Affiliate marketing is a method of promoting a website in which affiliate will bring new customers, visitors, subscribers through his efforts to the advertiser’s site. The affiliate will receive a fee based on the following
In simple terms, using one site to drive traffic to another website based on a system of revenue sharing agreement between those websites.
Affiliate marketing is the stepchild of online marketing and also one of the well known and successful Internet marketing methods widely practiced in today’s competitive business world.
Recent research has predicted that it is the most efficient and effective online acquisition channel/tool. Affiliate marketing programs are the most cost –effective forms of marketing and also basically about building customer relationships.
- According to Marketing Sherpa’s “E-commerce Benchmark Guide 2006”, affiliate marketing is a USD 6.5 billion business worldwide including lead generation and delayed sales.
Business Model – Affiliate programs
There are three parties involving in an affiliate program transaction namely:
- The customer
- The affiliate site
- The merchant site
Amazon.com - A success story
- Jeff Bezos, CEO and founder of Amazon.com, in the year 1996, has pioneered the first large-scale affiliate program in the online market place as a part of Internet marketing strategy.
- The affiliate brings the customer traffic via posting the links for the sale of individual books on Amazon.com and in turn it pays some commissions or rewards to the affiliates.
- The affiliate facilitates the sales of books, but Amazon.com takes care of all other aspects of sales cycle.
- With over 500,000 affiliate Web sites now participating currently in online market place; Amazon.com's affiliate program is a great success.
Rest all other companies followed the footsteps of Amazon.com in making their affiliate programs a great success.
- There are three fundamental types of affiliate program payment methods namely:
Pay- per –sale is also termed as cost-per-sale. In this option, the merchant site will pay to the affiliate site when customers purchase something from the site. The rewards may be either percentage of the sale or a fixed amount per sale depending upon the agreement terms signed off between merchant and affiliate sites. Amazon.com's affiliate program is a perfect example of a pay-per-sale arrangement.
Pay–per-click is also termed as cost – per-click. In these programs, the merchant site will pay the affiliate based on the number of customers visiting the merchant site by means of clicking the links. The customers don’t need to purchase anything and affiliate wont be involved in any matters once the visitors get into the merchant’s site.
Pay-per-lead is also termed as cost-per-lead. Affiliates will be rewarded based on the number of customers who may end up in asking or filling up any information in merchants site, which will be used as a sales lead for future marketing activities of the company.
There are several ways that affiliates can link to a merchant site. Depending upon the nature of the requirements, links can be chosen and the commonly available links include:
- Text links
- Banner links
- Search box
There are number of ways affiliate programs will be using these links based on the market requirements like homepage link, product store fronts, product/service oriented link, registration form, product promotions link, co-branding etc.,
- Easy to track measurable results
- Wide market reach
- More sales
- Repeat customers
- Word- of –mouth to bring new customers
Affiliate programs - Marketing strategies
There are few strategies to increase the output of affiliate programs like
Marketing communication support: Design and develop the requisite marketing collaterals for affiliates about the products/services information, promotions, offers, discounts and customer database structure for long lasting customer relationships.
In-house team expertise: Create an in-house team expertise to support affiliates to derive maximum exposure and benefits out of all affiliate programs being conducted. In simple terms, give maximum sales support to affiliates.
Create metrics: Always create a performance metric to evaluate the affiliate programs and also individual affiliate’s contribution/ performance on a regular basis to keep track record of what’s happening in the business environment and also to find a suitable ways to improve upon the process on comparison with industry benchmarks for long term business success and results
Create guidelines and methodologies to monitor affiliates: Based on the marketing requirements, the merchant site has to choose carefully the affiliate sites to define its affiliate programs outlook and also the rewards program that will bring more traffic to its site which in turn results in repeat purchases and high sales revenues.
Keep up the affiliate’s morale: In order to be successful in any business venture, always show a genuine interest in other businesses also by means of frequent interaction to share the best between the affiliates and merchants to be highly successful in the competitive business environment.
Some affiliates perform better than others ie., exceeding the performance. Its always to provide a requisite marketing and sales support not only to the top performing affiliates but also other potential affiliates who in turn will bring more visitors to the merchant site in future.
Case Study- Edmund Scientifics and Science Kit Companies
It is a 50-year-old catalog company and owns Edmund Scientifics brand, a science and hobby products. It was running a niche affiliate program with one of the affiliate networks that was not up to their fullest expectations and would like to expand their product offerings through other affiliate networks.
- All the affiliates networks working with them were not technologically sound enough to support all of its programs. So, it opted for a highly flexible back end technology to unite four of its brands together in a small network and its named as the Science and Education Affiliate Network (SEAN).
- With the help of SEAN, affiliates will be able to promote the several products across all Science kits websites using banner ads, text links and search engine marketing.
- It leads to a sharing of resources among all the scientific sites that allows for economies of scale and affiliate‘s share of rewards.
- The program was launched and went on successfully. The sales were up with an average of 430% growth for the first three-months of the launch in the year 2006.
- Affiliates also started showing much interests towards this new program with all facilities and in turn improving their monetary rewards also.
In recent years, affiliate programs have grown rapidly popular as a part of Internet marketing strategy in the online market place. It’s a collective and co-operative effort between affiliate site and merchant site to reap benefits out of it. It is one of the most cost effective ways of online advertising in comparison to the traditional advertising to build a long-term customer relationship and also research estimates that affiliate programs will be a future industry trend in online marketing promotions space.