most cost-effective marketing channels for the advertisers. In addition, some affiliates even get to give out discount codes in which case the consumer pays less for the product or service when bought through affiliate marketing.
The most important channels of affiliate marketersAffiliates always look at one another to find the best ways to engage their audience and persuade them into making a purchase. Not all affiliate marketers use the same channels to do so. These are the most common marketing channels used by affiliate marketers.
BloggersA good blogger ranks good in Google and ranking good in Google means reaching a lot of potential customers. The bloggers often sample the advertisers product or service and write an extensive review that promotes the brand in a captivating way. This persuades the readers of the blog to make a purchase. The blogger is then rewarded for every sale the blog produces.
Cashback websitesCashback websites are websites that facilitate the cashback a consumer can get after making a purchase. How does this work? The cashback website is an affiliate partner of the advertisers and offers part of their commissions back to the consumer as a cashback. Basically, the cashback website shares his commission with the consumer, which is how the cashbacks are paid for. There are even cashback websites that offer 100% of their commision as cashback.
InfluencersA so-called influencer is someone with a large group of online followers which they can ‘influence’. An influencer is in a great position to become an affiliate. They already have a large following, so it’s relatively easy for them to steer consumers towards the advertisers’ products or services. They can use their social media page, blog or website to do so. Reaching an audience is one of the hardest parts of affiliate marketing, and an influencer already has that audience.
The most common types of payment for affiliate marketersAffiliate marketing is very tempting for anyone looking to increase their online income. It’s often seen as a quick and inexpensive way to make money online, because you don’t actually have to own a product or service. It’s not as easy as one might dream, you do need to draw a lot of attention to the product or services of the advertiser. A large online following is pretty much required to make a lot of money in affiliate marketing.
The affiliate can get paid for every action on the consumer side. Let’s talk about the most common ways for an affiliate marketer to get paid.
PPSThe pay per sale, or PPS, structure is the industry standard. Every time the affiliate makes a sale, the advertiser pays them a percentage of the sale price. This percentage is different for every product and can vary between 5-20% of the sale price depending on the product/service sold. With a 10% commission the publisher gets 10€ for 100€ sale they generated.
This payment method is mostly preferred by advertisers because they only have to pay money when an affiliate actually makes a sale. The no cure no pay method makes it the safest option for the advertiser.
PPCIn the pay per click structure, the goal of the affiliate is to redirect consumers to the advertisers’ website. Every click means a website visitor for the advertiser. The affiliate must persuade as many consumers as possible to visit the website of the advertiser. The affiliate is paid based on the increase in visitors on the website of the advertisers. A click is easier to get than a lead or a sale, which is why this structure is the lowest paying for the affiliate but can also be effectively used in combination with other payment models.
PPLThe pay per lead, or PPL, structure is less common because a lead doesn’t necessarily mean revenue for the advertiser. In this structure, the affiliate gets paid for every lead they generate for the advertiser. A lead is someone that visits the advertisers’ website and performs a certain action, like signing up for a newsletter, a free trial, or filling out a contact form. This structure is used when the advertiser has a goal other than sales, like receiving email addresses to send their newsletters to.
Because the pay per lead structure doesn’t lead to direct sales, the commission for the affiliate is often lower than it is with pay per sale.
That’s the basicsYou should now have a pretty clear understanding of the basics of affiliate marketing, what the different roles are, and how advertisers and affiliate marketers help each other make money. If you’re looking to grow your business using affiliate marketing, using the right affiliate software combined with the best expertise is crucial to your success. The Circlewise Partnership Hub is the ideal tool for both affiliate marketing newbies and experienced affiliate marketers as it allows them to manage, automate, and scale all of the partnerships in one place.
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