Basic Concepts for Your Affiliate Marketing Program
There’s no question that a majority of online businesses say, “I’ve heard of affiliate marketing and know paying affiliates for generating new customers is an amazing way to grow my revenue, but I have no idea how to start.” If that sounds like something you’ve said, then you’ll want to tune in to this awesome blog series designed to help you learn the basics of affiliate marketing, teaching you how to build a successful affiliate program for your company. You won’t need to buy an ebook. You don’t need to enroll in a class. Just follow along with this series of blog posts, and you’ll learn everything you need to know to get your affiliate program up and running.
This blog series is designed for marketers who are new to affiliate marketing, but even if you’re already running an affiliate program or have more than a year under your belt, you might find out something new. And since we’re going to cover every high-level tip you’ll need to run your own affiliate program in this series, please make sure to bookmark this post and those that follow. You can always head to the TUNE blog to find this series and more great content on performance marketing.
Let’s get this series started by covering the most basic concepts of affiliate marketing: the benefits, what sort of sales you’ll generate, what tools you’ll need, who the major affiliate players are, and a great example to bring it all home.
So, what’s so special about affiliate marketing?
The internet provides endless opportunities for people to succeed. Whether you have (or know someone who has) a product to sell, a service to market, or a website that gets great traffic, the internet can provide maximum advertising power without draining your advertising budget.
Setting up your own affiliate program gives you the ability to control your own corner of the online marketing world. Affiliate programs fill the needs of online advertisers with maximum exposure and provide inventory for online marketers, which translate into profits and sales. Anyone with the right tools, knowledge, and drive, can create their own affiliate program and start increasing revenues.
What benefits can I expect?
Oh, the benefits! The benefits of starting your own affiliate program are massive. With an affiliate program, you can increase sales by only paying for results. You’ll work with affiliate networks and/or direct affiliates and set the rules for your offer. You’ll set the offer location (URL), payout, the daily, weekly or monthly volume thresholds, approved traffic sources, creative requirements (banners), and best of all, you only pay when sales or leads are generated on your behalf.
If you were looking for “more revenue” as an answer, you’re in luck. The sky is the limit with an affiliate program. As long as you have the inventory to support continued growth and make good decisions on building affiliate relationships, your profits will continue to grow. All you have to do is scale your business to turn that single dollar into thousands and those thousands into millions. Many successful affiliate programs are bringing in ~$85K in profit within the first year, but depending on the offer (product/service), it can scale much more quickly.
This all sounds good, but what tools will I need?
If you’re an online business owner, you probably already have most of the tools necessary. All you need is a way to sell your product online, a website, a shopping cart, etc, and an affiliate tracking software to track and manage your affiliate program, like the TUNE Partner Marketing Platform.
Who are the main players in affiliate marketing?
- The User: is the customer. They make online purchases, fill out your surveys, sign up for your services, etc. Sometimes referred to as visitors, traffic or the target audience.
- The Advertiser: is the seller or merchant. They’re looking for users and traffic specific to their products/services which will result in leads or sales.
- The Affiliate: is the publisher. They have relevant websites or traffic sources for your target audience and generate revenue by promoting advertisers’ offers (products/services) and getting a cut or flat payout for generating a conversion.
- The Affiliate Network: is the relationship liaison. Affiliate networks are the middle‐man and act as a broker for the advertiser, almost like an agency for affiliate marketing. Affiliate networks recruit affiliates to promote products and/or services. The network specializes in finding and managing both advertisers and affiliates so advertisers are free to focus on their products/services and affiliates are free to focus on publishing and promoting offers.
So how do these players relate to each other? Advertisers have products/services and want to gain exposure by reaching the largest target audience. Affiliate Networks act as mediators between Affiliates and advertisers. They recruit affiliates and advertisers, track all activity, arrange payments, and help affiliates set up the necessary links on their websites. Affiliates work as representatives of the affiliate networks. They promote the advertiser’s products/services in exchange for a payout or commission of each sale or lead resulting from their efforts.
