What Is Affiliate Marketing And How Does It Work
I’m pretty sure you’ve heard of affiliate marketing, but haven’t fully understood how it works, how people make money from it, and more generally what affiliate marketing is.
In a very reduced, succinct, and short definition, affiliate marketing is a marketing business model in which your customers and/or readers become your marketers.
How is that? Today, we are going to cover all the questions you have about affiliate marketing, including:
- What is affiliate marketing?
- What are the relationships in affiliate marketing?
- What are affiliate networks?
- How can I join?
- How do I become a merchant?
What is affiliate marketing?
Affiliate marketing is a form of pay-for-performance marketing in which an affiliate sells items on behalf of a merchant at an agreed price or percentage of the sale.
It’s a great form of advertising for e-commerce stores, as funds are only exchanged after a sale is complete, but it works for all the business models out there.
As long as you have a product to sell, or can find a product to promote, you can engage in affiliate marketing.
While on the marketing, merchant, and network side (more on that later), everyone gets a share of the sale.
81% de las marcas tienen un programa de afiliados.
And that doesn’t seem like it’s going to decrease anytime soon. Affiliate marketing revenue has increased almost 23% year-over-year since the second quarter of 2017.
Sometimes known as an affiliate program, affiliate marketing programs come in all sizes and shapes to suit the many businesses they are linked to. For example, you can see the Mailchimp program below:
And another affiliate program from The Vitamin Shoppe:
Affiliate programs can work for you, even if you are not a big name. Entrepreneurs across the web are using affiliate marketing programs to sell their products.
And in some cases, their sales are enough to create million-dollar markets, like Poster Gully.
So what is affiliate marketing?
A system that, at best, works for everyone involved and moves more products to more customers. Accessible and comprehensive, affiliate marketing is a great option for anyone looking to increase their earnings. Whether you are the seller or the merchant.
None of this tells you exactly how affiliate marketing works. To understand that, you have to inquire into the relationships involved in affiliate marketing.
What are the relationships in affiliate marketing?
Affiliate marketing is about the relationships forged between people. The relationship between the customer and the affiliate needs the same foundation as the relationship between the affiliate and the merchant: strong trust, fair conditions, and transparency.
In the most basic version of affiliate marketing, there are three parties involved:
- The client (audience)
- The affiliate (promoter)
- The merchant (owner)
Here’s a great visual summary of the sales cycle in affiliate marketing:
With affiliate marketing making up to 16% of all e-commerce sales, this cycle represents the primary process from an affiliate’s point of view.
The affiliates promote the product to their audience, often using a special link to track their sales and referrals. After the transaction is complete, the merchant delivers the commission.
Wash, rinse, and repeat for the life of the member.
If you prefer visual learning, here’s another take on the process:
The commission rate for affiliates varies between individuals, industries, and companies. No standardized rate is agreed as the best, although 30% is the upper limit in all cases.
But it is by no means a rule.
For example, 3dcart offers a much higher commission rate. About 100 times higher:
But this type of fee won’t work for everyone. Paul Jarvis had to shut down his affiliate program when a 50% commission rate became untenable for his bottom line.
So as a warning: be aware of the company behind an affiliate program because if they can’t afford it, they are going to shut it down.
Still, offering higher rates is good practice for building relationships, which are at the core of what makes affiliate marketing work.
Focusing on relationship building helped an affiliate program go from $ 2,000,000 to $ 14,000,000 in two years.
It also helps your affiliate page convert at a rate 4.4 times higher than your average site visitor.
That’s how important relationships are to affiliate marketing.
So be fair, be transparent, and remember that affiliates are not your employees or employers. They are your companions. And you can do great things together.
As long as they can get together, which is where the next question comes in.
What are affiliate networks?
We have been avoiding this topic until now for a reason.
Well, for two reasons:
- Affiliate networks, in our humble opinion, are not the best option.
- They are not necessarily viable for smaller companies.
