Affiliate marketing is a system that depends on the performance of its actors. A company pays partners for sales created by their own marketing tactics. In general, these partners entrust the sale to other partners, and earn commissions from the sales of the latter.
According to Business Insider, it contributes 15% of global e-commerce revenue. Digital marketing, analytics, and cookies have made affiliate marketing a billion-dollar industry. There are several types of affiliate marketing. Nevertheless, let’s note the three most important: independent affiliate marketing, linked affiliate marketing, and affiliate marketing involved. We will see what the advantages and disadvantages are, and then how the concept works.
Understanding Affiliate Marketing
It is indeed Amazon that popularized this practice by creating a program. As part of it, websites and bloggers place links to a product’s Amazon page. The purpose is to collect advertising fees when a purchase is made. In this sense, it is essentially a pay-to-performance marketing program. In this process, the act of sale is outsourced through an extensive network.
An e-merchant wishing to reach a wider base of Internet users and buyers can hire an affiliate. An affiliate can be the owner of multiple websites or email marketing lists. A wide area network requires multiple websites and a long email list. The committed affiliate then communicates and promotes the products offered on the e-commerce platform to their network. It does this by serving banner ads, text ads or links on its websites or sending emails to its customers. In order to draw the public’s attention to a service or product, companies use advertisements in the form of articles, videos, and images.
Visitors, by clicking on ads or links, are redirected to the e-merchant’s online sales site. If they purchase the product, the affiliate is paid the initially agreed commission, which can be 5-10% of the sale price.
The goal of this model is to increase revenue and make the relationship between merchant and affiliate « win-win ». Indeed, thanks to its profitability, this system is now becoming more and more popular.
The Different Types of Affiliate Marketing
There are three main types of affiliate marketing: independent affiliate marketing, linked affiliate marketing, and affiliate marketing involved.
Independent Affiliate Marketing
This is an advertising model in which the affiliate has no connection to the product or service they are promoting. It does not require any known skills or expertise in the field, is not authoritative and does not claim its use. This is the least engaged form of affiliate marketing. The lack of attachment to the potential customer and the product relieves the affiliate of the duty to recommend or advise.
Related Affiliate Marketing
As the name suggests, this involves the promotion of products or services by an affiliate having some type of relationship with the offer. In general, the link is made between the affiliate’s niche and the product or service. The affiliate is therefore usually a public figure or influencer, who is able to have an impact on the behavior of the public. His image makes him a reliable source for Internet users, and increases the probability of clicks and traffic. However, the affiliate makes no representations about the use of the product or service.
Affiliate Marketing Involved
This type of marketing establishes a deeper connection between the affiliate and the product or service they are promoting. The affiliate has already had « positive » experiences with the product or service, and shares their feelings with others. The principle is the same as traditional word-of-mouth. Their experiences are advertisements, and they serve as reliable sources of information. In addition, because they provide recommendations, their reputation can be compromised in the event of problems arising from the offer.
Pros and Cons of Affiliate Marketing
An interesting opportunity cost
Affiliate marketing can be particularly interesting for an advertising company or marketer. The company benefits from low-cost advertising and creative marketing efforts from its affiliates. And the affiliate benefits from additional income and bonuses. Affiliate marketing brings a significant profit, because the cost is lower. The company only pays per click, and the rest of the work is done by the affiliate. The latter will use all possible means to maximize his commission.
Then, the advertising company sets the terms of an affiliate marketing program. In the beginning, companies essentially paid the cost per click (traffic) of banner ads. With the evolution of technology, the focus has been on commissions on actual sales or qualified leads. In the beginning, this branch was fertile ground for fraud, as clicks could be generated by software.
The game has changed
Today, most affiliate programs have strict requirements on how to generate leads. Some methods are also prohibited, such as installing adware or spyware that redirects all product search queries to an affiliate’s page. Some programs go so far as to specify how a product or service must be addressed in content before an affiliate link can be validated.
Therefore, in order to make an affiliate marketing program effective, one must have a certain sense of foresight. The terms and conditions must be clearly stated, especially if the contract remunerates traffic rather than sales. Despite this, in the digital world, fraud is never impossible.
In short, to have convincing results in affiliate marketing, actors will have to understand this model, and of course its advantages and disadvantages. Companies looking for affiliates will have every interest in properly verifying and qualifying their partners. Overall, it is an effective and inexpensive way to advertise products and services, increase brand awareness, and expand a consumer base.