HOW TO START AN AFFILIATE MARKETING BUSINESS
Affiliate Marketing: What affiliation is and how it works
Affiliate Marketing or Performance Marketing is an element that cannot be underestimated if we want to get results from digital marketing. Of all the available channels, Affiliate Marketing stands out because it is one of the best known performance channels and affiliate marketing represents a new form, born online, of highly successful digital marketing. Being a powerful channel, very widespread but also quite complex in its genre, it is necessary first of all to define your goals, get adequate documentation before spending money and finally decide on the best strategy that best suits our business by making the most of the strength of the medium.
Often online we look for what the affiliate logic is through the definition of Affiliate Marketing or even to collect as many reviews and complete opinions on how Affiliate Marketing, affiliate platforms and even Affiliate Marketing works. without site. Let's find out together in this article, going in order, all the answers we are looking for.
Affiliate Marketing: Find out how it can help you
To better understand what affiliate marketing is and how it can be useful to you, you must first start from the concept of the sales network and get to know its main features:
- Ability to generate the greatest amount of contacts that in the offline world means traffic to your point of sale.
- Create a relationship of trust with potential customers.
So how does it all work online?
Surely, there is a legacy in the offline world sales network that is taken in the digital sector by affiliate marketing, or by affiliate networks. Online affiliates (bloggers, editorial portal, magazine ...) are all those interlocutors able to generate traffic from search engines, social networks and other channels capable of gaining the trust of an audience to whom they can then convey a product or service .
To better understand how affiliation works, let's take an example: that of a blogger who deals with technology. If this blogger writes consistently, he will have the opportunity to acquire some traffic from the search engine and social networks over time by sharing his articles and resources. Part of this flow will likely build loyalty over time by becoming a fan, follower, or newsletter subscriber. It means that his audience will come to trust him when he has to make decisions in the technology sector giving him the opportunity to monetize.
How can this be done?
By signing agreements with companies that, for example, sell technological products in drop shipping; of them and their products, will speak in a competent and credible manner. In this way, every time a user visits the company website from their article and purchases some product or service, they will earn a commission.
What can all this mean for you?
Well, if you are an entrepreneur, it means that thanks to your affiliate network you will be able to generate additional sales compared to what you are able to produce on your own.
Affiliate Marketing: what it is
Affiliate Marketing is in fact a performance-only channel: the advertiser only pays for the results generated by the affiliate program based on the objectives set by himself. Better to say, compared to all other forms of advertising management in digital, it has a completely different model of commercial engagement: you pay for the sale and you don't pay for the space.
Affiliate Marketing is a promotional channel that is part of the new forms of marketing born online. It consists of a commercial agreement between three parties:
The first person is the merchant or advertiser who promotes an affiliate program to recruit publishers or affiliates to promote their online business.
The second subject is the publisher or affiliate who participates in the program by registering their website, portal or web property by entering the JavaScript code that will host the advertisements. The publisher subsequently through search engine optimization (SEO) and search engine marketing (SEM) promotion activities will acquire traffic on its web site by promoting the merchant's advertisements together with its own content.
The third party is the affiliate platform, that is the party that provides the KnowHow and the technology to manage payments, exchange advertising material and resolve disputes between the various publishers.
Affiliate Marketing: characteristics of the relationship
The remuneration model of Affiliate Marketing is therefore mainly that of:
- CPA or cost per action - goes on a per cart basis and is a percentage
- CPL or cost per lead - is represented by a fixed cost
In addition to the pure affiliate remuneration models mentioned above there are also:
- CPM or cost per thousand impressions - i.e. views, is widely used to make brand awareness
- CPC or cost per click - the remuneration is triggered when the user clicks and lands on the merchant's site
Let's take a closer look at this business relationship by giving some simple examples.
MAKING MONEY WITH AFFILIATIONS
The affiliate relationship is a so-called win-win relationship: as an advertiser I have to advertise to promote a product / service, to make a purchase, to have someone register on my site. As a publisher, I have to deliver advertising so if I made the user do the action, I won: because you will pay me a commission. As an advertiser, if I managed to get the action done, I won, because I have an economic return. Obviously, the affiliate platform acting as an intermediary will also have an ROI.
Basically, Affiliate Marketing is a relationship in which we are not based on the principle of advertising delivery, but on the commercial relationship: I, as an advertiser, make my publishers my sales force. Put simply, I give you advertising material and you have to publish and sell it for me. Transported to the real world it is as if for example I asked some people to make flyers for me, making sure that I will pay them for every entrance I have in my place. However, since the world of Affiliate Marketing is all digital, here we will only have purely technical web materials, entirely mediated by technology.
