Affiliate marketing is universally applicable, and any online business can be enhanced by running an affiliate program. Since the essence of affiliate marketing is in placing the main emphasis on the actual end-consumer action occurred, it is always a no-lose situation for the merchant (unless you mismanage your program). When starting an affiliate program you decide how to remunerate affiliates, and this is based on the end action you desire to achieve through your affiliate marketing campaigns. Most merchants choose to tie the compensation of affiliates to the registered and confirmed sales or leads (fraudulent, duplicate, and other unqualified actions do not count). If you do not yet have an affiliate program, here’s an exercise worth trying out: go to any search engine, type in a “<your product> affiliate program” key phrase, and see what your competition is already doing. This basic competitive intelligence exercise will make your decision-making a much easier task.
In addition to the things mentioned above, another aspect of universality is extremely important to understand. Affiliate marketing exists on the crossroads of all other types of online marketing out there; and I frequently underscore that it is wrong to think of it as a type or channel of marketing. It is more appropriate to understand it as a special marketing context, the undergirding principle of which is its performance-based remunerating model. This model works with any type of marketing: display, contextual, video, social media, and other types of advertising, as well as search engine marketing (SEM), email marketing, and other methods. The main difference with the pre-affiliate model is that advertisers generally post-pay and do it for the actions of their choice, as opposed to pre-paying for the actions of the publisher’s choice (e.g.: banner placement).
To illustrate how you may encompass an array of different marketing channels by starting an affiliate program, let’s look at the common types of affiliates, and how they can/will market your business/product.
Marketing Channels & Types of Affiliates
To begin with, it is worth noting that successful affiliates seldom exist in a pure form but are more often incorporating several marketing approaches in their strategies. However, for our better understanding of how things work, it is helpful to break down the more popular approaches into groups. They all cover an online marketing channel, and I like to split them into the following five groups (arranging them in an alphabetical order):
Affiliates who employ this method build content-saturated websites (see Figure 1) and monetize them by featuring merchants’ links on those properties. Links should be understood as all possible types of affiliate links: banners, widgets, text links, video, product links, and so on. The array of ways in which a content affiliate may advertise a merchant ranges from in-text links to sidebar ads, to separate sections devoted to merchants’ banners, or even a product selection. Examples of content publishers would include both large portals like Forbes.com, popular online forums, and smaller content producers like bloggers.
Multiple affiliates are using this method of promotion; and with projections on online coupon use anticipated to increase further, new coupon websites should be expected to spring up. These affiliates play on human psychology of trying to find a product at a discounted price if possible. To satisfy this demand, these affiliates put together collections of coupons from different merchants (see Figure 2). Since the number of coupons gathered on one website can easily exceed several thousands, the key to success is in convenient categorization of deals. The more successful coupon affiliates segment their coupons by verticals, holidays, lowest price markdowns, expiration dates, types of coupons (e.g.: deal of the day, free shipping, buy two … get third free), and so on.
There is a whole segment of affiliates that work with merchants’ product feeds. They are generally selling products of multiple merchants “under one roof” (Figure 3), importing product information into their websites via the use of data feeds that merchants make available to them.
A subgroup of comparison shopping affiliates should definitely be mentioned here. Adding the convenient function of cross-merchant price- or feature-checking to their online engines, they add value by simplifying the product search and comparison process for the end user.
Any individual or organization that has a mailing list of targeted prospects that have opted-in to be contacted can make an excellent email affiliate. Here, just as is the case with any type of affiliate, is it important to emphasize that merchants safeguard their own brand and reputation by partnering with kosher marketers. It must be made explicitly clear that advertising commonly referred to as “spamming” or unsolicited commercial email (UCE) is unacceptable, and will be penalized. Let your emailers know that they may use mailings to customers and opt-in e-mail lists only so long as the recipient is already a customer or subscriber of the affiliate’s services or web site, and recipients have the option to remove themselves from future mailings.
Many PPC marketing experts turn to affiliate marketing to monetize their skill and expertise. Such affiliates bid on me
rchant-specific keywords and key phrases at Google (Figure 4), Yahoo!, Bing, and other search engines, and either send the PPC traffic directly to the merchant’s website or via an in-between page of their own (depending on their own goals and the restrictions imposed by the merchant). In multiple situations paid search affiliates can effectively replace either the merchant’s in-house paid search marketing expert, or an outsourced solution. As with every affiliate, the main benefit lies in the fact that PPC affiliate invests his/her own resources, and costs the merchant only when the desirable action occurs.
Loyalty marketing has been around for a while. It has become especially popular when airline companies started using it. They would reward their customers with “frequent flyer miles”, or essentially, points that once accumulated to a certain threshold, would qualify the customer to obtain a free airfare, or other product/service. Now, while traditional loyalty marketing aims to “reward loyal customers for making multiple purchases” (Essentials of Marketing, 2008, italics mine), loyalty affiliate websites focus on one sale/transaction at a time. Loyalty affiliates (also known as incentive affiliates) facilitate the desired end-user action by offering them an incentive. Cashback/rebate offers, donations to charitable organizations and contributions to scholarship funds are by far the most popular forms of incentives used by this type of affiliates (see Figure 5). FatWallet.com, BigCrumbs.com and CashBaq.com are classic examples of incentive affiliate websites. The idea behind such a business model is simple — share a part of the revenue you receive from the affiliate program with the end-consumer.
