Affiliate Marketing in eCommerce 101

Affiliate Marketing, it’s a topic that unfortunately is not widely understood. However, at its core, it has always been about building relationships and centred around performance. In a nut shell, it’s performance based marketing. Within the realm of eCommerce, it is a fantastic strategy for merchants to take advantage of, to not only reach more customers but also test out new markets.

If you’ve ever been curious about what Affiliate Marketing is or wondered how to get started, keep on reading. We’re here to break down the elements of Affiliate Marketing, how to get your business involved, and what to look out for when you’re new to the game.

What is Affiliate Marketing?

Just like online marketing in general, Affiliate Marketing can cover PPC, social media marketing, traditional media buy, etc. Affiliate Marketing isn’t really a form of advertising, it’s a way of paying for advertising. What does that mean?

With Affiliate Marketing, you pay “affiliates” (people who promote your product) a commission. It’s done by tracking the traffic coming to your website from your affiliates and rewarding them if their incoming traffic results in a sale. You pay for marketing based on the performance of it. Some common types of affiliates are:

Related: 6 Types of eCommerce Traffic

Who Can Be an Affiliate?

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Traditionally, about 7-10 years ago, an affiliate was someone who owned a website and was willing to place advertisement that linked to another site. However, today, Affiliate Marketing has evolved into something much more than just that.

An affiliate is anyone willing to promote your brand or product, in exchange for commission if their traffic generates a sale. That means anyone from a blogger to an ordinary guy with a Twitter account can be an affiliate.

Here are some examples:

  • A Blogger can put a banner or text link on their blog to drive traffic
  • Someone with a Twitter account can promote a brand through their profile
  • A Search Engine Marketer can use their PPC knowledge to do some Google Adwords for a business
  • Is Affiliate Marketing Right For You?

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    Do you run an eCommerce site? If so, Affiliate Marketing IS right for you!

    It’s as simple as that. Whether you are a big or small merchant, there’s really no reason not to have an affiliate program. If you are selling things online, why wouldn’t you want people to promote it for you?

    We spoke with Ian Francis from AffiliateTraction to gain more insight into the current state of Affiliate Marketing. Out of all AffiliateTraction’s global clients, which include government subsidiaries and global brands, revenue from Affiliate Marketing represents about 19.7% of their online sales. This is not a small number! Affiliate Marketing is something that all merchants could be taking advantage of. For smaller merchants, Affiliate Marketing can be very powerful, especially when trying to enter new markets. In other words, it can act as a litmus test for next to no money.

    Example:

    Let’s say you are a Canadian merchant looking to enter the Australian market. Normally, this might be a very expensive and risky move to make. However, with Affiliate Marketing, you are able to penetrate a brand new market with relatively no money! Remember, affiliates do all the work to get your brand on hundreds of webpages, and you’ll only pay if it results in a sale. These local affiliates are experts in their respective markets, they know what sites, links and strategies work best. Very quickly, you are able to gauge whether or not a new market is open to buying your products/services. Even if the campaign results in zero sales, no commission is paid to affiliates (because their efforts did not result in a sale), but you have still raised brand and product awareness when testing out this new market. Then, the best case scenario – you as a merchant begin paying your affiliates a commission for their performance aka sales! Bam, you’ve just incepted the Australian market, congratulations! What market will you attack next?

    How Does Affiliate Marketing Work?

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    When you decided to launch an affiliate channel, an agency such as AffiliateTraction can help you select the right network and guide you on setting up the best rules and policies to meet your organizations goals and all the tracking will be done through them. So there’s really not much work to do on your part, besides adding a short tracking code to your shopping cart. Which is only 1 line of code and takes less than 5 minutes for a developer to put it in, however, here’s a brief summary of how it works:

    As the name suggests, the tracking code tracks the traffic coming into your site. When a shopper visits your site, a cookie is dropped on that page. When a sale is completed, the information is passed on to the network who verifies which affiliate drove the traffic by looking at the cookie data. If there is a match that the customer visited the page during a certain time, known as the cookie duration, then the sale can be attributed to the affiliate.

    Once that tracking code is placed, you’re set to go! All there’s left to do is some test transactions to make sure things are tracking correctly, which should be done by your network, and then start selling!

    Related: How to Import Affiliate Links in Magento

    4 Things To Consider

    As mentioned above, Affiliate Marketing can work for businesses from all industries and of all sizes; however, it is extremely important to have a strong structure to your affiliate program, or else it can quickly turn into a mess. Here are some things that you should think about regarding how to structure your affiliate program.

    1. Purpose:

    The first thing you should think about when structuring your affiliate program is determining your organizational goals. Is your end goal to raise brand awareness? Increase sales? Being conscious of your goal will help you make the appropriate policies.

    Examples: If your goal is to simply get sales, you may be a lot more lenient on which affiliates can participate and how they market your products. On the opposite end of the spectrum, if you’re selling high end designer products, you may be much more concerned about how the brand is represented rather than revenue. In the latter case, you may want to restrict your affiliates from advertising on coupon sites.

    2. Compliance:

    You should not only have defined policies and rules that affiliates have to play by, but also have a method of ensuring compliance. You want a system to qualify which affiliates are playing by the rules so that you can decide to either pay them their deserved commission or remove them for your program.

    Example: You have a PPC program already running at your company. In this case, you wouldn’t want affiliates to also do PPC work, otherwise it’ll just drive up bid rates, which is unnecessary and cost inefficient.

    3. Commission Rate & Cookie Duration:

    Commission for affiliates can be anywhere from as low as 1% and as high as 75%, so you have a lot of flexibility but it all depends on your business. The average cookie duration in Canada is about 30 days, but like your commission rate, your program’s cookie duration is also highly flexible. You can set it as short as 1 Day to as long as 10 years.

    Example: A fashion blogger is promoting a pair of shoes on their blog and a reader clicks on the ad. The reader doesn’t end up buying the product until 10 days later. If the cookie duration is 20 days, the blogger that drove that traffic will still be credited as the influencer of the sale since it was within the cookie duration.

    4. Sale Attribution:

    It’s important that your affiliate program has clear policies defining how a sale is attributed to an affiliate, since multiple affiliates can drive on consumer to the same site. This would be more of a concern for programs with longer cookie durations, however every affiliate program should consider it. Most often, affiliate programs would apply last click attribution. This means that the last affiliate who directed the consumer gets the sale. You can also decide to attribute the original affiliate or even split the commission.

    Its all about the relationship

    The biggest takeaway from this post is that Affiliate Marketing is all about building relationships with your affiliates and making sure terms of these relationships are outlined so that you can attribute the sale accordingly. If you’re interested in getting started in Affiliate Marketing, be sure to check out our friends at Affiliate Traction for more information.

    Related: The Case for eCommerce CRM for B2C