As we said before, the affiliate platform must also have a remuneration. Taking a simple example in the real world, it is as if I, the owner, wanted to earn on the entrances to my premises through flyers, instead of dealing with it personally, I asked someone to find me the best flyers and I assured the agent a good and high percentage of compensation on all the successful leafleting activities of those employees.
Within the characteristics of Affiliate Marketing, the concept of intermediation as a standard works like this in most cases: aftermaking a profit, the advertiser offers the publisher 70% of the commission. 30% of the commission goes to the affiliate platform. Taking an example in figures, if I establish as an advertiser that for every € 100 I earn thanks to this marketing activity I will have to give this affiliate system, formed by the platform and publishers, € 10 for every € 100, I will give € 7 to the publisher and € 3 to the platform.
However, it is not a fixed rule in the commission system, there are situations where it can happen that the affiliate platform chooses to recognize itself much less, such as 10% or 5% of the commission. It happens if we are talking about customers, advertisers of very high cabotage who produce very large turnover, who have great ability to scale the costs of the affiliate system in an important way.
How Affiliate Marketing works
What can be a typical Affiliate Marketing cycle?
To really understand how the affiliate system works, let's look at it from the point of view not from employees, but from users. Let's say that we normally browse any site, but more or less of our interest as a consumer. As we scroll through news and articles, we come across advertisements. Such advertisements may or may not catch our attention. If they manage to capture it, they potentially earn our click and end up on the merchant's or advertiser's site. Furthermore, if we decide to buy an item on the same site, a virtuous circle is created that starts from our first click and then from our first entry, ending up with a sale. What happened then? We took part in a real commercial transaction cycle.
A technological mechanism was activated whereby the advertiser's site called the affiliate platform, which intercepted the type of sale, marking it as made thanks to a click from one of its publishers or advertisers. In this case, the payment notification is triggered for the success of the transaction according to the agreed commissions.
Some well-known brands that effectively use Affiliate Marketing are:
- Amazon
- Zalando
- Yoox
- Expedia
- eDreams
- Booking.com
- Hotels.com
They essentially use it to get highly qualified results for their business.
What Affiliate Marketing is made up of
Affiliate Marketing is used to generate immediate and measurable results such as:
- Sale
- Lead
It is the most efficient marketing medium in digital today. If used well it requires:
Building a solid affiliate base
- Daily and granular management
- Contrary to popular belief, the affiliates who bring results, as we will see, are not those who use the display adv medium.
Finally, it is a tool that can suffer in terms of effectiveness:
- If the brand / product is not well known
- If the product is not palatable
Affiliate Marketing: technical characteristics
An effective affiliate program consists of an incentive payout (distribution of net profits in the form of dividends), restrictive but protective policies for the best performing publishers and engaging creative formats. The types of payment adopted by the affiliate platform respect the characteristics of the promotional channel, i.e. exclusively for performance and require a tracking system to protect the promotional work done by publishers.
Tracking is carried out with JavaScript coding that generate payment types such as CPC and CPM, or the attribution of the compensation for the purchase generated days after the click made and the impression found. This is a practice refined over the years that today seems to be the most widespread and most appreciated by publishers.
The difference between Affiliate Marketing and classic Internet Marketing consists in receiving compensation only after an action carried out on the affiliate's site (CPA = Cost per Action, CPL = Cost per Lead) and the other forms of CPC and CPM.
Manage an Affiliate Marketing program
Managing an Affiliate Marketing program is a more complex process than it may initially seem, so let's keep these things in mind:
- An Affiliate Network is not a black hole in which we place advertisements and receive money;
- The Affiliate Marketing program is primarily a consultative process towards the advertiser: if a program does not work, it is likely that something has gone wrong in this process;
- Publishers must be managed and the best performing ones must be recognized in order to promote the program to them;
- Affiliates constitute a "sales force" to be constantly encouraged. It is necessary to activate promotions and "competitions" between publishers;
- Publishers apply to participate in the program, screening must be done at least once a week to keep the program alive;
- In a successful program, the queue of publishers can be long, it is necessary to constantly monitor the activity of each of them, some could implement borderline methodologies that do not generate any value and actually correspond to scams;
- It is necessary to periodically check the validity of the generated sales / leads and possibly proceed with the cancellation of those that are not valid in order not to pay affiliates for actions that do not correspond to a revenue for the advertiser.
