Written by
Chris Chan
Affiliate marketing continues to grow; Statista recently projected affiliate marketing will reach $8.2 billion in 2022, up from $7.4 billion in 2021.
Building your brand’s affiliate program is key to maximizing profitability in 2022 and beyond. So what is it, how does it work, and why does your brand need it? In this post, we’ll dig into the following questions:
Affiliate marketing is a performance-based marketing channel that helps drive purchasing decisions without upfront advertising costs.
As a marketing channel, affiliate allows publishers, creators, influencers, or any other third party to facilitate a customer’s purchasing decision.
For example, a potential customer can come to a publisher site like Rakuten and be prompted to click the brand’s affiliate link for a cash-back discount.
Affiliate programs can also increase long-term customer engagement by incentivizing existing customers to join loyalty programs or subscription services.
Brands and businesses can create their own affiliate program or join existing affiliate networks like Rakuten, Impact, or CJ to promote and track sales.
Affiliate marketing strategy can be used across channels, but its success depends on individual publishers’ ability to drive conversions for a brand.
Affiliate partners take on all the risk associated with front-facing content while brands only have to pay when a purchase is actually made, which often makes affiliate more cost-effective than both CPM and CPC tactics.
Technically, there are two types of affiliate marketers: publishers and brand marketers.
Publishers create content, build word-of-mouth networks, and find their own unique methods for driving high-quality traffic with strong purchase intent to a brand’s affiliate offer.
Most brands, networks, and affiliate programs will provide publishers with custom codes and links to give to their audiences to facilitate purchases.
Brand Marketers are in-house or agency experts who arrange deals with publishers, choose appropriate affiliate networks or programs and develop winning strategies to maximize a brand’s revenue.
The best brand marketers will audit a company’s current programs and find pain points along the customer journey that can be solved by affiliate marketing. Such challenges can include abandoned carts, high bounce rates on landing pages, and competitor traffic.
Brand marketers also build program-specific strategies while managing third-party promotions and publisher material to ensure quality alignment with the company’s brand image.
Related: Proven Affiliate Strategies to Unlock Growth in Q4
Put simply, without an affiliate program, your brand is missing out on potential sales and customers.
One group brands can effectively target with affiliate marketing is abandoned cart users. 70% of users who abandon a cart can be targeted and converted through affiliate solutions provided by publishers.
For example, a user who previously added items to their cart but failed to complete a purchase may be served affiliate content from strong publishers like CNN or or the New York Times on a pay-for-performance basis.
But it doesn’t stop there.
Affiliate can operate across channels in almost any part of a user’s path to purchase, using content ranging from editorials to influencer posts to coupon sites. Brands can even generate affiliate sales through coupon sites like Honey and RetailMeNot.
Affiliate programs do more than sweeten a deal for consumers; they bring in untapped and undiscovered customers for your products by associating your brand with your chosen publishers.
Higher Potential ROAS: Affiliate payouts almost always occur upon conversions, not clicks or views, which means your ROAS is going to be generally higher on affiliate than most other channels.
The primary cost associated with affiliate is publisher commission. On CPC you could be paying $1/click, but conversions fluctuate; in affiliate, you’re only paying after the conversion happens.
Incremental Payouts: The structure of affiliate leads to steady growth over time without expensive start-up or ongoing costs.
Few Risks, Big Rewards: When using affiliate programs, brands can mitigate the risk associated with customer acquisition by offloading the heavy lifting to publishers.
Publishers will also decrease the cost of creating custom content (if a brand has effective program guidelines).
Overall Marketing Effectiveness: The benefits of affiliate can be seen across channels. For example, affiliate deals can be used in influencer campaigns, in retargeting ads, and on specific email segments.
Want a step-by-step guide to building a standout affiliate program? Click here to download our free eBook.
Affiliate marketing and affiliate programs often have an unwarranted bad rep. Here are some top misconceptions and why they don’t actually reflect the power of good affiliate marketing:
Misconception #1: Affiliate is Scammy
Let’s be honest: the internet is littered with low-quality affiliate links. But this doesn’t define affiliate as a whole.
Affiliate management teams must pick the best-of-the-best partner mix for specific brands to ensure partnerships do not dilute brand reputation.
Appearance matters when it comes to choosing affiliate partners as well. How a publisher, creator, or any other purchasing mediator looks should drive customers toward, not away from, brands.
Misconception #2: Affiliate Only Works With Coupons and Decreases Profitability
Running coupons with affiliates is a popular brand tactic and a strong offer strategy for engaging affiliate audiences. However, it’s not the be-all-end-all of affiliate marketing.
There are a number of other levers, including cashback and custom editorial content, which have proven to drive significant revenue.
Affiliate coupons are just one of the ways brands can partner with publishers. Coupons are typically not necessary with lower-funnel publishers, which gives brands more control over messaging.
Misconception #3: Affiliate Doesn’t Provide Measurable Incrementality
Contrary to popular belief, affiliate marketing can be an incredible driver of both measurement and incrementality.
In affiliate marketing, you partner with who you want, meaning you can choose network partners like Impact and Rakuten that provide incremental measurement analytics that fit your brand’s needs.
Recent developments in consumer journey reporting and commission-splitting allow you to lean more heavily on publishers that are able to hit your targeted KPIs.
A good affiliate program will educate brands on the business plans of different affiliates.
It’s up to you to decide on who you want to partner with and what’s important to your program/brand.
Related: What Is Lifecycle Marketing? Creating the Path to Loyal Customers
Brands can impact all parts of the funnel with affiliate marketing. Where it lies on your customer’s journey depends largely on your industry, business goals, and the type of affiliate partners in your program.
Some partners can introduce your brand to shoppers and drive traffic, while others are more focused on driving conversions.
Savvy online shoppers who are doing their background research before making purchasing decisions are likely to use affiliate marketing.
These shoppers prefer to read recommendations for products and scan for coupon codes before committing to a purchase.
Clever shoppers require incentives before making informed purchases. As a result, affiliate marketing tends to be the best bottom-of-funnel strategy for securing a purchasing decision.
Affiliate is ideal for brands who are open to affiliate-specific negotiation/optimization levers such as exclusive offers, vanity codes, and TM+.
It’s also optimal for businesses with an active performance marketing team and a history of data for efficient placement optimization.
As a channel, affiliate tends to work better with brands that allocate a flat spend budget for the highest-exposure opportunities and brands that run consistent newness or promotions that facilitate constant communication with publishers.
Preferably, a brand should understand how affiliate fits into business KPIs and have a vested interest in establishing meaningful partnerships while listening expertise around what publishers are projected to drive growth
Besides the above considerations, ask yourself these questions before diving into affiliate marketing:
1. Do you have existing site traffic/brand awareness?
If not, this is something you can build, but it will slow down the launch and scale process of affiliate programs.
2. Do you have the ability to have 10+ offers or CTAs?
These can vary from evergreen email sign-ups, to free shipping, to category or collection callouts, to product launches. Without a list of CTAs, a publisher will have fewer chances to earn traffic and conversions for your brand and will be less likely to partner with you.
3. Does your brand have a variety of products?
Without a variety of products, it is difficult to scale affiliate marketing. It will take more robust recruitment and promotion strategies to run an effective program.
Usually, a consumer finds an affiliate and clicks on their content, taking them to your site. This process is tracked using affiliate tracking links.
Next, a customer completes a purchase or takes a desired action (“converts”) on the advertiser’s website.
Finally, an affiliate network tracks the conversions and provides payment methods for the advertiser to pay the publisher a commission (CPA).
Want a step-by-step guide to building a standout affiliate program? Click here to download our free eBook.
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