An Introduction: Affiliate Marketing for Your Business

Wondering how to get started with your own affiliate program? The experts at TUNE are here to help. We'll start by covering the basic concepts of affiliate marketing, which is one type of performance marketing.

Basic Concepts of Your Affiliate Marketing Program

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, all of which translate into profits and sales. Anyone with the right tools, knowledge, and drive can build their own performance-based partnerships and create a successful affiliate marketing program.

The Benefits

In the world of performance marketing, you only pay for results. You’ll work with affiliate networks and/or direct publishers and set the rules for your offer. You’ll set the offer location (URL), payout, traffic volume thresholds, approved traffic sources, creative requirements (such as banners), and more. Best of all, you only pay when sales or leads are generated on your behalf.

The sky’s the limit with an affiliate program. As long as you have the inventory to support continued growth and make good decisions on building performance relationships, your profits will continue to grow.

“Performance marketing is a comprehensive term that refers to online marketing and advertising programs in which advertisers and marketing companies are paid when a specific action is completed; such as a sale, lead or click.”

- Performance Marketing Association

The Tools

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 a partner marketing platform (also called affiliate tracking software or performance marketing software) to track and manage your affiliate program.

The Main Players

  • 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 middleman 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.

How the Main Players Interact

Advertisers have products/services and want to gain exposure by reaching the largest target audience. Affiliate Networks act as mediators between publishers and advertisers. They recruit affiliates and advertisers, track all activity, arrange payments, and help affiliates set up the necessary links on their websites. Publishers 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.

How Tracking Software Makes It All Work

Small businesses interested in adding performance 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 performance marketing 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 publisher, 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 and the tracking URL tells them which publisher 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 publisher referred the user. The affiliate program pays the affiliate for each lead or sale generated on their behalf. To the right is a simple diagram that can help you understand these concepts.

Now that we have the basics of affiliate programs behind us, it’s time to learn about optimizing your offers for publishers to promote.

Diagram of how affiliate marketing programs work

A Brief Introduction to Affiliate Offers

There are a countless number of different types of offers, but they typically fall within two different categories: Lead Generation and Product/Service Sales.

Offer Types

Lead Generation Offers collect personal information of potential customers and qualify where they fall within the purchase process. This data is handed over to the advertiser’s sales team to start generating customers. “Lead Gen” information might be collected through: email list sign ups, lead generation forms, newsletter sign ups, ebook downloads, survey completions, and several others methods.

Product/Service Offers typically drive users to ecommerce sites, shopping cart experience, or service sign up where users can purchase products/services with a credit card, paypal, or some other electronic payment. Service offers allow visitors to request information about services to be provided at a future date; electronically or physically. These offers can include paying in advance on a website or at the time of service. Again, the defining characteristic of a product/service offer is that the user must provide a form of payment.

How to Determine Affiliate Payout

First of all, you need to know that publishers almost always work with several different affiliate programs, and even with your competitors. Publishers promote offers based on their expected return, the highest ROI for them – not you. Ensuring your payout is competitive is a key component to a successful performance marketing program. Affiliate programs need to research the market price and find a competitive payout or your program won’t grow. Talk with trusted publishers and affiliate networks, read blogs, browse directories, and dig through forums such to get insights into the market payout for similar offers. There’s no perfect science to this.

Another major piece to determining your payout amount is your own margin of profit. Though you may have additional budget for marketing channels, affiliate marketing is different. In order to scale your affiliate program, it will need to be a profitable program. For example, if you sell widgets for $5 and it costs you $1 to make them, you cannot pay publishers $4. You need to determine the amount you’re willing to give up for publishers that are making the sales.

The Main Ways to Pay Out

There are five common types of payouts to publishers. Finding the right one to fit your business model may take some testing and tweaking, but one of these five should get you there.

  1. Cost per Action (CPA): means that the affiliate program will payout the publisher with a flat dollar amount for each desired action (i.e., conversion) recorded.

  2. Cost per Sale (CPS): offer means the affiliate program will be awarding a percentage of the sale amount to the publisher. This is common for offers where multiple products can be added to a shopping cart, and thus compensating an affiliate for all of the items purchased by the user.