Basic actions to launch an Affiliate Marketing program
- Agree with the advertiser the action (s) to be remunerated, the commission and the need to use or not a landing page;
- Create the program on the platform, generate the tracking codes and, if required, set the platform to deliver the creatives;
- Launch the program with a newsletter to all publishers subscribed to the platform, so that they learn about the new program;
- Recruit the best performing publishers relevant to the type of advertiser
- Screen publishers who have applied to the program (once / week);
- Monitor the results;
- Plan publisher incentive actions;
- Verify the actions and eventual cancellation of the fake (1 - 2 times / month);
- Perform actions of constant renewal of creativity;
- Schedule communication to affiliates about promotions and any opportunities to increase results.
Where to do Affiliate Marketing? In which market?
There is an initial premise to be made. Much less has been said about affiliation and its mechanisms in recent years. This lower diffusion, we are talking about the current 1% reached in the digital market, is not due at all to the concept that the machine does not work or that it has technical problems, nor that it does not bring results or that it requires too much care. It is mainly due to the bad, not to say bad, management of its real potential. Users have promised false potentials and objectives, and therefore have tried several times in the long run to use it to do wrong things and not really exploiting the real strength that this means could also make economically. All this unfortunately on a global scale.
Looking at Affiliate Marketing in Europe and USA, it can be said that it works well and that it could lead to an even more profitable return on investment.
Let's dwell for a moment on the 1% diffusion of Affiliate Marketing and try to give an example to better understand the concept. Let's imagine spending € 1000 on advertising: € 990 brings us € 5000, or 500%; that 1% missing, or € 10, alone earns us another € 500. So 10% of our markup is brought by that 1% in Affiliate Marketing. Summing up, in this way we managed to build a solid digital marketing system with our € 990; they have correctly fertilized that last euro which, paid by us only for the results obtained, brought us a further 10% return on investment.
It can be said that in reality this low diffusion of the Affiliate, with this undoubted potential, is not to be considered so negative. Rather, it can be said, as a fact, that Affiliate Marketing is natively part of being the small and residual piece of planning.
Why do Affiliate Marketing?
Let's look at the image, it is a customer journey purchase for those who need to renew or activate a new car insurance.
In an ecosystem where the majority of transactions still occur in different percentages from desktops, tablets and smartphones and we have in 69% on average of cases interested consumers, we see above all that the search touchpoints, which contribute to a typical transaction and which generate immediate and measurable value, almost all performance marketing tools managed through Affiliate Marketing and the affiliate world are still today:
- Pcs (Search)
- Advice
- Social Media
- Cash Back
- Broker
- Provider
Tools and platforms to use
We have seen so far what the macroeconomic system of Affiliate Marketing is like. What is missing? One of the 3 actors that makes all this technologically possible, the affiliate platforms.
The best known Affiliation Marketing platforms available today are:
- Clickbank (USA) - The world leader in digital products, ebooks, etc.
- Tradedoubler (Europe) - General consumer products
- Awin (Worldwide) - Global network with over 210,000 affiliates
- CJ Commission Junction (The largest in the United States, does not exist in Europe)
- Netaffiliation (Europe) - Consumer products
- Dating Factory - Dating services
- Awempire - Adult industry affiliate programs
- SellHealth - Health and beauty products
- Markethealth - Health and beauty products
But one is still missing, the most important affiliate platform in the world is missing, the one that gave the right inspiration to create all this: Amazon Associates.
Amazon has therefore created its own internal affiliation system which over time has become the most powerful in the world. Legend has it that it was Amazon who invented an affiliate system. The story tells of a blog that proposed to Jeff Bezos, Amazon CEO, to get Amazon banners and to get paid only if he managed to get him to sell more books (at the time Amazon was born from here). Jeff Bezos enthusiastic about the idea set up a system to do just that. To date, it boasts millions of affiliated sites, with hundreds of thousands of publishers making a turnover around billiards, that is, 1000 to the fifth and therefore a thousand billion. Dizzying.
As we all know, China is the #1 manufacturing country in the world, and as such it has made the fortune of thousands of resellers worldwide on platform such as Amazon and eBay.
Great stuff, however, what about if you had the chance to introduce directly to worldwide consumers thousands of Chinese wholesalers who in many cases are able to sell and export just 1 piece of a given product at better prices than Amazon or eBay? Well then, one of the best B2B/B2C Chinese e-commerce platforms for that and one of those that pay the highest commissions to it's affiliates is DHGate.
DHgate Affiliate Program offer between 3-22% commissions on customers purchases who have bought through your affiliate link.
What is good about DHgate.com retail platform is that customers are protected by the DHgate Buyer Protection scheme they have in place. DHgate will provide a full refund if customers do not receive the goods they have paid for, or a full or partial refund if the items received are not as as described by the seller. Basically, the buyer doesn't send payments directly to Chinese sellers but exclusively to DHgate who will release the payment only after the buyer has received the goods ordered and confirms they are as promised before the order.
