Performance marketing insights, discussions and expertise

Affiliate Marketing in a Nutshell

By on October 3, 2012

Affiliate-Marketing

For the last piece in my newbie series, I discussed performance marketing. A subset of performance marketing (and often confused for being performance marketing) is affiliate marketing. With the seemingly thin line between performance and affiliate marketing, I wanted to take a closer look at the affiliate model.

What is Affiliate Marketing?
Affiliate marketing is a performance-based advertising model in which media partners promote the products or services of advertisers.
Media partners receive compensation for the promotion only if their efforts result in a predetermined event (normally a sale or a lead) as outlined by the advertiser.

Within the affiliate model, there are two basic roles to understand. Media partners, also commonly known as “affiliates” or “publishers”, manage channels (such as websites, search, social media, etc.) on which they promote the products and services of advertisers. Advertisers have a product or service they are looking promote via some form of advertising on a media partner’s site.

How does Affiliate Marketing work?
In affiliate marketing, media partners seek out advertisers whose products and services complement the media partners’ content and vice versa. So, for example, a fashion blogger might look for advertisers who sell shoes or beauty products. Or an advertiser looking to promote their latest line of bake ware might want to advertise with a media partner who focuses on cooking.

When media partners and advertisers enter into a partnership, there are two key aspects of the agreement. First is the desired outcome. Typically, advertisers are looking for either sales or leads as a result of their media partners’ promotional efforts. The completion of the desired outcome leads to the second aspect, the payment or reward structure for media partners. Often the payout to a media partner is either a percent of the total sale value or is a fixed amount for every sale or lead.

After a media partner begins promoting an advertiser, affiliate tracking systems are used to monitor when a media partner’s efforts result in a sale or lead for an advertiser. Tracking is done in a number of ways – tagging site visitors, unique promo codes for different media partners, unique phone numbers, etc. – and can be done either in-house or via 3rd party tracking solutions. Without an unbiased system in place to track the progress of a consumer from media partner to advertiser to conversion, the affiliate model simply does not work. Accurate tracking thus becomes the cornerstone of any successful affiliate marketing program.

Once consumers turn into leads or sales, advertisers analyze performance data provided by their tracking system. From this information, advertisers not only determine the proper payout for media partners but also evaluate the performance of campaigns with specific media partners in various channels. When all is said and done, advertisers pay media partners for their performance either directly or through a 3rd party service.

And that’s it. Affiliate marketing in a nutshell. If you’re looking to start an affiliate marketing program, check out our Buyer’s Guide to Affiliate Management Software.

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