WHAT IS AFFILIATE MARKETING?
Affiliate Marketing is the practice whereby a digital publisher or website promotes an online retailer and earns a commission based on the sales or leads that the advertising generates for that online retailer.
We term this payment metric CPA – Cost Per Action. Typically an ‘Action’ is a sale of an online good or service, but it can also be a lead or registration, a call, a download or any other trackable action that is desired of the end customer. In recent years this has grown to even include offline sales — provided they can be tracked back by a coupon or barcode
There are two ways the CPA are set:
Flat rate: For every action a fixed fee is paid. This is typically used for registration type actions with no cost, such as a credit card sign-up or for a fixed price product like a mobile phone contract
Revenue Share: The price of the item purchased is tracked and a percentage of that price is then paid to the affiliate. This is generally favoured by advertisers selling a range of tangible goods at varying prices, such as fashion retailers.
Affiliate Marketing is part of the performance marketing family, meaning the return on investment is guaranteed and the advertiser is only paying for advertising that has succeeded. It’s a versatile channel and is very effective at driving actions for merchants selling consumer products or services across a wide range of verticals, including apparel, travel, electronics, health and beauty, telecommunications, finance and groceries. It should be considered as a key part of an advertiser’s marketing mix in an integrated campaign, specialising in turning brand awareness and interest into conversions towards the end-of-purchase funnel.
We use the terms ‘Affiliate’ or ‘Publisher’ to define the website that is promoting the brand or products. In later chapters we’ll look more in-depth at the business models that affiliates employ to drive actions for the advertiser. For now, let’s just dispel a common misconception: Affiliate Marketing isn’t just banner advertising, in fact, most campaigns will get less than 10% of their sales as a result of banner advertising. Consumers have learned to ignore these banners, so successful affiliates employ smarter, more engaging tactics to generate sales for the advertisers they work with, with most sales coming from ‘text links’ often hidden behind ‘Buy Now’ or ‘Shop Here’ type buttons. A ‘text Link’ in the affiliate world is just a trackable URL that redirects to the relevant page of the advertiser’s website.
Whilst the majority of affiliates still generate actions for their advertisers by promoting on their own website or blog, there’s now many other ways they generate customers. This includes email marketing, mobile apps, paid search, remarketing widgets or campaigns, offline promotions and social campaigns. The scope is almost unlimited. Any publisher or partner paid to promote on a CPA metric could be considered an affiliate.
How does it work technically?
Most advertisers will employ an Affiliate Network to administer the tracking of their Affiliate Campaign. The network will provide a set of tracking links to the affiliates that sit behind the banners and text links on the affiliates’ websites.
When the customer clicks on that link a cookie is dropped onto their computer and that click is registered by the Affiliate Network. When that customer then completes a purchase and reaches the advertiser’s confirmation page, the Affiliate Network’s tracking tag is fired. That tag checks for the relevant cookie and if the customer has come from one of the Affiliate Network’s publishers, the sale is recorded by the Affiliate Network in their platform. Via that platform both the advertiser and affiliate should be able to see that the sale has tracked and a commission can be awarded.
The advertiser populates the tracking tag with all of the information relevant to the sale, typically the price and order ID are always included, then additional fields such the product stock keeping unit (SKU) or promotion code can be added and tracked to assist with analysis of the campaign’s performance.
Again, there’s a wide range of complications and options to improve on the basic tracking model. The more advanced networks are able to provide cookie-less tracking, so that sales can still be attributed to affiliates when the user has blocked or deleted the affiliate cookie. This is becoming increasingly important as some browsers automatically block third-party cookies.
More complex tracking can utilise unique promotional codes or block non-affiliate codes to record sales. Affiliate tracking pixels can be conditionally fired to de-duplicate against other traffic sources — though complex programming is needed around the rules for this, given that cookie lengths are typically much long than a single session.
Ongoing customer engagement
Advertisers are leveraging Loyalty, Cashback and Reward Affiliates as a means to maintain ongoing customer loyalty and engagement. Aside from providing a great product or service, marketers need to consider the ‘why’: Why should a consumer continue to interact with your brand if they’re not rewarded for continued support?
As the role of Affiliate Marketing is evolving, so too is that of Affiliate Networks and partners. Acting as a trusted advisor to both publishers and advertisers, networks are required to provide insights and recommendations on how to leverage every stage of the consumer journey.
|Advertiser||This is the standard term for a company who has an Affiliate Program. Also known as ‘merchant’ and ‘brand’.|
|Affiliate Link||This is also known as a text link or tracking link. This directs users from an affiliate site to a an Advertiser site|
|Agency||Agencies provide the management of an Affiliate Program where the Advertiser wishes to outsource it to an objective 3rd party.|
|Banner||This are display media banners that some Publishers choose to add to their sites.|
|Cashback||Cashback sites return much of the commission they earn for driving a sale back to their users as a reward for using the site. Cashback sites are often significant parts of Affiliate Programs.|
|Commission||This is the incentive provided to affiliates for driving sales to a given Advertiser. The commission can be in the form of a percentage of sale, cost per click a flat amount or bounty for reaching targets. See CPA, CPC and CPL for more detail|
|Content site||Also known as a blog. These sites contain unique content around a given subject and often command a loyal following.|
|Cookie||The technology typically used to track user behaviour.|
|Cookie Period||The length of time the tracking cookie will remain active on a user’s browser.|
|Coupon||This is a discount which is made available to shoppers and are typically a series of letters of numbers.|
|Coupon Site||Coupon sites (also known as Voucher Code sites) drive value by incentivising users with coupons. They can be an effective means of driving revenue.|
|CPA||Cost Per Acquisition – the commission paid to a Publisher, typically for driving a sale on an Advertiser’s site.|
|CPC||Cost Per Click – the commission paid to a Publisher for driving a click to an Advertiser’s site.|
|CPL||Cost per lead. The commission paid to a Publisher in return for driving a lead to an Advertiser’s site. E.g. completing an enquiry form|
|Override||This is the tracking fee charged by Affiliate Networks for providing tracking. It is usually based on a percentage of the commission amount.|
|Price Comparison||These affiliates comparing the prices of thousands of products, from Insurance to food stuffs|
|Product feed||Also known as Merchandiser feed. Some affiliates import the products which Advertisers sell compare pricing.|
|Publisher||Also known as an ‘Affiliate’. Any website that is paid a commission for driving a sale or generating a lead via an affiliate link.|
|Tenancy||The fee required to buy a piece of media on an affiliate site or in an email newsletter. These can vary considerably.|
|Validation Period||The length of time from a transaction tracking place until the advertiser approves its validity.|
|feeds||feeds can typically work with most feed types of a brand|