Many merchants and affiliate program managers do not know what loyalty affiliates are, and how exactly they operate. This, in some cases, results in low quality affiliate program performance, whereas in others, it may bring about unwanted customer activity. To illustrate how it works when it does work for the merchant, let’s look at the following example:
• Merchant A pays 10% commission on all orders
• Incentive affiliate offers their visitors a 5% cashback
• Everyone (customer, merchant, affiliate) is happy
However, there are instances when partnerships with incentive affiliates do not work (and cannot work) for the advertiser/merchant. Let me model three contexts to illustrate such situations. If one of the below-described performance-based payment models describes your current or prospective affiliate program, you want to (a) explain in your program’s Terms and Conditions agreement that you do not work with loyalty affiliates, and (b) screen affiliate applications carefully to look for sign-up requests from incentive/loyalty affiliates.
• Merchant B (hosting company) pays 50% or $25 (whichever is greater)
• Incentive affiliate offers $15 cashback on all orders
• Problem: customer signs up for 1 month of hosting at $6.95
• Merchant C (diet supplements merchant) pays $35/sale (including orders for free trials)
• Incentive affiliate offers $20 cashback on all order (including free trials)
• Problem: customer orders a free trial
• Merchant D (credit relief company) runs a PPL affiliate program paying $20/lead
• Incentive affiliate offers $10 cashback to everyone who fills out the form on the merchant’s website
• Problem: obvious
The marketing model used by incentive/loyalty affiliates can work for you when your affiliate program’s specifics allow for such type of online marketing. In certain contexts — like the three scenarios that I have modeled above — affiliate program managers should keep the incentive affiliates out of their programs.
Additionally, let me emphasize that in cases when there is room for merchant’s partnerships with incentive affiliates, affiliate program managers should regularly monitor their behavior. Some incentive/loyalty affiliates are known for using cookie-overwriting toolbars, forcing clicks, and engaging in other unethical behavior.
Partnerships with kosher incentive affiliates can bring additional sales to your affiliate program. Conversely, partnerships with the wrong types of incentive affiliates can do your program much damage (it will simply not grow beyond the level of sales that a handful of unethical affiliates can refer to you, interfering with the performance of your other online marketing channels; and no decent affiliate will want to work with you). This principle applies not only to this particular type of affiliates, but to any rogue affiliate in the program.
This is the area that is quickly gaining popularity among Internet users, and affiliates are happily leveraging this growing acceptance of forums, microblogs, social networks, and other social media channels. Some affiliates are putting together Facebook and iPhone apps and monetize them through affiliate marketing; others are tweeting deals on Twitter (with the help of tools like the one in Figure 6), while yet others create social shopping engines where users could interact with each other, helping each other shop. The more sophisticated and innovative the method is, the more successful the affiliate generally is. Just as it is with other types of affiliates, make sure you partner with marketers that have got ethics on their side, and are helping you build up your brand.
Online video is a technology that is enthusiastically accepted by end-users. The number of affiliates that are using it is still relatively small; but expected to grow fast, ; especially since in November 2011 Coull.com have signed a deal with Google Affiliate Network (GAN), granting them exclusive rights to affiliate-link YouTube’s videos.
If the affiliate program platform allows for it (as in Figure 7 or in the above-quoted GAN-Coull partnership), you want to provide affiliates with any video creatives (that would track referring clicks and credit commissions when they are due), or allow them to use their own (encouraging them to produce video clips for marketing use). In the least sophisticated scenario, encourage them to at least embed YouTube (or Viddler) videos into the pages of their blogs/websites, complimenting the video with search engine friendly text, and linking to you through an affiliate link.
Any of the above-listed methods can be generic or niche-oriented. When an affiliate chooses to be “niche” they specialize on a particular vertical only, optimizing their website in such a way that it gets most of that targeted traffic. Examples of popular affiliate niches are: apparel, shoes, entertainment, books and magazines, sports.
Note also that my above list does not include those that I call wanna-be-affiliates (banner farms is the best example). Each of the above groups has its super affiliates. You need to understand the way each group works, what problems and challenges they encounter, what factors they are considering while looking for an affiliate program to join, and what they want you, as an affiliate program manager, to help them with once they are on board with your program.
The famous Russian emperor Peter the Great was known for striving to learn everything first-hand, from the inside out. With this philosophy in mind, and already being the Emperor of Russia, disguised as a common man, he traveled to the Netherlands, and also to England — to study shipbuilding and sailing. This knowledge and experience helped him build Russia’s first navy which was instrumental in his wars against the Ottomans and the Swedes. I always encourage affiliate program managers to follow the Emperor’s example, and start affiliate accounts with all major networks and take your time to try yourself in the capacity of PPC affiliate, data feed affiliate, coupon affiliate, social media affiliate, and so on. Try various affiliate tools provided by the networks and third parties. You will gain invaluable experience in the process. Do not quit those accounts. You can use them later for competitive intelligence too.
Affiliate marketing is one of the most powerful and cost-effective customer acquisition tools available to an online merchant today. You decide what commission to pay, and pay only when results (sales, leads, subscriptions, and/or clicks) are obvious.
Remember that unlike with other channels of distribution, affiliate marketing hardly has any advertising and marketing expenses involved yet often shows the best ROI. While affiliate marketing, you pay only for the desired performance. With most other advertising, however, you get no performance guarantee, and generally the results aren’t as good.
If you do not yet have an affiliate marketing program, I strongly encourage you look seriously into starting one.