  3. Cost per Conversion plus Cost per Sale (CPC+S): is a hybrid payout method in which publishers will be compensated a flat dollar amount per sale plus a percentage of the total sale amount. This type of offer encourages publishers to generate large sale amounts while still giving them a base payout per each sale.

  4. Cost per Click (CPC): means that you are going to pay publishers on a cost per click basis. For each click affiliates send to your offer, they will be paid a flat amount for each click.

  5. Cost per Thousand Impressions (CPM): means that performance marketing programs pay affiliates for every thousand impressions. Impressions are recorded when the impression pixel is “fired” from the creative displaying on the affiliates site.

    Affiliate Payouts Structures

    Categorized Tier Payouts assigns publishers into different buckets, sometimes depending on; traffic volume, content quality, type and quality of traffic, conversion rate, etc. For example, Publisher X drives high quality traffic and converts well for your offer; he’s categorized as a Gold affiliate and gets 30% commission. Publisher Y sends low quality visitors but high volume traffic, resulting in mediocre sales each month; he’s a Silver affiliate and only receives 20% commissions. Publisher Z sends millions of spam emails resulting in tons of traffic to your site and almost no sales; he is your Bronze publisher and only gets 10% commission. In this structure, you’re able to reward high quality/volume publishers with competitive payouts, while low quality publishers receive lower payouts.

    Two-Tier Payouts encourage your publishers to refer other publishers to join your affiliate program. For example, Publisher X is promoting your offer for a 10% commission per sale and refers his friend, Publisher Y, to join your Affiliate Program. To reward him for promoting your affiliate program, you offer a percentage of Affiliate Y commissions. In the future, Publisher X will receive 5% commission on the payouts Publisher Y receives for the referral. This is a phenomenal way to increase your affiliates and to reward current affiliates for promoting your affiliate program.

    Scaling Payouts is designed to reward publishers to drive more traffic to your offer. You pay your publishers more when they exceed monthly thresholds. For example, if an affiliate drives 50 sales per month, they receive 10% commission, if they drive between 51 and 100 sales per month they receive 15%, and so on. This is a self-selecting reward system; you pay top producing publishers more and encourage them to continue driving high quality traffic to your offers. Additionally, it encourages your low volume affiliates to drive more sales in exchange for higher payouts. Along these lines it is common for advertisers to require a minimum monthly payout (such as $100) in order to actually make a payment to an affiliate.

    How to Optimize Offers for Affiliates

    Affiliates like to promote offers that run specials and promotions. This gives their users a reason and sense of urgency to click on your offer. Think about promoting a “24 Hour Special” or “Deal of the Week.” These are time-sensitive promotions that expire and are always being refreshed.

    Your affiliates often have repeat visitors or members of their site. Publishers need to remain trustworthy and credible or they can lose these valuable users/members. Help your affiliates out: offer a guarantee with your product/service, put customer testimonials on your page, have a no-hassle return policy. These are basic elements that will instill confidence and increase sales.

    How to Optimize Checkout and Landing Pages for Affiliates

    Optimizing pages is an art and never ending process, but let’s touch on a few best practices for optimizing your checkout and landing pages. Remove advertising banners, distracting links or useless objects users can click on and distract from making the purchase. Minimize the use of pop-up windows (another distraction from your desired action). Make sure users know exactly what to do when they land on your checkout or sign up page, provide clear and to-the-point copy that makes it easy to sign up or purchase.

    How to Stand Out to Affiliates

    Publishers are driven by data, so give it to them. Make sure your performance marketing software provides reports for your affiliates, or that your program manager sends reports frequently. Providing as much data as possible enables your publishers to optimize their campaigns and generate more sales, more effectively.

    Provide your publishers product information and content they can include on their site. Think of affiliates as your salespeople. You’re going to want to educate them - you wouldn’t send a new hire on the sales floor without any training, right? Great performance marketing programs will even provide their publishers with products so they are familiar with what they are promoting. Educate them with the benefits and why potential customers need your product/service.

    Understanding Your Affiliates

    To build and maintain performance-based partnerships that work, you need to understand who you are working with. We'll review the role of affiliates, how to think like a publisher, and talk about how affiliates operate their businesses.

