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The Mechanics of Affiliate Marketing
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Introduction to Affiliate Marketing
HISTORY OF AFFILIATE MARKETING
The practice of internet-based affiliate
marketing was established in the early
nineties when the business model of
paying commission on sales for online
referrals was first implemented. This
‘paying on performance’ model was
adapted into mainstream ecommerce in
1994 with the Amazon Affiliate Program of
1996 serving as the first widely recognised
example of successful online affiliate
marketing. The practice of affiliate
marketing and its emergent industry has
since grown at a rapid rate. This is in part
due to the growing significance of the
transactional website. More commonly,
in recent years, the performances of
online stores have outshone that of
their bricks and mortar counterparts
prompting retailers to invest accordingly
into their online marketing activities.
Its popularity extended into the travel,
telecommunications and finance sectors
amongst other dominant industries and as a
result, has shaped into a multi-billion pound industry itself.
Affiliate marketing involves the exploration of internet channels
(e.g. email and SEO) in order to drive sales. The emergence
of web version 2.0 in the Noughties and the influx of the ‘the
blogger’ and user generated content (UGC) further diversified
the way in which affiliates presented advertiser offerings to
visitors in order to drive traffic to advertiser sites and encourage
conversions. New media continues to broaden the methods
in which affiliates present advertiser offerings. Future growth
is predicted within mobile advertising as more businesses
optimise their website functionality for mobile. The practice of
affiliate marketing is increasingly referred to as ‘Performance
Marketing’ reflecting the nature of the payment model
employed.
INTRODUCTION TO AN AFFILIATE NETWORK
The affiliate marketing industry encompasses advertisers,
affiliates, affiliate networks and media agencies; all of which
attend regular council meetings organised by the Internet
Advertising Bureau (IAB). These meetings encourage self
regulation, standardisation across the industry and best
practice. Affiliate networks facilitate advertiser/affiliate
relationships; to initiate and optimise their affiliate programs.
They handle fundamentals such as payouts, tracking
transactions and provide a consultancy-based service to both
parties, utilising their network of advertisers and affiliates to
nurture mutually beneficial partnerships.
WHAT IS AFFILIATE MARKETING?
As well as being an effective channel for driving sales, affiliate
marketing can help to generate qualified leads for future
marketing activities. Affiliates are only paid when the visitor
that they have redirected to the advertiser’s site makes a
sale or takes a predetermined action in accordance with the
advertiser’s marketing objective. This payment model means
minimal risk is attributed to the advertiser and facilitates
maximum return on their investment.
Affiliate marketing is an internet
based marketing practice in
which an advertiser (a merchant
or a brand) rewards channel
partners termed as ‘affiliates’
(website owners or publishers)
for their marketing contribution
towards visitor conversion on a
commission basis.
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Introduction to Affiliate Marketing
BENEFITS OF AFFILIATE MARKETING
The popularity of affiliate marketing is thanks to the stream
of benefits imparted to both the advertiser and affiliates
throughout the course of a successful affiliate program.
Setting up a program is simple and risk free and provides a big
opportunity to drive sales volumes and broaden audience reach.
From the advertiser’s perspective, a successful affiliate program
means increased targeted traffic relevant to their sector, a
dedicated marketing partner whose interest it is to effectively
promote the advertiser offering and maximisation of ROI due to
the pay on performance payment model.
With access to an affiliate network, an advertiser can adopt
a multichannel approach to evaluate which activities best
optimise their program. Test activity on new channels such
as mobile is an attractive prospect to many advertisers as the
integration of online, offline and mobile marketing on a CPA
metric becomes more commonplace.
DO YOU KNOW YOUR CPA FROM YOUR CPL?
Whereas the traditional CPC (cost per click) and CPM (used for
ad inventory branding) are not concerned with the conversion
rate of visitors driven to the merchant’s website, affiliate
marketing and its payment models are:
Jargon Buster
ADVERTISER (merchant or brand) - A website offering a
product or service which opts to promote through a third
party in the digital space
AFFILIATE (publisher or partner) - A site that promotes
an advertiser offering in the digital space and is paid on
a performance basis
AD CREATIVE - Graphics and/or text supplied by the
advertiser for display on the affiliate website
AD IMPRESSION - A metric which measures how many
times a user views an advert
AD SPACE - The area of a web page to which ad creative
is allocated by the affiliate
BANNER - A form of horizontal ad creative which is
usually aligned to the top of a web page
• CPA (Cost per action) An affiliate is rewarded when the site
visitor that is redirected to the advertiser’s website by the
affiliate, makes a purchase.