Affiliate networks fit between the affiliate and the merchant, adding a third party to the sales mix.
In many ways, they make life easier in affiliate marketing. The networks connect affiliates with products that they might not find on their own and offer merchants a vast database of potential partners to work with.
The terms of your affiliate program are subject to network policies, and you can expect a significant portion of your out-of-pocket change to go towards your monthly maintenance.
Rakuten Marketing & ShareASale are 2 particularly best examples.
Walmart uses Rakuten Marketing for its affiliate program.
Brit + Co, an online course and content site popular with millennial women, use ShareASale.
Amazon and Skimlinks both top the charts for market share.
Amazon, in particular, has become a strong competitor to bloggers and review sites interested in affiliate marketing.
The WireCutter, an electronic review site that was acquired for $ 30,000,000,000 in 2016, uses Amazon’s program for most of its revenue.
And, a blog with no more than one birthday to its name managed to attract close to $ 3,000 a month with the Amazon affiliate program. Although this was in 2016, it is definitive proof that an affiliate doesn’t have to be years behind to earn a decent monthly income.
Therefore, affiliate networks are not that bad. We still choose to create our own site rather than work with someone else, but if you have the budget to spare and want to get up and running as quickly as possible, the vast pool of potential affiliates that a merchant can connect to is worth considering.
How can I join?
OK, we’ve talked a lot about the people involved in affiliate marketing, but we’ve saved the best person for last. So let’s talk about how to fit in with affiliate marketing. If you are a blogger, you have options. The larger your audience, the more opportunities there will be.
But it doesn’t have to be too big. In fact, an audience on the smaller side puts you in the realm of “micro-influencers,” and companies love micro-influencers. Micro-influencers offer better engagement and cost less than larger-scale influencers.
Affiliates have to get down to business selling their product – creating social media posts, blogging, hosting webinars, etc. – so it has to be worth doing.
Also, clarify your terms upfront. The earlier the commission rate, the better. It will help you weed out people who want too much and save time for both parties by keeping everyone on the same page.
When we launched our own affiliate system, which is quite good at offering the highest payouts in the industry, we kept all of this in mind. Specifically, for every Kinsta hosting plan someone refers, they receive a one-time sign-up bonus:
- If someone you refer joins the starter plan, you get $ 50.
- If someone you refer joins the Pro plan, you get $ 100.
- If someone you refer signs up for any of the business plans, you receive $ 150.
- If someone you recommend signs up for any of the Enterprise plans, you get $ 500.
- And affiliates receive a 10% monthly recurring commission for each referral, in addition to the sign-up bonus.
But if you think I’m biased too, I can tell you that BigCommerce is a good example to consider as well:
Step 1: Join a network and/or partner program
Or, start your own. We’ve mentioned a few networks that you can already join, but others worth considering include CJ Affiliate and VigLink.
For example, if you are creating a beauty blog, you may want to start with cosmetic distributors. Look up familiar names first to see if they have a show for you.
For example, Ulta has a program that you could join.
But if none of these programs work for you, a simple search for “beauty affiliate program” can lead you to hundreds of potential avenues in seconds.
The same process would apply to food blogs and travel blogs. Whatever your niche is, use it to find relevant programs, apply to be a partner, and then move on to the next step.
Step 2: Choose the relevant products
Just because one retailer fits your niche doesn’t mean that all products are going to be right for you. You have to work on selling these products to earn a commission, so it is important to find products that really resonate with your audience.
For example, your niche would likely be much smaller than “women’s beauty products.” If you are selling beauty products from abroad, you will want to find affiliate products that meet this criterion.
Profitable and niche relevant products are the key to getting sales pages that look like this:
It’s even better if it’s a product that you personally believe in and can vouch for. Becky Mollenkamp, an online entrepreneur and small business owner, has made hundreds in recent months thanks to her advocacy of a product that she truly believes in.
Once you have these two steps knocked out, you have the hard part. But now is the time for the rush, also known as promotion.
