Affiliate marketing or performance marketing is an advertising strategy in which a business uses a third-party company to promote its services and products. In return, it gets a commission for providing specific results to the business. Typically, the outcome is usually sales. But in other cases, you can be rewarded for traffic, free trial, clicks, or downloads for an application.
The Affiliate marketing concept started back in the 1980s when William J. Tobin’s company started by driving leads from consumers needing flowers to send to their loved ones. In layman’s language, William J. Tobin was not an owner of a flower store or any distribution company. However, he was able to plan an arrangement with the flower stores and the distribution companies to deliver flowers to consumers, thereby earning a commission for the sale.
The advancement of technology in the 1990s, plus the introduction of the world wide web in 1994, led to the growth of the e-commerce sector in a huge way. The most remarkable early adopter of affiliate marketing was Amazon in 1996, when they started their Associate Program. The program permitted anyone to register and add links to Amazon products on their websites. The product links are connected with an identifier so that when sales occur due to the affiliate creating traffic on Amazon, the affiliate earns a commission for the sale.
In spite of it having been in existence for over 30 years and having created billions in revenue for businesses, many people are yet to understand what exactly affiliate marketing is. In the next section, we will look at the vital components of an affiliate marketing strategy and how you can make use of it in your marketing mix.
There are four main elements of an affiliate marketing strategy.
1. Vendor: refers to the service or product company or a channel partner of a particular brand that arranges the affiliate marketing strategy and partners for sales.
2. Marketer: refers to the affiliate whose task is to sell the affiliated services and products to earn a commission. Marketers use online content with connections to the vendor’s page for products and services.
3. Deal qualifier: refers to when the vendor and the affiliate sign an agreement on what qualifies as a trump sale. Some of the deal qualifiers may be easier than others. Online products such as applications and software may be easy to deal with, while it might get more complicated when it comes to e-commerce products since an order can be placed and canceled before dispatch—making it hard to know the authenticity of the consumer.
4. Revenue sharing: generally, the revenue sharing percentage ranges from 3% of the product’s price to 50%. However, this revenue-sharing range depends on the type of industry, brand awareness( the less brand awareness equals more revenue share), and the vendor’s profit margin that they are willing to share.
Affiliate Marketing Has Three Main Types:
1. Unattached Affiliate Marketing: this type of advertising strategy uses marketers or affiliates who have no connection to the vendor’s product or services they are advertising. The marketers have no related skills on the product or services and hence have no authority on its use. Unattached affiliate marketing is the most impersonal form of affiliate marketing.
2. Related Affiliate Marketing: this kind of affiliate marketing involves advertising by the use of affiliates who have some connection with the product or services. Typically, the relationship between the affiliates’ daily routine or niche and the product or services. A marketer is always a person who has influence and is an expert to generate leads, their level of influence and authority qualifies them to be a trusted source. An example of this kind of marketing is a well-known athlete being used to promote athletic wear for a particular company.
3. Involved Affiliate Marketing: this type of marketing involves building a deeper connection between the marketer and the vendor’s product and services. The affiliates have used the product and services, and they are confident that their experience can trigger others to use the product or services. Their positive experiences are the vendor’s marketing strategies; the affiliates provide a connection of trust between consumers and vendors. One of the cons of this type of marketing strategy is that the affiliates are always at risk if a product or service they are promoting brings a problem or it’s not up to the said standards.
In 2017, the worth of the affiliate marketing industry was $5.4 billion. With the given popularity of this market, it is expected to register a growth of over $8.4 billion by the end of 2022. The affiliate marketing strategy is a low no-cost business that generates profit immensely. While the industry’s potential growth is a good sign of success, businesses and entrepreneurs can also take this advertising strategy for other reasons.
- Easy to Execute: Affiliate marketing strategy requires you to take charge of the digital marketing part of creating and selling products and services. You do not need to worry about the bigger works of developing, supporting, and fulfilling the offer.
- Low Risk: Since there are no costs in becoming/ joining affiliate programs, it is easy to start making money without any upfront investments. Though you have to invest the time to create lead sources initially, your affiliate connections can be a steady paycheck.
- Easy to Scale: Running a successful affiliate marketing strategy allows you to scale your income without having to hire. You are in a position to introduce new products and services to your audience at any time and then proceed to create more revenue through other works in the background.
Performance marketing also has some disadvantages when compared to marketing strategies.
- Requires Patience: Affiliate marketing may seem like a get-rich life hack to entrepreneurs. But it requires a lot of time and patience to grow your audience and be able to influence sales. This marketing strategy requires you to try different channels to properly understand your audience. Take time to research your most relevant and authentic products and services to promote.
- Commission-based: Affiliate marketing strategy can be stressful if you are from a monthly or weekly cheque job. As an affiliate, you are paid on a commission basis; it can be based on leads, sales, clicks, or even downloads. The more leads/traffic you generate, the more you get paid.
- No Control: Affiliate marketers must obey the set rules given by the company for the promotion program. To earn and be successful, you need to follow their rules as you present their product or services.
Performance marketing is the best solution for people searching for control over their income. Though it might be hard to start as you are required to have a pool of audience so as to make sales and earn, affiliate marketing can be a source of passive income for you from the comfort of your home without the hustle and the worry of producing your product or service.