CLICK THROUGH - When a user clicks on a link and is
redirected to the advertiser website
• CPL (Cost per lead) An affiliate is rewarded when the site
visitor they refer enters enough information for them to
qualify as a ‘lead’ i.e. if the visitor enters their personal
details into a hotel’s website to request a travel brochure.
The affiliate is then remunerated for each brochure request
made.
CLICK THROUGH RATE (CTR) - Frequency of click
through on creative
BEST PRACTICE
Successful affiliate marketing requires a commitment from
both parties. Affiliates are not paid unless they perform and
they are only able to perform when they are provided with the
right tools and incentives by the advertiser. For example, if the
affiliate is not confident that the advertiser’s offering will appeal
to his/her site visitors, they are less likely to assign the advert a
prominent ad space on their site. In a similar vein, if an affiliate
anticipates that the commission rate offered by the advertiser is
not competitive enough, they may opt to display an alternative
advertiser for a better return. Thus, a dedicated approach is
required to make a relationship of mutual benefit. An advertiser
must nurture their relationships with affiliates and utilise their
network of partners to test, evaluate and refine their affiliate
activity in order to optimise any program.
CONVERSION RATE - Measurement of success for an
online ad when compared to click through rate. An
advertiser’s marketing objective defines what qualifies
as conversion; this can be in the form of sales or a
request by the user to receive more information
COOKIE - A small text file that is stored on the user’s
computer to enable the user to be ‘recognised’ by a
website on their return
DEEPLINK - A link which connects to a page beyond the
homepage of a site
EARNINGS PER CLICK (EPC) - Divides earnings by
traffic delivered- a useful metric to gauge profitability of
affiliate activity
USER GENERATED CONTENT (UGC) - Online content
generated by web site users as opposed to affiliates or
site owners
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Understanding and
Working with Affiliates
AFFILIATE CATEGORIES
Since 1996, affiliate marketing has developed dramatically.
Now most digital channels and even in store sales
can be driven on a performance basis. Affiliates are
becoming increasingly savvy and using more channels
to communicate their offering. Increasingly new and
emerging business models such as social and mobile are
joining the space and utilising a performance metric.
Voucher Sites (e.g. VoucherCodes.co.uk and Discount
Vouchers) One of highest performing publisher models
historically is voucher code sites which promote discount
codes and offers on behalf of the advertiser. The voucher
code market is highly competitive and to participate the
advertiser should be open to tactical discounting and
be able to figure out margin considerations to inform
intelligent discounting. The emergence of voucher codes
within the mobile space has been helping to generate both
online and offline sales.
Reward/Loyalty (e.g. Quidco and Asperity) The reward/
loyalty scheme has been around for years within closed
employee benefit schemes. Cash back sites pass on their
commission rate in the form of a cash reward to the consumer.
Loyalty sites such as Nectar operate point redeeming sites
where consumers earn redeemable points with each purchase.
Content (HouseCharm.net and Shopstyle) The concept of
content sites is that editorial is the main focus. Content sites
can implement SEO techniques to increase traffic. Content sites
can be directly relevant to the advertiser’s offering but it may be
useful to understand their readership demographics as these
may also be relevant.
Paid Search (e.g. Found and Venturian) Paid search publishers
can either run an advertiser’s search activity or complement/
supplement the advertiser’s existing search activity, for
example, by covering the advertiser’s search footprint to
ensure competitors are not occupying their search result space.
These affiliates work back to a CPA model.
Email (e.g. Freemax and Intela) Email affiliates manage or own
their own large databases and are thus able to target customers
who could push incremental sales (see jargon buster) for the
advertiser. Emails can be fully in line with the advertiser’s own
branding.
Social Media (e.g. Rocketer and Digital Animal) Theses affiliates
use various social platforms to generate leads and sales on the
advertiser’s behalf. Search affiliates use PPC Ads on Facebook
to target the advertiser’s desired audience by using the vast
amount of user information available to them. Other technology
based affiliates encourage social engagement by rewarding
social referrals known as micro affiliation. Before engaging in
social affiliate activity, it is best to build awareness of your social
landscape to determine the best channels of engagement.
Price Comparison (e.g. Twenga and Money Supermarket)
Price comparison sites aggregate and compare all advertiser
data based on price and availability. Depending on the price
sensitivity of the advertiser, it may be useful for them to be
aware of their competition’s pricing strategy to ensure a share
of the volume.