    The Role of an Affiliate

    To better manage affiliates that join your program you must first understand a little about publishers themselves. You should know what they want, what they look for in affiliate programs, and the tools they need to be successful. One of the most important things to publishers is the opportunity to represent a product or offer they have confidence in; one they would purchase themselves and use on a daily basis. For this reason, most affiliates choose to represent products related to their interests or areas of expertise. This helps give them the drive, knowledge, passion, and interest necessary to successfully promote your offers.

    How to Think Like an Affiliate

    To recruit affiliates, you need to understand their needs and what drives them. You’ll have trouble recruiting publishers if they’re disappointed when they visit your website, if your payouts are low, or if you’re not specific in your affiliate agreement.

    The first thing affiliates are looking for is the right offer. If the offer doesn’t match their traffic sources, their users won’t convert and they won’t make any money (and neither will you). For example, if they have a website that provides reviews for Hollywood movies, they’ll be looking for offers that fall into the same niche of interests. Perhaps they would look for offers that showcase celebrities. If they’re trying to monetize traffic they’ve purchased from Google Adwords, offers that have low price points, free trials, or sign up forms work best for these users. In CPA (cost per action), affiliates have to make sure the offers they promote match their users.

    On top of that, your offer has to have a great conversion rate. As an advertiser or affiliate network representing an advertiser, it is your job to make sure that a reasonable percentage of people that enter an offer actually complete it. If something happens to your sales funnel and visitors are no longer converting, publishers start losing money by the second.

    The second most important thing to an affiliate is getting paid. This means they’re looking for clear terms and conditions, competitive payouts, and responsive affiliate management. Publishers need to trust the affiliate programs they’re working with to payout on time. You can imagine the pressure associated with buying traffic for an offer and not receiving payment quickly enough. It can seriously bring an affiliate's business to a screeching halt.

    Along the same lines, affiliates need to trust the tracking platform your program uses. They want to make sure every conversion they generate is recorded so they are compensated fairly. Downtime and broken tracking issues are the biggest pet peeves of any professional affiliate.

    A successful performance marketing program accurately represents their offers so affiliates can best match it to their audience, they make sure their offers convert, they payout on time and have reliable and trustworthy affiliate tracking software in place. Set your program a part by providing your publishers with accurate and transparent data and a variety of tools to help them make you money. You should always be testing new landing pages, banners or trying to squeeze another 1% out of your conversion process.

    How Affiliates Target an Audience

    Most affiliates find that focusing on a particular audience is very important to their long-term success. Picking a specific niche or subject is one of the most effective methods for building up traffic sources with a very targeted audiences. For example, a publisher might choose "personal finance software" instead of "software" for their audience keyword. This strategy allows publishers to build their own marketplace and target one specific audience looking for help explicitly in personal finance technology.

    In order to identify a potentially successful niche, affiliates evaluate their passions, interests, and hobbies. Once they’ve narrowed this down to a few topics, they’ll need to perform extensive research to determine which options will be most viable, popular and profitable. Publishers look at the demand for the products related to their niche, they investigate the market and level of competition. A great publisher knows how to fill a need that already exists. They’re able to find customers with specific wants and expectations and provide them with a solution, your offers.

    How Affiliates Apply to Your Program

    Before an affiliate can begin promoting your offers they must apply to your program. The publisher will visit your site and complete an application to become a member. The application will ask for personal information (name, address, payment method) and information about the affiliate’s site(s) (URL, name, and description of content) and provide a service agreement. The affiliate program must screen and approve/deny the affiliate, establish payment arrangements, and explain the affiliate tracking system in place.

    Ready to Get Started?

    Now that you know the basic concepts behind affiliate marketing, you're on your way to starting your own program. We're here to help: request a trial of TUNE and get started today.

    Have questions about affiliate marketing, partner platforms, or mobile advertising? Send them to us at [email protected] and we'll be happy to answer. And for more performance marketing resources, be sure to follow the TUNE Blog.

    About TUNE
    TUNE is a fully customizable SaaS partner marketing platform that enables networks, advertisers, and agencies to manage performance-based partnerships across app and web.

    Becky Doles

    Becky is the Senior Content Marketing Manager at TUNE. Before TUNE, she handled content strategy and marketing communications at several tech startups in the Bay Area. Becky received her bachelor's degree in English from Wake Forest University. After a decade in San Francisco and Seattle, she has returned home to Charleston, SC, where you can find her strolling through Hampton Park with her pup and enjoying the simple things between adventures with friends and family.