Phillip Gibbs How Affiliate Marketing Works

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THE ANATOMY OF AN AFFILIATE PROGRAMME AND HOW AFFILIATE MARKETING WORKS

Affiliate marketing is an incredibly powerful tool to use as an entrepreneur or an SME owner who is looking for new streams of revenue with minimum risk involved. Because it is a performance-based practice, the business only pays when the agreed results are achieved and the sales are made.

Business owners, regardless of industry or revenue level, should consider making a shift from spending their advertising budget on “lead generation” to investing it into performance marketing and affiliate partnerships. The latter allows you to be more efficient by working smarter rather than harder. It also maximizes the online opportunities without having to invest the extra time to convert the leads through an in-house sales process.

On average, a tailored affiliate program supported by a network of relevant affiliates and a strong manager will typically increase your revenue by 25-50% a year. So for example, a physical product business or, an online ecommerce store with a 500k yearly turn over can make up to 250k extra a year just by having an affiliate programme.

Affiliate marketing has been used for many years by businesses in the form of referrals. However, with the arrival of the Internet the opportunity to reach more people, quicker, grew exponentially and thus affiliate marketing was established as a marketing practice. Some of the first companies to use it in anger were CDNow.com and Amazon.com. CDNow.com started BuyWeb program in the fall of 1994 which was followed by Amazon’s Associates Program in the summer of 1996. Amazon later bought out CDNow.com and they claim to, now, have a network of over 1 million associates worldwide.

Along the years the market started seeing an increasing shift towards more and more complex affiliate programs being put in place and used by business owners, however it all revolves around the same concept: the merchant pays an agreed commission to a third party also called affiliates for generating new business on behalf of the merchant in an online environment.

A closer look at the process reveals the following “customer journey” through the affiliate program.

For example, a chiropractor has been struggling to fill in appointment slots for particular days so the first step is to devise an ad to promote that. The affiliate(s) will post that ad on their own website with a clickable link that connects it to the merchant’s site. The customer will then click the ad or link, which will take him or her straight to the purchase page of the merchant. At this point, the customer buys and books a suitable appointment with the chiropractor. The details of the transaction will then get recorded by an affiliate network, which in turn is confirmed by the merchant as a valid sale.

This is what generally happens in an online affiliate programme, however, it is important to have an in-depth understanding of all the individual elements that build this ecosystem in order to find relevance in the practice from a business perspective. An affiliate programme typically consists of affiliates, sub-affiliates, super-affiliates and the affiliate network. They are all interconnected and each plays a crucial role in the delivery of a successful affiliate programme. The following looks at the importance of each piece of the puzzle through a business lens.

What are affiliates?

Affiliates are often called affiliate partners or associates and they can be either individuals or other businesses that are on the front line of your affiliate programme. They are the bread and butter of your sales, as they will invest their own money into promoting your products or services in return for a commission.

Your affiliate partners are extremely valuable assets as they invest time, money and effort into building an online platform and presence that generates enough traffic which can then be converted into sales for the brand they are promoting.

They usually have similar interests and areas of expertise as the brands they are supporting. For example, a dental practice might have an individual who is studying dentistry as an affiliate promoting their services or a yoga teacher might be an affiliate for a company that makes and sells yoga mats.

It is crucial for the success of an affiliate programme to recruit and train affiliates that are the right fit for the brand and who understand what makes a good advocate in order to maintain and build upon your brand equity alongside sales.  To learn more about how to research and recruit the right affiliate partners pop over and join my FREE Facebook Group ‘Partnership Profits’ – we have lots advice and support to help you get going.

What are sub-affiliates?

The second layer of a program reveals a subcategory of affiliates, which are called sub-affiliates. They are people who have joined your program as a referral from an affiliate partner. This makes them a second tier affiliate and some programs will often pay both on a two-tier commission basis. The benefits of having a second tier in your program translate into more people working towards achieving your business goals and therefore you will increase your revenue quicker. The downside to this structure is that you will have more affiliates to manage and a much more complicated commission structure to work out which translates into more time being invested in managing the program.