Freebie (e.g. Prizefinder and Competition List) Freebie affiliates
promote an advertiser’s complimentary offering to site visitors
usually as part of a lead generation or data acquisition activity.
For example, a freebie affiliate may require a site visitor
to fill in their personal details before they can acquire the
complimentary product, thus generating qualified leads and
marketable data for the advertiser.
EMERGING AFFILIATE MODELS
Email Remarketing (e.g. VeInteractive) Email remarketing is
an emerging affiliate model which requires simple integration
and intelligently re-engages with consumers via email who have
abandoned the online transaction process. The emails use data
from the consumers abandoned transaction to re-market the
offerings, sometimes offering additional discount or up-selling
complementary products.
Display Retargeting (e.g. MyThings and AdJug) Display
Retargeting is an affiliate model which enables advertisers
to re-engage with a user around the web after they have left
the advertiser’s site. Extensive inventory space enables feed
based dynamic banners to be used as the customer continues
their journey to show contents of their abandoned basket, for
example, to encourage a return to the advertiser’s site.
Mobile This is an area of growth which is fast emerging in
affiliate marketing. Mobile has opened the door for affiliates to
work with search, display and apps. Existing affiliates such as
Quidco and VoucherCodes.co.uk have developed their mobile
offering by introducing tools such as downloadable apps.
Geo-targeting gives advertisers the opportunity increase footfall
into their offline stores and essentially combine their offline
and online marketing activity. Advertisers are encouraged to
develop mobile friendly sites in order to make the most of this
channel.
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Understanding and
Working with Affiliates
THE NATURE OF
AFFILIATE/ADVERTISER RELATIONSHIPS
Owing to their revenue sharing model, affiliate/
advertiser relationships foster shared success.
They should thus be relationships of collaboration.
It is the level of collaboration between both parties
which will ultimately decide the level of success
of an affiliate program. Advertisers should thus
exercise transparency about other promotional
activities they are running. In order to keep affiliates
abreast of merchant deals, promotions and general
activities, advertisers could, for example, circulate
a newsletter sharing marketing calendars, conduct
promotional activity through a network or provide
detailed information to content affiliates to facilitate
article write-ups. By sharing their marketing
calendars, for example, affiliates can then identify
opportunities for collaboration i.e. if an advertiser
is running a TV campaign, an affiliate could identify
this as a good time to promote the program as this
would be likely to boost sales further. Advertisers
need to collaborate to a certain extent with all of their different
publishers by being tactical and offering different deals for
different affiliates to get the best of all worlds. More complex
technical solutions such as retargeting will need enhanced
collaboration between advertiser, affiliate and network. A level
of visibility should be maintained throughout the relationship
though collaboration doesn’t always have to be facilitated face
to face.
With a host of publisher models available, in order to identify
which of those will generate the largest return for an advertiser,
a ‘test, evaluate and refine’ approach is advised. An advertiser
should operate a level of flexibility in regards to their program
and demonstrate a willingness to respond to an opportunity.
An affiliate program should evolve throughout its lifetime,
corresponding with the performance of its current affiliate
activity. Advanced data analytics within affiliate marketing help
to determine the performance levels and return on investment
of affiliate activity and identify which affiliates are generating the
most income with what product offerings at a point in time.
HINTS AND TIPS TO LOOK FOR A GOOD AFFILIATE
PARTNER
Advertisers should ask themselves ‘Who are the affiliates that
best suit my brand and what promotions do I want to do with
them?’ A long term affiliate plan should also be devised in
conjunction with partner selection.
Select partners befitting of your brand. It is wise for advertisers
to partner with affiliates that share their own brand values.
In order to make this connection, advertisers should be
transparent about their objectives and facilitate open
communication with affiliates so that they can do the same.
Networks have a multitude of experience and can recommend
the best suited partners for an advertiser’s program.
Consider your overall marketing plan.
An advertiser should ask themselves
“Do we want pure sales/ a certain type
of sales/ leads/brand engagement”
They should consider how this affiliate
activity plays a part in their overall
marketing mix. Advertisers should
make sure any limitations within the
program are defined in their Terms
and Conditions, then organise their
affiliate activity and reward accordingly.
Know your audience. Conduct the
relevant market research at the
beginning of your program and
match affiliates accordingly (niches,
complimentary products, specific
demographic). As the program progresses,
observe your audience reach and behaviours
by engaging in trailling e.g Email testing and
experimenting with messages and different creative. Basket
analysis within affiliate marketing can help an advertiser get
to know their online audience and their behaviours and which
affiliates are more successful at selling certain products.
