What is Affiliate Marketing
What is Affiliate Marketing – Affiliate marketing is an advertising model in which a company compensates third-party publishers to generate traffic or leads to the company’s products and services. The third-party publishers are affiliates, and the commission fee incentivizes them to find ways to promote the company.
What is Affiliate Marketing – Affiliate marketing predates the Internet, but analytics and cookies made it a billion-dollar industry in digital marketing. A company running an affiliate marketing program can track the links that bring in leads and, through internal analytics, see how many convert to sales.
What is Affiliate Marketing – Visitors who click the ads or links are redirected to the e-commerce site. If they purchase the product or service, the e-commerce merchant credits the affiliate’s account with the agreed-upon commission, which could be 5% to 10% of the sales price. On the surface, an affiliate program seems like a straightforward pay-for-performance setup. You kick back part of a sale to the third-party website that drove a customer to your site—no risk; all reward.
What is Affiliate Marketing – It feels so much like a traditional sales commission structure that it’s hard not to interpret it that way. However, the definition of affiliate revenue can be misleading and result in commission payments that are out of line with the value created.
What is Affiliate Marketing – The Face Value of Affiliate Marketing
What is Affiliate Marketing – Affiliate revenue—measured by tracking platforms and networks—means that an affiliate has a marker somewhere in the transaction click stream, not that the revenue is exclusive to the affiliate channel. In other words, in addition to the affiliate channel, many different channels or touchpoints may get credit for the same revenue (e.g., social, search, display, etc.) before or after the affiliate interaction.
Unfortunately, many stakeholders—including third-party agencies, networks and in-house affiliate managers—advocate that this face-value affiliate revenue is the best measure of program success. As a result, they tend to rely on affiliate partners that overlap with other channels instead of those who create real, incremental demand.
Here’s a taste of how this usually plays out for the merchant: Let’s say a customer adds an item to the cart and then opens a new browser window to look for a coupon.
The customer clicks around a few sites, lands on a coupon offer from an affiliate site and decides to buy the product—but the coupon code displayed by the partner has expired.
What is Affiliate Marketing – In this instance, the coupon doesn’t bring the customer to the merchant. But because the customer clicks on the coupon website, the transaction is attributed to that site as affiliate revenue, regardless of whether it didn’t make the original acquisition or that the coupon was neither used nor valid. Without a solid attribution system, this misleading trail can skew data and make it seem like an affiliate is driving new revenue when it’s piggybacking on the efforts of other online marketing channels.
What is Affiliate Marketing – How to Evaluate Your Marketing Program
To receive the most accurate data from your affiliate revenue program, it’s essential to assess how each channel drives sales. These five steps can help you evaluate the effectiveness of your affiliate marketing program:
1. Analyze your affiliates’ actions.
What is Affiliate Marketing – “To understand how your advertising dollars are impacting sales, you need to have full visibility into the customer journey across all paid, owned and earned channels,” says Tijs van Santen, vice president of Impact Radius. “Only when you have this full visibility can you understand how each media partner and the channel contributes to a conversion.”
To truly understand how an affiliate works, look at what it does and where its traffic comes from. For example, if the affiliate posts coupon codes that aren’t offered and relies on searches for a merchant’s trademark plus the word “coupon,” it might not add much value to your program.
To fight such actions, review your affiliates’ tactics.
What is Affiliate Marketing – Check to see whether they’re using weighted URLs containing trademarked terms and stuffing their URLs and descriptions with phrases that correlate little with the products they’re advertising on your behalf. Are they relying on adware or plug-ins? These behaviours underscore an incompatibility that calls for coaching or ending the relationship.
2. Beware of conflicts of interest.
What is Affiliate Marketing – Many affiliate networks also create conflicts of interest between housing affiliates and program management. One of the primary responsibilities of a program manager is to police affiliate activity and watch for fraudulent or low-value activities. A good manager should remove an affiliate from the program or reduce the commission if that affiliate doesn’t provide incremental revenue.
However, suppose the affiliate network is paid a fee based on the number of sales generated and commissions paid, regardless of attribution considerations.
In that case, its program managers will be conflicted about decisions regarding the program’s best interests. What is Affiliate Marketing – Removing revenue or cutting commissions reduces their companies’ income and their incentives from that fee stream.
“It’s like having the same real estate broker represent both the buyer and the seller in a single transaction,” says Brian Littleton, president and CEO of ShareASale. “Certainly, it could be done, but the opportunity for trouble is greatly increased.”
What is Affiliate Marketing – Ask probing questions to verify that a potential affiliate network is interested in protecting your company’s brand and value beyond a single affiliate transaction. What will they do in cases of fraud, terms and conditions violations or behaviours outside of your stated goals?
A better approach may be to manage your program using a dedicated in-house manager or specialized third-party firm that partners with the in-house team and provides an independent perspective. An in-house manager or a responsible third party will consider the brand first and foremost, and a third-party program audit could be a great way to get started.
3. Watch for fraudulent activity or “cookie stuffing.”
What is Affiliate Marketing – Be on the lookout for downright fraudulent affiliate behaviours. For example, an affiliate could place an invisible 1-pixel by 1-pixel merchant banner on a page, setting a cookie for that merchant.
If a user buys something from that merchant, the affiliate receives credit and a commission even though it had nothing to do with the acquisition. To run a successful Affiliate business, you will need a trustworthy VPN service, and our trustworthy partner for years has been SurfShark!
4. Assess conversion rates.
What is Affiliate Marketing – Conversion rates speak volumes about the intent behind a customer’s actions. It’s up to you to determine whether the affiliate or the product is doing the heavy lifting for conversion rates. For example, suppose a merchant’s typical e-commerce conversion rate is 1 per cent and an affiliate converts at 30 per cent. In that case, a good chance customers coming from that affiliate are already committed to buying. In this instance, the affiliate is likely intercepting customers who are already in the process of purchasing.
The same goes for new customer rates. If the affiliate channel has the same new customer rate as the merchant’s site, the affiliates likely aren’t making much customer acquisition. What is Affiliate Marketing -They’re just playing the averages of people who already visit the site.
What is Affiliate Marketing – By creating a benchmark that represents your affiliates’ typical conversion rate, you can quickly identify outliers, taking advantage of already sold customers. Tracking trends over time and listing revenues next to conversion rates when assessing affiliates’ metrics will also provide context to your numbers. Simply export data for your top 25 affiliates and review their conversion rates for any abnormalities.
5. Monitor your trademark.
What is Affiliate Marketing – Use a service to monitor your trademark. “Users also use branded search as a form of navigation,” says David Naffziger, CEO of BrandVerity. “They will use a search like ‘Amazon’ as a shortcut to take them to Amazon.com. A low-value affiliate will show an ad to users who search for ‘Amazon’ that takes users directly to Amazon through its affiliate link or perhaps encourages them to visit a coupon site first.”