Affiliate Marketing - The Fundamentals

1/10/2008

- Danielle Leitch, Exec. Vice President

Affiliate Marketing is not new to the online world, however – given the competitive landscape of paid search and overall demands on marketing ROI, it is a resurging opportunity for many.

What is it?

Affiliate Marketing is like having a “commission-only” sales force promoting your products or services through their website or other online means and then getting paid only when a conversion occurs.  This conversion, also know as an acquisition, can be a sales transaction, lead generated, or some other action you deem worthwhile for payout.  Cost Per Acquisition or Cost Per Lead advertising has been offered in other marketing channels, but is the primary goal behind the success of an affiliate program.  The weight of responsibility is shifted from the advertiser to the affiliate, who at times is laying out advertising dollars for your company or brand in the hopes of a larger return/pay-out.  This return is in the form of a commission, either a percent of the sale or flat rate amount per lead, which the advertiser establishes and controls.  These commission amounts can vary tremendously, examples being 1% of a sale amount or $25 flat rate per transaction or lead.

How it works?

Most affiliate programs are managed through an independent, third party network.  Some of these networks include: LinkShare, Commission Junction, LinkPoint and Kowabunga.  These networks serve as a middle-man between advertisers and affiliates. They also serve as the administrator for both, handling all reporting and financial components between the two.  Not every affiliate program is run through a network though. Very small programs may be run manually through the advertiser’s company and very large programs may have invested funds into development of their own platform. The majority of programs though, especially if you are starting out, will be engaged with one of these networks.  You have the opportunity to recruit and communicate to affiliates as a member of the network – which is critical when launching a new program.  The advertiser must pay the network, typically a % of what they are paying the affiliates in commission, for the assistance and benefits offered through their network. If your affiliates receive $25 per lead, then you may have to pay the network 10% of that amount or $2.50.  So, your overall cost on that lead would be $27.50.  Keep in mind, you are only incurring a cost or commission after a qualified transaction has occurred.

Who would benefit?

Many companies can effectively implement Affiliate Marketing into their marketing programs. Both B-B and B-C advertisers are successfully using affiliates to increase revenue. It seems to be more advantageous to advertisers that aren’t extremely niche in their offering, although I have seen it work there, too.  If your product or service if very specific or limiting in who would be interested in it, then you should expect to work harder recruiting affiliates than a mainstream advertiser.  A dedicated and specialized number of affiliates will drive qualified and hopefully, converting traffic, which can still result in additional revenue for you. Mainstream advertisers with large offerings of products or services usually have no problem recruiting a high number of affiliates looking to promote their company through a variety of ways (email distribution, website banner ads, text links, blog postings, etc.)


For more information on Affiliate Marketing and how MoreVisibility can assist you with these efforts, please email me. Additionally, a great introduction and education in this arena can be found through our Affiliate Marketing Webinar.

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