An Introduction to Affiliate Marketing for Merchants

Affiliates are as old as the internet itself, but in recent years they’ve become an incredibly important — if not essential — stream of revenue for many ecommerce businesses. A staggering 90% of advertisers report that affiliates have become an integral aspect of their overall marketing campaigns, and the value of the overall market is expected to hit a record $6.8 billion by 2020, according to Digita Global.

Clearly, affiliate marketing offers a huge number of benefits for ecommerce sellers. Here, I'll be explaining how they work, and what you can do if you'd like to get started. Remember, this is only intended to be an introductory guide, and I've only shared a few basic techniques here. So, if you'd like to learn more, take a look at our complete guide to affiliate marketing.

What is affiliate marketing, and how does it work?

Affiliate marketing is a promotional model that connects merchants with independent marketers (known as "publishers") who are willing to promote a merchant’s products. If a user engages with the affiliate, the publisher shares and completes a valid transaction — usually in the form of a product purchase — then the publisher will receive commission. In a nutshell, affiliate marketing connects merchants with a product or service they want to sell with marketers who can get that sale.

When the user clicks on the affiliate, they’re sent to the relevant page on the merchant’s site. This creates tracking cookies in the user’s browser. The merchant can use this data to track which publisher referred them and award the commission they’re owed.

There are a number of different types of affiliate marketing. Some of the most common techniques include:

• Cashback sites: These sites encourage users to visit websites via links in exchange for a share of the affiliate commission.
• Onsite content: This is a form of marketing where affiliate links are including within the content of a website — for instance, in the form of product reviews, round-ups, competitions or buying guides.
• Display advertising: Sometimes sites will display a banner advert, in exchange for commission for any sales that result from it.
• Social media, including Twitter, Facebook and Instagram: With this sort of affiliate marketing, a publisher with a social media platform will share an affiliate link or code with their followers, usually in exchange for commission for every valid transaction.

To an extent, affiliates are about trust. When you work with an affiliate publisher in this way, your business gets the chance to connect directly with someone else's audience, and if the publisher has established trust with their followers, then it could net you that sale. For instance, if a fashion influencer with thousands of followers shares one of your products via an affiliate link, then there's a strong chance that some of them will be compelled to buy your products because they value the influencer's recommendations.

What benefits does it offer merchants?

By far the most appealing thing about affiliates for merchants is that it's a performance-based system. That means the merchant only pays a fee when the affiliates deliver a specified customer action, typically in the form of an online purchase. This can make affiliate marketing very cost effective - unlike other forms of online advertising, like PPC – as you're only paying when you secure a conversion, or another profitable transaction. And, because you get to decide which types of transaction are valid, and also set the commission rates, it allows you to control and protect your profit margins.

While the pay-per-sale aspect is the biggest draw for most ecommerce businesses, there are a number of other benefits, too:

• It’s relatively low maintenance: While exactly how much time and energy you need to devote to your campaign will depend on which model you choose, it does tend to be a relatively low maintenance form of digital marketing. This is because the publisher does most of the actual marketing work on your behalf.
• You can glean valuable marketing insights: The performance of your affiliate strategy can tell you about other aspects of your marketing, like which areas of your campaign are driving the most conversions. You can then redouble your efforts in that area.
• You can reach valuable new audiences: Affiliates work on lots of different channels, from social media platforms to cashback sites. That means you can gain access to all sorts of new audiences.
• You gain exposure: Affiliates provide fantastic brand exposure, and those ads are still getting your name out there, even if they don’t lead to a conversion every single time.

Kickstarting your affiliate campaign

A successful affiliate marketing strategy requires software, time and expertise. So, firstly, you'll need the tech to handle link generation, conversion tracking, and commission payments. Secondly, you'll need someone with the know-how to design, execute, and manage your strategy.

Exactly how you decide to run your affiliate campaign will depend on a number of factors, like your budget, goals, and how much time you can devote to managing your strategy. But, generally speaking, you'll have three options:

• Sign up to an affiliate network and then manage the program yourself
• Invest in software for affiliates and then managing it yourself
• Hire an agency to execute your strategy for you

Now you know a little more about affiliate marketing, you should have a better idea of whether or not it could benefit your marketing strategy.