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Affiliate marketing is still an essential digital media channel for many transactional Ecommerce sites for retailers, travel and financial services. Affiliate marketing is also a revenue model to consider for site owners, especially online publishers. Here's the issues to think about it to manage it effectively.
Affiliate marketing quick guide
Affiliate marketing success factors
Success in affiliate marketing for the merchant is all about building the right relationships with the right types of affiliate. Most businesses find a 95:5 rule for affiliates, so the first thing to get right is to choose the right affiliates. To form the relationship, you'll need a great offer since if an affiliate is good, they'll have other great offers already.
Affiliates are driven by your potential measures through their Earnings Per Click (EPC) that they offer you or they may compare to ad revenue based on eCPM - earnings per thousand pages served. So you need to think of affiliates like publishers and consider these factors which will increase the value they can generate from you:
- Commission - This needs to be competitive to increase eCPM or EPC for the affiliate
- Cookie expiry period or window - The more you can extend this from 7 to 15 to 30 or even in some cases 90 days will increase EPC.
- Conversion rate and average order value - if these are competitive within your sector you will be bale to offer a more better commission than your competitors so affiliates will display your links and ads more preferentially.
- Communication of offers and creative - you have to make it easy for affiliates to do the best job for you by contacting them in advance with new products and deals and giving them the creative, feeds and content they need to promote you.
- Relationship value - do they value working with you - do you offer them extra apart from the commission?
Affiliate marketing is not so suitable for business products or lower priced consumer products since it won't be sufficiently profitable for the affiliates, so it may be difficult to recruit sufficient affiliates.
Affiliate marketing definition
You could say that Affiliate marketing is the ultimate form of marketing communications since it's a "pay-per-performance marketing" method i.e. it's a commission-based arrangement where the merchant or business selling products only pays when they make the sale or get a lead.
The graphic summarises the affiliate marketing process. You can see that the when a visitor to an affiliate site (who may be an online publisher or aggregator) clicks through to a merchant site, this prospect will be tracked through a cookie being placed on the visitor's computer. If the prospect later transacts within an agreed period, i.e. usually 1, 7, 30, 60 or 90 days, the affiliate will be credited with the sale through an agreed amount (percentage of sale or fixed amount).
Compare this to the wastage with traditional advertising or direct mail! It can also drive a volume of business in a range of sectors - many banks, travel companies or online retailers get more than 10% of their sales from a well-run affiliate marketing programme.