What are super-affiliates?

As we delve deeper into the inner workings of an affiliate program we discover the super-affiliate. They are highly skilled in creating and running extremely successful campaigns, which makes them the biggest earners in the industry. These professionals usually have a huge following and they can single-handedly generate the highest percentage of profits within a program. A super-affiliate refers to individuals or companies that bring immense value to a campaign and therefore are in a position to negotiate custom rates for their commission.

As the business owner it’s important that you understand how these ‘super-affiliates’ operate so you can help them help you!

It is common practice for super-affiliates to organize themselves or seek support in one of the following team structures:

1] Solo Affiliate

These are the super-affiliates who prefer to work alone. They take on and manage the workload themselves from start to finish and they will often have to fulfil many different roles within the program. The advantage of this setting is that there is no one to manage and therefore not have to worry about checking anyone else’s work but the disadvantage is the very real possibility of burning out and limiting their earning potential due to that.

2] Solo Affiliate + Virtual Assistant(s)

This structure delegates the low importance assignments, that are often time-consuming, to part-time assistants while the super-affiliate will focus all their time and energy on high importance tasks. This is fairly cheap to do and manpower is easy to find however the downside is that employees on part-time contracts tend to be less loyal and committed to the job so they may well have to deal with a high turnover.

3] Affiliate Team Collaboration

Teams work great in most business settings due to their collaborative nature. Having a partner “in crime” brings reassurance and a level of accountability that keeps affiliates on the right path. The combination of two personalities and two sets of skills along with the strengths and weaknesses that a team brings to the table is an advantage for any super-affiliate. The only downside to this is if a team is based on an original friendship, these can be inclined to breakdown suddenly with little to no notice leaving a significant hole it your business.

4] Affiliate Mentor and Apprentice

This is where a well-versed super-affiliate who has already established their position in the market takes on a protégé and teaches them how to become a super-affiliate themselves and how to run their own campaigns. This is a mutually beneficial setting, as the apprentice will typically earn a wage and a commission on top of the knowledge and hands-on experience of running their own affiliate campaigns. The super-affiliate gains a professional of their calibre and the apprentice a set of skills to create their own programs.

5] Affiliate Companies

These are big players in the industry that have their own teams of people who can fulfil many roles that are needed at different stages of an affiliate campaign. Their strength in numbers means that they dominate certain niches and can deliver results faster than individual affiliates. They will often take on and manage the maintenance of the program and the testing of the results.

What is an affiliate network?

An affiliate network is another key element in the chain as they are the connectors between the affiliates and the affiliate programs. They provide the opportunity for people to become affiliates and join existing programs alongside offering maintenance and results-tracking services for those programs.

These online entities are particularly helpful in providing the merchant with all the tools they need to run their own programs.

Affiliate networks will charge the merchant a fee to join and will also negotiate a commission structure for their affiliates. The main benefits of “employing” an affiliate network are:

  • the access you get to a more relevant pool of affiliates that will match your business needs better;
  • an array of tools and systems that will work for you without you, the business owner, having to allocate manpower to run it;
  • and the industry authority bias which you will be benefiting from by association.

It is clear that affiliate marketing is increasingly becoming the go-to practice for businesses that want to generate more sales and be successful online. So if you are a business owner or an entrepreneur who is looking for a cost-effective way to gain more customers, who would like to have a wider reach and increase their brand visibility through a low cost and low-risk investment you might want to consider affiliate marketing.

The challenge will seem daunting at first, especially if you are not versed in the art of affiliate marketing. This is why it is important and even wise to seek support and the expertise of marketing professionals who are very successful and achieving great results for their clients.

To help you with all things “Affiliate Marketing” if you’re not already a member please pop over and join my FREE Facebook Group ‘Partnership Profits’ – we have lots advice and support to help you get going, along with FREE guides, FREE video training and weekly LIVE Q&A sessions.

See you there…

To your success, all the best

Phillip Gibbs Signature

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