What is affiliate marketing?

You may have come across the term affiliate marketing, or performance-based marketing when you have been searching for methods to improve your online marketing for your brand and wanted to know more about it, or you were searching for ways to increase your revenue as an affiliate.

With the introduction of the internet, advertisers realised that they could increase their revenue by rewarding websites who refer customers to your site that go on to buy something from you. In essence, this is affiliate marketing or performance-based marketing. An advertiser rewards a website a set amount of commission for each customer that the site refers who goes on to make a purchase.

Increasing revenue is not the only reason to utilise affiliate marketing. You can use it to increase traffic, increase your conversion rate, create brand awareness and more - it depends on your KPIs, and it can help your brand reach your goals.

How does it work?

It is essential to know that affiliate marketing is a relationship-based channel between three different groups - the advertiser, the publisher, and the consumer. The affiliate network plays an important role too.

The Advertiser

If you're an advertiser, it means that you have something to sell (either a product or a service), and you want to use affiliate marketing to boost your sales. Products can include anything from electronic goods through to fashion, and services can consist of flights, or meal delivery services.

The Publisher

The Publisher is the website who advertises a product or service and earns a commission when their visitor goes on to the site and makes a purchase. There are so many different types of affiliates including influencers, bloggers, or loyalty websites and more non-traditional affiliates too, including paid search, on-site tech solutions and remarketing to name a few.

The Consumer

The consumer is the person who buys something from the advertiser by clicking on an affiliate link or banner, depending on the website that they have visited.

What does the affiliate network do?

The affiliate network is a third party that is responsible for tracking transactions and attributing the correct affiliate to the sale. There are other benefits to using an affiliate network.

If you're an advertiser or an affiliate:

• Tracking is done by the affiliate network, which means an advertiser doesn't have to build a system themselves and the affiliate doesn't need to worry about tracking either because an impartial third party does it.
• Affiliate payments are processed by the affiliate network which takes away some of the work from the advertiser, and it makes it easy for the affiliate to track successful payments.
• They act as a third party in case of disputes
• For advertisers, the affiliate network has a big pool of affiliates ready to promote their brands

For advertisers, the affiliate network has a vast marketplace of affiliates ready to promote their brands.

The affiliate network attributes the affiliate to the sale using a link, a pixel which gets installed on your website, and a cookie.

The link

The link allows the affiliate network to accredit the correct sales to the right affiliate. When an affiliate is logged in and accepted into your program, they will have access to any creatives you choose to upload or a text link. The link is made up of different components.

The pixel

Installing the pixel onto your website ensures that the affiliate network is notified whenever a sale is generated via an affiliate. Setup usually is pretty straightforward with the tracking code or pixel placed on the Thank you page. Your affiliate network provides instructions on how to do this and depend on which cart you are using.

The cookie

Cookies are files stored on your computer, and they hold a small amount of data like login information, shopping carts or the language you want to view a specific website.

You might notice that when you have been browsing a website looking for something, (for example, a pair of shoes), then you will start to see ads for those shoes when you're browsing the internet. The reason this happens is the cookies on your computer. Alternatively, you clicked 'yes' when you got asked if you wanted the website to remember your username and password.

A cookie doesn't ever collect any personal information, for example, photos or bank information. Only the data set by the website you are on, so it varies depending on the site.

When you're browsing the internet and go to a website, a search is made associated with that site to see if there is already a cookie there.

A cookie is created when you visit a new website, and the page has finished loading. Some cookies delete automatically after a period of inactivity, and some expire.

The process

• The affiliate shows their visitor an ad for the advertiser on their website, which includes an affiliate link. The ad can be displayed in many different ways and can consist of banners, blog posts, or text links, depending on the website itself.
• The consumer clicked on the ad and is taken to the merchant's website via a tracking link. This tracking link enables the affiliate network to see which affiliate refers the sale so that the correct affiliate gets paid.
• The customer buys something on the website.
• The affiliate network records the purchase and some of the details of the transaction.
• The advertiser confirms the purchase as a valid sale.
• The transaction is credited to the affiliate who referred the sale.
• The affiliate is paid for their sale.

Steps to starting an affiliate program

Once an advertiser has signed up to an affiliate network as an advertiser, there are a few things they need to do before their program is available to the affiliates.

• The most critical step is to install the tracking pixel on the 'thank you' page. This enables the affiliate network to see when an affiliate has referred a sale and some of the details of the transaction. Then it's essential to test the tracking pixel and all of the different methods of payment so that the affiliate network can ensure that everything is working correctly.
• Upload your creatives: This includes banners, data feeds, images - basically anything you are happy for the affiliates to use for the promotion of your brand.
• Choosing your commission rate: A reasonable commission rate can attract affiliates to your program - of course, this depends on your margins and what you can afford to give to them. Make sure you have some room to move with your commission rate so that you can offer affiliates incentives.
• Writing a good description of your brand is essential for attracting the right affiliates to your program. Make sure it includes information about your brand so that the members can assess whether they would like to work with you.

Affiliate marketing can sound daunting at first, but once you break down what the technology is and how it works, it's a lot simpler than it seems. Affiliate marketing is all about relationships, and the connections between the advertiser, the publishers, and the consumers are essential facets of this. The affiliate network brings this all together with their tracking technology to enable affiliates and advertisers to work together effectively to increase revenue.