Affiliate marketing is “a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate's own marketing efforts.” Over the years, affiliating marketing has grown tremendously and it has proven to be an effective way for businesses to increase their customer-base, sales and meet set marketing targets.
Affiliate marketing works by dividing the responsibilities of marketing a company’s products or services among various marketers. It makes use of the marketing skills of various individuals to help promote a business in exchange for a share of the profit made. The marketers are then rewarded based on the number of conversions they are able to generate multiplied by a previously agreed upon rate.
While many may think affiliate marketing might lead to an increase in sale of products and services, it isn’t always the case! Most times, the commission rate on a single sale or conversion is a very minute fraction and doesn’t lead to a noticeable change in price. This is why affiliate promoters often need to generate lots of conversions to earn tangibly.
How does it work?
In simple terms, affiliate marketing is a commission for conversion system of marketing. This means the company only pays for conversions generated by an affiliate promoter. These conversions can be sales, lead or click oriented. For a business to start affiliate marketing, it needs to understand the roles of those involved:
The merchant refers to the business looking to expand its reach and increase its sales. This could either be a solo entrepreneur, big co-operation or a vendor with a product,service to sell. The products available for marketing can either be a physical or digital product.
The Affiliate or Publisher
An affiliate,publisher is a marketer that promotes a merchant’s product with the aim of receiving a commission for each sale or lead generated. The job of the affiliate publisher or marketer is to take products and services to consumers that stand to get the best value from use of such products. Modern-day affiliates often advertise products on social media, blogs or websites and are often niche specific.
Irrespective of the marketing strategy employed by businesses to expand, the consumers making a purchase remain the target. Affiliate marketing is no different, and it relies on consumers making purchases to generate profit shared between the merchant and the marketer.
Forms of Affiliate marketing
A business can choose to practice any of the following forms of affiliate marketing depending on the products and services they offer. These include:
1. Pay per sale Affiliate marketing
This is the most common form of affiliate marketing; the merchant pays the affiliate a commission for the sale of a product. Put differently, a sales conversion has to occur for the affiliate to get paid. This method is mostly employed by businesses that are sales oriented.
2. Pay per lead Affiliate marketing
The Pay-per-lead form of affiliate marketing rewards affiliate marketers based on leads conversion generated. In this model, an affiliate is expected to convince consumers to complete a desired action. Desired actions range from filling out a contact form, signing up for a product trial, subscribing to a newsletter or downloading software and files.
3. Pay per click Affiliate marketing
This is a purely online based form of affiliate marketing, and it requires the affiliate to redirect customers to the merchant’s website. The affiliate is then rewarded based on the amount of web traffic he/she is able to redirect.
Pros of Affiliate marketing for Businesses
• The merchant pays just for conversions generated.
• The merchant can employ the services of affiliate networks. Thereby saving the merchant times and effort.
• If practised correctly, affiliate marketing can be more cost effective than regular advertisement.
Cons of Affiliate marketing for Businesses
• A merchant stands the risk of getting false advertisement from employed affiliates. This may affect the reputation of such brands.
• Employing too many affiliates means excessive cash outflow for the merchant.
One major benefit of running an affiliate marketing program for a business is that it gives them the opportunity to quickly reach their target audience. It is usually tailored to appeal to a specific demography. This means businesses can better channel resources to meet such demography, unlike regular advertisement that appears to the public. It is a marketing strategy every business owner should consider employing.