I’m ready. Give me more details about affiliate programs!
Small businesses interested in adding affiliate marketing to their online advertising mix can create affiliate programs to increase leads or sales. The business will create an affiliate program through their website. They manage all aspects of their affiliate program through their affiliate tracking software and provide details along with the URL for the offer. Affiliate programs will produce a tracking URL which contains several pieces of information, including an identification number for the affiliate, the offer and the URL of the advertiser’s offer.
A conversion pixel is generated by the affiliate program’s tracking software and then placed on the confirmation page of their website. Placing the pixel on the confirmation page enables affiliates to receive credit for the sales they generate. The affiliate then publishes and places the link on their website for potential customers to click on.
When a user clicks on a link, the affiliate program’s tracking software records the click, the tracking URL tells them which affiliate sent the user to the advertiser’s offer (remember, the affiliate program is also the advertiser in this scenario). The program tracks sales using browser cookies* containing those same identification numbers (from above), tracking which affiliate referred the user. The affiliate program pays the affiliate for each lead or sale generated on their behalf. Below is a simple diagram that can help you understand these concepts.
You can find lots more information about affiliate marketing, setting up affiliate marketing programs, and how tracking works on our help site, starting with Intro to Performance Marketing.
*There are several different methods of tracking users, and different methods for tracking on mobile, but cookie tracking is one of the simplest and most common on web.
Seriously though, can you tie it together with an example?
Sure can. Here’s an example to illustrate the affiliate program model:
Imagine that WidgetWorld is an online retailer that sells widgets. They would be considered the advertiser, because they’re looking for new ways to get customers to visit their website to purchase widgets. WidgetWorld has been searching for new ways to generate leads and increase sales. They have a smaller advertising budget and need solutions that focus on results.
Let’s say WidgetWorld reads this same blog series and decides to set up their own affiliate program. WidgetWorld recruits specialized affiliates that have access to high quality and product relevant users through their own websites and online assets. These affiliates act as a gateway to sending highly targeted potential customers with an intent to buy widgets to WidgetWorld. The best part is that WidgetWorld will only have to pay for the users that actually make a purchase. While an affiliate might send millions of people to WidgetWorld, they’re only required to pay for real transactions, and after they happen.
WidgetWorld decides to promote one of their best selling widgets in their affiliate program, the Wonder Widget. The Wonder Widget sells for $50 and WidgetWorld agrees to pay their affiliates $20 for each sale. WidgetWorld sets up the Wonder Widget offer in their affiliate tracking software where their clicks and conversions (sales) are tracked. After adding Wonder Widget as an offer, an auto generated conversion tracking pixel must be placed on their “Confirmation” or “Thank You” page where the purchase is completed. This will track when a user makes a purchase and identify which affiliate was responsible.
WidgetWorlds’s affiliates log-in to their account and get their unique tracking links to place on their sites and in their marketing/advertising campaigns. When a user clicks on the link, it directs them to the Wonder Widget offer, and when a purchase is made the tracking pixel fires and tracks the sale as a conversion, giving the specific affiliate credit for the sale. The user has then paid WidgetWorld $50 for the Wonder Widget, and WidgetWorld pays their affiliate $20 for the sale; everyone makes money, while WidgetWorld increased sales without any risk.
OK, I think I get it! Now what?
Well, you’ve just mastered the basic idea of running an affiliate program. Stay tuned. Next week we will expose more on affiliate marketing for your business, and get you ready to make some serious affiliate profits!
- Part 1: Basic concepts for your affiliate marketing program.
- Part 2: A brief introduction to affiliate offers.
- Part 3: Understanding affiliate marketers.
- Part 4: Setting up your affiliate offers.
- Part 5: Variables and parameters for your tracking URLs.
- Part 6: Affiliate planning, research, targeting and traffic.
- Part 7: What can my program offer to attract affiliates?
- Part 8: Ways to recruit affiliates.
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Judy is the Director of Demand Generation at TUNE. Specialties range from marketing automation and operations, display advertising, and PPC, to content syndication and email marketing campaigns.