Performance marketing is an encompassing term for online advertising programs whereby a retailer’s advertising partners, also called affiliates, are paid when a specific action, such as a sale, is completed. Affiliate marketing is a subset of performance marketing. Often the terms are used interchangeably. And the lines are rapidly blurring as affiliates leverage more online marketing techniques to drive conversions.
In affiliate marketing the advertiser pays the publisher of its advertisement a commission after-the-fact and only if a potential customer takes a defined action, such as making a purchase or signing up for a newsletter. Affiliate marketing is based on actual results. This makes all affiliate marketing efforts measurable and trackable down to the mouse click. It is also what makes performance marketing reliable and predictable in terms of revenue projections.
This all sounds like a win-win for your marketing efforts and the affiliates in your program. And it is. However, before you get started, you need to understand that performance marketing requires a long-term commitment (6 months to a year) and you’ll need to evaluate your business to know if it’s truly a good fit.
Benefits to Consider Before Launching an Affiliate Program
The Types of Businesses Can Benefit
Affiliate marketing works best for those focusing on business -to-business (B2B) or business-to-consumer (B2C). This type of online marketing works very well for nearly every vertical. Those selling computer and electronics, apparel, home and garden, pets, travel, automotive, Internet service providers, movies and music, software, and more use this channel. Businesses looking to generate leads (such as financial services, dating services, and insurance) have also embraced performance marketing with great success.
Affiliates are Motivated
Because affiliates are incentivized and compensated using commissions, they are highly motivated to get customers to take action (such as sign up for a newsletter, purchase a product, sign up for email, etc.). It’s a huge benefit to have a stable of affiliates working to promote your products.
Affiliate marketing also offers some incremental branding opportunities. That’s not the main focus of this type of online marketing. Although many affiliates use social media and paid advertising as part of their over efforts to promote your brand and you may see a boost in awareness. In addition, many affiliates are able to reach audiences that your business may not be getting to.
No Geographical Boundaries
Because affiliates are not geographically bound, you will be able to have affiliates across the country. These affiliates can sell products to anyone on the Internet. Therefore, you should have a product that you sell nationally or globally. However, local business can use affiliates that are savvy in highly targeting customers to make the affiliate channel work for you.
Organizational Factors When Deciding if Affiliate Marketing is Right for Your Business:
Existing Digital Efforts
Starting an affiliate program will be significantly easier if your company is already doing eCommerce and is generating decent revenue. Having other digital channels running will make it even easier. If not, it’s going to be hard to sustain a new affiliate program and advertising channel. Affiliate marketing requires some start up costs.
Before getting started you’ll need an affiliate manager (in-house or hiring an outside program manager at a reputable agency with affiliate experience). You’ll also need the resources/buy-in of your technical and creative departments. Everyone needs to understand their roles and how they will participate in making the program a success.
Basic Online Marketing Knowledge
Understanding other methods of online marketing will also help get your program off the ground quicker. Having a handle on digital marketing disciplines (SEO, PPC, CPA and CPM) will minimize your learning curve.
A Holistic Approach
Also consider how affiliate marketing will be integrated with your existing marketing channels. You don’t want the affiliate channel to be operating in a silo. Online marketing works best and delivers the most success when there is a holistic approach.
Optimized Consumer Experience
In addition, your business must already have a solid eCommerce platform and shopping cart already in place to attract good, reputable affiliates to join your program. Affiliates won’t take chances on retailers that have sketchy policies for buying and returning products. Affiliates want consumers referred to your website to make secure purchases. They also want to ensure a good overall shopping experience. Problems on your site will ultimately reduce the conversion rate.
Carefully evaluate all these factors. Only then will you be able to determine if affiliate marketing is a viable marketing channel for your business.