Step 3: Promote Products
Blogging is a fairly easy way to get started with promoting products, although it’s not as simple as plugging in a product and telling people to buy it. You have to produce high-quality content (which generally means long form) to make your case.
Longer blog posts can take longer, but they can generate up to nine times as many leads, so they’re worth it for an affiliate.
NerdWallet, for example, derives most of its income from its associations. Almost all of their posts, including their reviews, exceed the 1,000-word mark.
Like this 6,000 word article on the best credit cards of 2018.
Loaded with affiliate links, but focused on providing a use for the reader – rather than just making sales – this piece is a good example of how to make an affiliate blog right.
It’s also a great example of how to use long-tail keywords to drive traffic to your affiliate links. Long-tail keywords like “best credit card of 2018” helped one affiliate earn $ 16,433.
If you are not familiar with long queues, you can read more about them in our SEO checklist.
First, bounce to LongTailPro.
Scroll down to bring up the drop-down menu with the free trial offer, then click on it and sign up for an account.
Once you’re done with that, you will be taken to the dashboard.
Search for long-tail keywords by entering a few seed keywords in the box provided. In this case, let’s search for keywords related to digital cameras.
Here are our results. By default, you will only see 20 results or less, but you can change the parameters to get more.
These are already strong suggestions that give us a clear idea of how to create content for these types of products, but there is more that we can learn from this tool.
The “digital cameras” are going to be too expensive for us to bother to compete (as are the next two options), but the competition is down a lot and still has a decent volume behind it.
Let’s take a closer look at “Panasonic digital cameras”. Click on the link to see more information.
With mostly organic results and decently manageable competition, this could be a viable long tail for someone trying to create content around digital cameras.
But that is not all that this tool can show. Scroll down to see the competition.
Nice, right?
While blogging and SEO would be our first suggestion for promoting your products, you should take advantage of your email list and social media, too. Marketing on Twitter is a unique art unto itself, but if you already have an audience there, it’s worth a try.
Step 4: Profit
This is a bit ironic, but after joining a program, finding a product, and promoting it, there is only one thing left to do: take advantage of it.
Affiliate marketing is that simple. At least in theory.
How do I become a merchant?
Becoming a merchant in affiliate marketing is a bit more difficult than becoming an affiliate, although it shares many of the same steps. If you are already an established eCommerce store, you can skip steps one and two.
If not, go full blast.
Step 1: Identify a niche
If you remember, affiliate marketing depends on the relationships involved. And if you want to create an affiliate program or eCommerce store that brings more than pocket change, you need a niche. You’ll get fewer leads with a niche, but with a much higher conversion rate.
A mass-market can work for certain products, like Apple’s, but for a store that is interested in generating sales as quickly as possible, a niche is a way to go.
It is also vital if you want to work with affiliates who have a lot of influence on the public. This means that you are going to need someone who has their own niche of attraction.
You can identify a niche in two ways.
- Start with a product.
- Start with an audience.
If you already have a product that you want to sell, you should put your efforts into finding a market need for it with a specific audience. Instead of considering demographics such as location, search audiences by psychographic attributes.
After all, 57% of shoppers have made a purchase with a retailer far away from them. If you limit your clients to one place, you are also limiting their funds.
Examples of psychographic attributes could be hobbies, family life, and tax philosophy. The chart below provides a great breakdown of how it differs from traditional demographics.
So if you were trying to sell a product like an online course in finance, your niche audience might have psychographic characteristics like:
- Lower levels of financial literacy.
- Small business or startup owners.
- Ordering of values.
If the product you want to sell meets the needs of people with those attributes, you have found the audience to serve. If it doesn’t, you have to keep looking.
Keep in mind that most eCommerce stores follow the second model – starting with the audience – and then they find a product, using the same parameters of market need.
The specific circumstances in which you might start with a product are those in which you are creating something unique and new, at which point your goal will be to create demand, rather than respond to it.