One might think: can an advertiser be a normal company that wants to make its brand known? Maybe yes. Better to say it can be, but something has to pay off. Do I sell anything on my site? Do I have to bring clients to whom I have to sell a service? May I want to register users for a newsletter so to acquire leads? Everything can be done but the important thing is that it must be convenient for the publisher.
How to learn to do Affiliate Marketing
To learn how to do Affiliate Marketing or Affiliate Marketing well, it is essential to make examples of a typical advertiser and a typical publisher, in order to identify what our business goal is and understand where to stand and what it will take to start.
From advertiser: My company opens an affiliate program
- E-commerce company
- Finance company (banks, consumer loan companies)
- Insurance (car insurance, home ...)
- Instant selling company (Groupon)
- Comparators (car, motorcycle quotes ...)
E-commerce company (ex: Expedia, Yoox, IBS, Groupon ...)
CPA model (cost per action / sale)
Revenue share publisher remuneration model
Commission examples
Considering that the average shopping cart on the ecommerce site is € 300, the average advertiser margin is 30% (net profit € 90); the commission will be a percentage (generally 5 - 10%) of the average net profit. A fixed CPA, if the products sold generate a fairly or completely uniform average unit revenue (always calculated on a 5/10% of the net profit). Criticality: It is difficult to generate large volumes if the customer is not a big player with already a big reputation on the market.
Finance Company, Comparators, Insurance, Online Mortgages, etc.
CPL model (cost per lead)
Pure CPL publisher remuneration model
It is adopted when the customer's goal is to generate a contact to be transformed later into a customer; the CPL is calculated by the customer based on the lifetime value of the user, the average value of the converted user and their internal conversion cost (CRM, call center etc.). The share model of the commission between publisher and network does not change (30% / 70%). Criticality: model very exposed to fake conversion.
Instant Selling, Private Selling Portals
Mixed Model
Remuneration model for the publisher CPL + CPS
It is adopted when the customer's goal is to generate contact with high conversion rates and in short periods. Publishers and networks are therefore encouraged to give greater visibility to the double commission program. The share model of the commission between publisher and network does not change (30% / 70%). Criticality: these are always evolving business models, it is likely that the remuneration models will change in a short time (reduction of commissions, elimination of the CPS part).
As an affiliate: I am a publisher participating in the affiliate program
- Sites / Blogs (ADV display)
- Comparison engines (Find prices, Kelkoo ...)
- Couponing Site
- Email Marketing
- Keywords Marketers
Adv / Retargeting display
Banner formats
Great visibility for the brand / product covered by the program. Poor post click conversion power. More opportunities if the program includes the Post view.
Comparison engines
Banner formats / Product data sheets feed
The user views the advertiser's product sheets within the comparison engine. Great conversion power because the user is exposed to advertising in "pull" mode. It only works if the product is competitive in terms of price, because it is compared with its competitors!
Couponing Site / Loyalty sites
Txt + image / banner formats
Couponing Sites are sites that collect and publish discounts and promotions from ecommerce sites;
Loyalty sites are operations linked to the collection of points on loyalty programs to which advertisers can join with promotions on the sale of their product.
Great conversion power thanks to the promotional factor. Very complex approach in some markets where couponing is not traditionally present in the "marketing culture".
Email marketing
One of the most effective push modes. The product is promoted through the sponsorship of emails sent (or even from newsletters created for free) by publishers to large databases of users. Excellent conversion power in Lead programs. Not recommended for sales programs because the power of redemption on sales is very low.
Keyword marketers
They are "agencies" that buy keywords on Google to promote the customer's product. Excellent affiliates when the advertiser does not manage their own campaign on Google. Most conversions are generated on the brand keyword and the advertiser does not always allow it to be bought.
Finally, let's compare the strengths and weaknesses of the various models available in Affiliate Marketing:
CPA
On average higher commissions
Long-term sustainability
It is difficult to generate large volumes if there is not a very solid product behind it
CPL
Lower fees
Easier to generate results
Possibility of fielding many more affiliates
Very exposed to fake leads
CPA + CPL
All the advantages of the two models
Fees are unlikely to remain stable for long periods
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REVSHARE
This type of commission is very common in the online gambling industry where affiliates share with the casino affiliate program a percentage of the net revenue generated when players lose money.
HYBRID (CPA + REVSHARE)
As above but the affiliate earns a fixed commission for each new depositing customer introduced, plus a lower revenue share commission.