The basics of affiliate marketing - How to succeed?

Affiliate Marketing

Iina Knuutinen

9 min read

Affiliate Marketing. Most digital marketing professionals have either tried it once and left it there or simply tried to avoid this area of marketing altogether.

Affiliate marketing is a lot about the dynamics between the merchant and the affiliate. Although it can truly be described as a numbers game, a lot comes down to business relationship mixed with a tiny bit of luck.

Affiliate marketing is one of the most rewarding ways to make money online, but it's also complex and challenging. However, it is known that it can bring a considerable number of traffic and leads to the site when done correctly. When mentioning affiliate marketing, we often either think of major online shopping sites such as Amazon or mom bloggers making extra income by becoming an affiliate. But affiliate marketing is much more complex yet rewarding than we think.

If you haven't had time to listen to our latest podcast episode interviewing Fintan Costello, we highly suggest that after reading this article. He is an affiliate marketer who has experience from both sides of the table, being both the merchant and affiliate. But now, without further ado, let’s delve deeper into the world of affiliate marketing.

What is affiliate marketing?

Affiliate marketing has been around since the late 90's, so it definitely is not a new kid on the block of digital marketers.

When it comes to affiliate marketing, the merchant pays the affiliate based on common goals set between them and the company. This is a performance-based payment system where success in sales equals commission checks from various companies for the affiliate. The goals for the performance are often related to sales, but they can also be traffic, impressions, leads or something else depending on what the company wants to achieve.

The payment model in affiliate marketing is relatively simple and safe for the merchant - after all, they usually have to pay to the affiliate only after the goal has been met, therefore alleviating costs from unsuccessful promotion activities.

However, this does not mean that affiliate marketing is necessarily cheap for your company or that it is the best option for you. But let’s start with the basics: who or which entities take part in affiliate marketing?

Affiliate marketing graphic

The trinity of affiliate world

The affiliate marketing landscape is a lot more complicated than it first appears. There are three entities necessary for an effective business: merchants who want their products or services advertised online; affiliates that help them do so via commission-based agreements and paid ads on other companies' sites (third parties refer traffic); as well as customers looking to buy what's being offered by these two groups of people combined.

Merchants or sellers are often B2C companies who aim to attract more traffic and essentially, more sales via the affiliates. Selling through an affiliate can be the perfect solution for companies looking to get more sales without hiring expensive in-house staff. Not only will the company spend less time working on some digital marketing activities, but it also gives the company access to new customer segments that weren't worth targeting before.

Merchants set how much they pay for each lead and manage the process between them and affiliates. Oftentimes the affiliate management is executed by professionals designated for the task.

Affiliates are at the heart of making it all happen. They promote and advertise your products on a platform or various platforms depending on how the affiliate considers where the most conversions will happen. Some operate mainly on social media whereas others base their business on YouTube or their website or blog. Unlike 10 years ago, nowadays people working in this business tend to niche themselves in a certain field in order to be more profitable.

Customers are to decide whether the whole affiliate marketing cycle can become profitable. As with affiliates, customers have also become more selective on whether to click on affiliate links or not. It is known that some are prone to visit the website through organic search instead of the link which is still good for the company, but not for the affiliate partner. On the other hand, dedicated followers or fans of the website, blog, forum or social network of that affiliate may be likelier to click in order to support their favorite platforms or online personalities.

In addition to the following entities, affiliate networks tend to be considered as their own entity where the affiliates join an already established affiliate program that pays according to a set pricing manual. These tend to attract those who are just starting as affiliate marketers since they are relatively effortless compared to signing up with deals with merchants. However, this comes at a cost for the affiliate in the form of network fees. For more about the problematics of affiliate marketing programs, go and have a listen here.

The ups and downs of affiliate marketing

As with everything, there are pros and cons to affiliate marketing. Here we have collected some of the pros and cons from the perspective of the seller:

Pros and cons of affiliate marketing

The most valuable benefit for sellers is that it's easy to see when affiliate marketing works and when it doesn't since the company pays them based on performance. The more the merchants pay, then in theory there should be an increase of conversions.

Yet nowadays, you have to put time and effort into affiliate marketing activities as a seller. Making sure the product is top-notch, knowing that the checkout process is smooth and the customer support is doing their best are only some of the things that can have an impact on the effectiveness of affiliate marketing.

If you want to learn more about the affiliate’s side on the topic or learn more about revenue optimization, make sure to listen to the podcast .

Common niches in affiliate marketing

"Any industry that operates on the web" is a very common answer to what industries are using affiliate marketing. Besides the obvious eCommerce that somewhat covers all industries below, these are some of the industries that have seized the opportunity:

Finance : Finance, especially Fintech, is lucrative and attractive for many. According to Affise , affiliate programs in the financial industry offer some of the highest commissions around. Payday loans, credit cards and cryptocurrencies tend to be popular topics you will see when it comes time for a finance affiliate program.