Step 2: Create Your Affiliate Program Terms
We have touched on the need to offer competitive commission rates. As a general rule of thumb, your commission rate should start at 10%. But to start off on the right foot, look at your competitors to set your affiliate commission rates. What do they offer? See if you can offer something better.
Affiliates have to get down to business selling their product – creating social media posts, blogging, hosting webinars, etc. – so it has to be worth doing.
Also, clarify your terms upfront. The earlier the commission rate, the better. It will help you weed out people who want too much and save time for both parties by keeping everyone on the same page.
When we launched our own affiliate system, which is quite good at offering the highest payouts in the industry, we kept all of this in mind. Specifically, for every Kinsta hosting plan someone refers, they receive a one-time sign-up bonus:
- If someone you refer joins the starter plan, you get $ 50.
- If someone you refer joins the Pro plan, you get $ 100.
- If someone you refer signs up for any of the business plans, you receive $ 150.
- If someone you recommend signs up for any of the Enterprise plans, you get $ 500.
And affiliates receive a 10% monthly recurring commission for each referral, in addition to the sign-up bonus.
But if you think I’m biased too, I can tell you that BigCommerce is a good example to consider as well:
Other terms to consider regarding your own affiliate program:
- whether it is a one-time payment or recurring income (for example, with a subscription service).
- if you want to create assets for your show such as banners, social media templates, and logos. I know, this takes more time and resources, but the more affiliates are given to work with, the easier it is for them to make the sale on your behalf.
- if it can be configured with an affiliate platform or with a WordPress plugin. Rewardful is a particularly easy platform to use for a new affiliate merchant:
Once you’ve established your terms, post them to an easy-to-find page from your website (most people keep their links in the footer area) and attach a contact form. Then promote it on your blog, social channels, and optimize it for search engines.
Or, if you prefer a more proactive approach, continue with step three.
Step 3: Find Relevant Influencers
Letting affiliates find you are an easy way to navigate, but if your business is new, it’s not going to get you traction anytime soon.
So instead, you have to go to them.
One of the easiest – and cheapest – ways to find relevant influencers is by searching for blogs in your niche. Run a long-tail keyword like “small business financial tips” from Google.
This is what you get:
Then follow the links and find a “partner with us,” “work with us,” or “advertise” page. The first result gives us this in the footer.
Breaking down, we come to your partner page with its terms, which are not bad:
And since they were the first result of a long-tail keyword that is relevant to the example niche, they have already shown that they are in a good place to reach organic traffic with our target audience.
As your audience grows for you, your own affiliate page should start to see some momentum as well. This means our last step is pretty straightforward.
Step 4: Gain (again)
As an affiliate, your last step as a merchant is to benefit from your hard work. Track your sales through your plugins or platform, continue to expand your product offerings, and feed your affiliates with convenient payments.
After all, if you treat them right, they will become your star sellers. And those are people worth incentivizing, right?
Summary Of What Is Affiliate Marketing And How Does It Work In The Year 2021?
Affiliate marketing is a type of pay-for-performance marketing in which an affiliate sells a product on behalf of a merchant. In return, the affiliate receives a commission for the sale.
There is nothing more important than the relationship between affiliates and merchants. Remember that they are not your subordinates or your bosses – in an affiliate system, they are partners working to help each other.
Do this well enough and you can build a business from scratch while putting neat stacks of money in your own pocket.
If you don’t know how to find an affiliate or merchant to work with and want to get started as soon as possible, affiliate networks can take a lot of the work out of it.
As a real-world example, Amazon has worked well for many bloggers.
The steps to becoming an affiliate are not complex:
It takes an audience, but it doesn’t have to be on a superstar scale to make a difference. Even newborn blogs have made waves with affiliate programs.
Then join a show, find a product that suits your audience, promote the product, and make a profit.
If you do it from the merchant’s point of view, the process is similar. Start with a niche, create your affiliate program terms, find relevant influencers, and of course make a profit.
Affiliate marketing is difficult, but there are many possibilities. Ready to dive in?
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