WHAT CAN YOU EXPECT FROM AFFILIATES
A successful affiliate program will generate increased revenues,
increased number of sales and increased traffic. Affiliate
activity can also generate leads for future marketing activity and
facilitate brand exposure. The success of a program does not
solely rest on the shoulders of affiliates, however. In addition
to affiliate contribution, there are also requirements from the
advertiser in order to achieve growth.
A responsive market that is neither too broad nor too narrow
should be clearly defined by an advertiser before partnering
with affiliates. The better a advertiser knows their market- the
demographic, online behaviours and what spaces their market
occupies online, the better they can target the right affiliates.
Without this understanding, affiliate earning potential could be
limited from the start if the wrong partnerships are formed.
Encouraging industry best practise from your affiliate partners
is advised. Affiliates need to ensure that they are compliant with
the EU e-Privacy Directive to protect the advertiser’s brand. It is
also preferable for an affiliate to have their own quality control
measures in place to maintain a secure and fully operable site.
Transparency and open communication helps to develop
stronger relationships with affiliates. Dependant on an
advertiser’s level of investment (time and resource) with an
affiliate, they can expect varying levels of engagement. If an
advertiser has a high level of engagement with an affiliate,
they may be willing to experiment with the placement of
merchant ads and banners for example, in order to examine
which placements generate the best return. High levels of
engagement with affiliates may also result in some affiliates
developing site features which are complementary to
advertiser offerings.
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Managing and
Optimising your Program
ETIQUETTE FOR ADVERTISERS
In order to establish and sustain successful affiliate programs,
advertisers should be respectful to affiliate relationship
etiquette. Advertisers, in effect, need to build an ‘affiliate brand’
in relation to how they are perceived by partners in the affiliate
industry. The IAB have drawn up an Ethical Merchant Charter
(EMC) to help encourage more open communication from
advertisers and promote ethical and reputable behaviour within
the industry. EMC encourage advertisers to give reasonable
notice periods for amended terms and conditions, offer reasons
for rejecting affiliates to a progam and take steps to conduct
business with an appropriate level of transparency.
MANAGING YOUR AFFILIATE PROGRAM
- HINTS AND TIPS
STARTING OFF ON THE RIGHT FOOT
Pay affiliates on time. An advertiser should be operating an
efficient payment model where all affiliates are paid on time.
Orders should be approved in a timely manner and reasons should
be given to affiliates for every cancellation of a sale whether it is
due to a returned item, duplicated order or breach of campaign
terms and conditions. There is a need to explain why commissions
are reversed or reduced in each scenario. Affiliates should be
notified of the validation period for sales and validation criteria on a
program before joining. A short validation period is more attractive
for affiliates because making affiliates aware of their return will
encourage affiliates to reinvest time and necessary spend on
developing that partnership.
Optimise your site. The advertiser’s landing pages (see Jargon
Buster) should be optimised in order to maximise conversions. This
involves maintaining working links to up-to-date information and
functioning pages. Activities such as removing any phone numbers
from web pages will prevent any leakage from the channel and allay
any affiliate concerns. Deep links could be added to improve the
user journey. Ensuring optimisation of their website will protect an
advertiser’s brand and reputation as an affiliate partner. With the
increasingly relevance of mobile, advertisers should optimise their
site for handheld and tablet devices and ensure the correct tracking
is in place.
Give reasons for rejection. Affiliates arguably have the most to
lose within affiliate/advertiser relationships with many of them
being smaller enterprises and sole traders who rely heavily on their
affiliate commissions. An advertiser should notify their affiliates of
when they will be removing them from the program and give them
reasons as to why to demonstrate a level of respect that would be
expected of any business relationship. Affiliates are not disposable
partners and it is important to remember that the start-up affiliate
of today could be the top performing affiliate of tomorrow.
Incentivise your affiliates. Merchants should consider what is
attractive to incentivise both their affiliate partners and their
site visitors. Generally, the higher the CPA, the more affiliates
your program is likely to attract. However, it is worthwhile for
an advertiser to be dynamic in their approach to commissions
by avoiding setting one blanket rate. Commission rates can
also be strategically raised around seasonal peaks or to attract
new affiliates to encourage boosts in promotion of the program.
Networks can also assist with setting competitive commission
rates through benchmarking against other similar programs. Non
monetary incentives such as offering exclusive deals or free products
and services to top performing publishers are also an intelligent way
of incentivising an affiliate base. Relationships with affiliates help to
inform which approach would appeal most to partners.