Travel : Travel bloggers have been turning their passion for travel into a full-time job by becoming affiliate marketers. Many successful travel blogs focus on writing articles and reviews about specific destinations, so it's natural that these individuals use affiliate marketing as another revenue stream in addition to paid collaborations. It is common to see merchants such as accommodation booking services or flight comparison websites being promoted.

Health & Beauty : With the growth of the health and beauty industry, it has become one of the most popular industries within affiliate marketing space. The size of the industry is huge which attracts many new affiliates to give their wings in this field as well.

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This is especially true in the supplement and cosmetics industry where social media influencers act also as affiliates, gaining income through their followers. A great deal of health and beauty affiliates tend to be social media influencers.

Gaming : You have probably seen those slightly quirky animated mobile game ads or noticed a mid-level YouTuber promoting an unknown mobile game. This industry, especially when it comes to mobile gaming, has become a dumpster fire of affiliate marketing. The chaotic nature due to the extremely rigorous competition between affiliates as well as the gaming companies is well-known, but it is still possible to gain traffic and visibility while making profit.

Gambling : The online gambling industry takes advantage of affiliate marketing tactics. Also known as iGaming industry, the industry is known for its dependency on Search Engine Optimization and affiliate marketing due to the regulations restricting the digital marketing activities of the companies.

Although the possibility to lean on PPC, Google Ads, TV ads and other traditional forms of marketing varies depending on the legislation of each country, affiliate marketing is a robust part of marketing in the industry globally.

Five steps towards becoming affiliate marketing merchant

If you want to be successful in affiliate marketing, the most important thing is not underestimate how much work it takes.

Here are five tips that you should master:

  1. Data is the king . Make sure that tracking has been set correctly. Utilize Google Analytics, Google Tag Manager and other necessary tools for tracking. Only after the basic data tracking has been implemented and tested, you may consider moving into the 2nd step.
  2. Get an affiliate tracking software regardless of the number of affiliates. This showcases the affiliates that you know the industry and provide contemporary tools to work with. ‍
  3. Consider the cookie duration . The affiliate gets compensation depending on the type of the cookie and the length of the session. Longer cookie duration allow the affiliate to get the compensation even when the users do not convert during the first session. ‍
  4. Do a competitive benchmark . This lessens the hassle and makes the merchant look credible when contacting and suggesting the pricing and cooperation plan to the affiliates. ‍
  5. Conversion rates . The affiliate marketer is keen on knowing the merchant’s conversion rates in order to predict whether the product or service has potential to convert - in other words, make money for them in the process.

Besides the steps introduced above, it is meaningful to consider what kind of value your company is able to offer to the affiliate in addition to money. If your company has an established marketing department, it can act as a valuable asset in the promotions and affiliate marketing acts. Furthermore, offering exclusive content or tailored landing pages could spark the interest for cooperation. Evaluate the skillset your company has and package them into a memorable deal that is challenging to decline.

How to recognize a successful affiliate?

During the podcast, our wonderful guest Fintan gave away three traits that always apply to the most prosperous affiliates regardless of the field they are choosing to operate in. These people or organizations excel in:

  1. Providing value added services - becoming an affiliate is easy, but becoming a meaningful one is nothing short of challenging
  2. Being one step ahead of the others in the game of search engine optimization
  3. Establishing and nurturing a robust community that the members trust and value

For affiliates, it is crucial to provide value added services since they must differentiate themselves from the competition among the affiliates. As anyone can become an affiliate, maintaining the top position requires constant evaluation on what the visitors truly are looking for. Besides the value, Fintan recalls that the company must have one of the other two points. If you want more tips on how to become an affiliate, have a go on the podcast here .

Organic vs. Paid

When setting up the deals with affiliates, you may want to consider asking how they feel about paid advertising and how knowledgeable they are in it. Some tend to rely mainly on the organic traffic whereas other affiliates lean towards mastering and optimizing the paid advertising. In the end, this is something that you should not worry about too much.

What you should care about instead is their skillset, knowledge and results they can showcase. The affiliates are to take the risks of advertising to themselves so it is not the merchant’s main responsibility to be concerned about the means of marketing activities the affiliate sees as the best. Of course, quality-related issues are always a place for discussion.

In the complex world of affiliate marketing, we will guide you.

Mastering affiliate marketing from the perspective of merchants is no easy task. The quantity of affiliates has not been the way for success for a while - instead, valuable, high-quality affiliates can bring you that extra traffic you are looking for. In case you are intrigued in learning more or getting affiliate marketing services, book a free, non-binding consultation with us here .