Be transparent. Key business objectives should be communicated
by the merchant at the beginning of the relationship. Regular
contact via email, face to face or over the phone should be facilitated
throughout the course of the program. Advertisers should aim
to keep their affiliate base up to date with new opportunities,
commissions and promotions to maintain their engagement. Affiliate
terms and conditions should be clearly outlined for all publisher
types at the outset. If an advertiser is updating anything on their
affiliate program, they should notify affiliates. Though affiliates are
generally flexible by nature, a reasonable period of notice should
be given as warning of any changes that may affect the terms and
conditions of the affiliate partnership. Affiliates can then ensure that
they are compliant by the time the proposed changes take effect.
Implement security. A merchant should either screen affiliates or
elect a network to do this on their behalf before they are accepted
onto a program to ensure IAB guidelines are being adhered to.
Update Creative Regularly. An advertiser should regularly update
their creative and product information to keep company information
displayed by affiliates, up-to date and accurate. Product feeds (see
Jargon Buster) should also be regularly updated when working with
content sites.
Optimising your program using data. A merchant should be
looking out for what is selling, where they are buying from (through
behavioural and demographic analysis) and what device they are
using as mobile in ecommerce becomes more prominent. Thanks
to the internet, brands have never known more about the people’s
purchasing habits. Affiliate marketing can inform a picture of
activities and channels that motivates a consumer to put their hand
in their wallets. Product Level Tracking is a tool which identifies
the popularity of product lines and gives an indication of not only
top performing affiliates but top performing products and product
ranges. An advertiser can intelligently use data from tools such
as Product Level Tracking to inform future promotional activity
on a deeper level. For example, an advertiser may decide to raise
the commission levels when running a sale on a particularly well
performing product range to further drive sales volumes. Effective
measurement isn’t just about reporting on how well you did,
but also on how successfully you apply what you learned.
6
Managing and
Optimising your Program
THE ROLE OF A NETWORK
An affiliate network fulfils all the fundamental affiliate
activities outlined in ‘Hints and Tips’ and ultimately, networks
have developed trusting relationships with a well established
publisher base over the years. Using a network enables all
an advertiser’s affiliate relationships to be dealt with from
one point where communication, reporting and payment
is centralised. Affiliate networks operate a stable tracking
platform that offers scale and reliability. The economies of scale
achieved by a network mean than even lesser known brands
have the opportunity of increased exposure with top performing
affiliates.
Depending on the needs of the advertiser, a network can
provide differing levels of service from a self-managed solution
to a bespoke consultancy offering. On a fundamental level,
a network manages technical implementation, the tracking
of cookies to determine payouts, validation of sales and the
payment of affiliates. Depending on service level, networks
perform varying levels of analysis and reporting for an
advertiser utilising tools such as Product Level Tracking to
inform strategy. From their years of data collation, networks
have the ability to benchmark and forecast industry trends
encompassing not only an expert understanding of affiliate
marketing, but a broader knowledge of digital marketing on the
whole. Networks are thus the first to identify new opportunity in
the industry and are often approached by new affiliate business
models first hand.
All advertisers on a network have access to their platform
technology through which programs and campaigns can be
managed and monitored. There are essentially two service
levels available from an affiliate network. The first level is
self-managed where an advertiser utilises the network’s
technology, affiliate network and billing system without any level
of consultancy. The second level is account managed where an
advertiser receives full bespoke consultancy from the network.
The level of experience networks have mean that they are also
knowledgeable of the performance of competitor programs and
can thus advise an advertiser accordingly on all practical and
strategic levels of a program.
Jargon Buster
De-Duplication - The logic and technology that rewards
one affiliate partner over another to ensure than an
advertiser does not remunerate more than one partner for
the same activity.
Landing Page - The page to which a user is directed
when they click on an affiliate link- This page can be further
deeplinked closer to the point of conversion so additional
steps are not added onto the user journey.
Product Feed - A mechanism for users to receive updated
data from sources usually generated by the online retailer.
Ideally these files of information should include real time
data on product information, categorisation, product image,
price etc. They are usually a CSV or XML file. It is key to
include all necessary product information in the right format
in product feeds.
Incremental Sales - New customers or actions
generated by affiliate marketing activities that would not
otherwise have been generated.
RESOURCES
For UK and international enquiries: Email us
IAB Affiliate Marketing Council
Follow us on Twitter @affilinetuk
Affiliates 4 U Forum
For more information about affilinet
and the marketplace, visit our blog
IAB Product Feed Guidelines
IAB Affiliate Marketing Council Ethical Merchant Charter
- Guidelines produced by IAB.
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