A Beginner’s Guide to Understanding Affiliate Marketing

Nick Veneris — October 24, 2019

A beginner’s guide to understanding affiliate marketing.

Affiliate marketing involves referrals where bloggers, influencers, and publishers get paid when a user takes action based on their recommendation.
This modern-day method of word-of-mouth advertising is a cost-conscious way to grow business, as it relies on a “pay for performance” model.
Implementing an affiliate program can help grow sales, boost brand awareness, strengthen reputation, and more on a budget.
Finding the right tools and understanding affiliate marketing laws will help you lay the foundation for an impressive affiliate-based program.

Anyone who owns or operates a small- or medium-sized business knows that referrals go a long way, even in a world where “word of mouth” means “word of online reviews.” Perhaps not surprisingly, the referral system is still one of the most powerful ways to boost business?—?a study from Nielson showed that recommendations from friends are the most credible form of advertising, with ?83 percent of people saying they trust the recommendations that their friends and family pass along?.

At its core, affiliate marketing is like a modern-day word-of-mouth referral, bridging the gap between business and consumer through a trusted channel. Affiliate marketing works like this?: Companies partner with influencers, affiliates, and publishers who already have a built-in audience of trusted consumers in order to put their products or services in front of their target customer. The result is high-quality, high-value exposure that helps grow your business without many of the traditional advertising challenges.

The fact is that almost all major companies leverage this form of marketing in some manner or another in 2019. When you start to ?dig into the question “What is an affiliate program??,” it won’t be long before you discover why. Because companies only pay for the sales or leads generated, this is an extremely cost-effective, budget-friendly, and relatively low-effort way to maximize profit and double-down on brand growth. Let’s dig into all the nitty-gritties of this modern marketing approach to help you knock your first affiliate campaign out of the water!

What Is an Affiliate Program?

To put it simply, affiliate marketing is when a blogger, influencer, or affiliate promotes a certain product or service and receives a commission when someone signs up or makes a purchase.?Let’s get a little bit more specific. A popular model of affiliate marketing is when a well-trafficked blog embeds an affiliate link into a post in order to guide users to take a certain action, such as to purchase a certain product or to sign up for a certain subscription or ongoing service.

This relationship requires the participation of three parties:

The User?– The user is the person who sees the affiliate link embedded into a website or social media page. Ideally, the user will turn into a customer by following the link and making a purchase or taking some kind of desired action.
The Affiliate?– The affiliate site is the blog, website, or social media profile where the referral link is posted. This party serves as the trusted friend or family member who’s providing a personal recommendation to the user.
The Merchant?– The merchant is the entity that pays the affiliate a commission for promoting their product on the website or social media service. It may be a company that sells a product or a service.

This is a win-win partnership for all parties?—?the merchant site gains targeted exposure, while the affiliate site makes passive income for doing virtually nothing, and the consumer gets the value of a personalized recommendation and?—?often?—?a discount, a coupon, or another incentive.

The companies looking to advertise through this channel must find influencers or affiliates with similar audiences to their own in order to quickly, effectively grow sales and leads. Sounds a bit challenging, right? By ?implementing an advanced affiliate marketing tool?, this process is actually extremely simple.

Benefits of Affiliate Marketing

So how, exactly, can affiliate marketing help your business? Below, we’ll delve into the ways that companies find success through this approach. Depending on your strategy, you can leverage this type of marketing for almost any broad business goal, no matter if you are looking to get early adopters for your new subscription box or give your new product a bit of a leg up in the reputation department.

Grow Your Company’s Sales?– Obviously, the primary reason why most companies opt to go the affiliate route is that it has the power to increase sales fairly quickly and shatter revenue goals. There are many unique affiliate strategies that can be implemented to grow sales in the face of specific company challenges. For example, businesses that once relied on offline advertising?—?such as catalogs or brick-and-mortar sales?—?can seamlessly grow sales through online touchpoints with an easier, more effective transition.
Drive Leads Quickly and Effectively?– Lead generation is still one of the most challenging facets of business, but affiliate programs can be used to combat that. Think of them as powerful tools of discovery for your target consumer. By partnering with websites, blogs, and other platforms, you can advertise to a very specific group of people without having to sink resources into building up your own audience. Ideally, the affiliates you choose will already have detailed audience demographics and data available, so you know you’re placing your products in front of those who are most likely to become customers.

Boost Brand Awareness Authentically?– You already know this, but authenticity and transparency are still ranked really high among consumers with regard to things they desire in marketing. In fact, a whopping ?90 percent of surveyed consumers report that authenticity is important to them when deciding on a brand, and 61 percent report that authenticity is the most important way to achieve impactful content. How is affiliate marketing authentic, you ask? In theory, the affiliates who promote your brand will have tried it or sampled it and can provide a genuine recommendation if they choose to promote it.
Test and Experiment with Campaigns?– One of the most beneficial yet underused ways to leverage affiliate marketing is by using it to test and experiment as you’re rolling out new products and services. Because it relies on a pay for performance model, using it to test your new campaigns and marketing strategies can be a really smart move. In other words, if you know you need to experiment a bit with a certain product or service, going the affiliate route is an awesome way to test the waters before you throw lots of dough at other methods.
Affect the Way People Think of Your Company?– Companies spend millions annually on reputation building, yet affiliate marketing can do some really heavy lifting in this realm without the high cost. In many cases, you’ll get to position your link within longer-form marketing content, which means your affiliate can call out and address issues?—?which you have now corrected?—?in order to sway users back into your favor. It can be a really effective tool at helping to drum up new interest or forge a whole new brand impression.
Do It All as You Save Money?– The pay for performance model of affiliate marketing makes it a viable option for organizations of any size. Remember that companies don’t pay a commission to the affiliate?—?or the entity promoting the product or service?—?unless their user makes a purchase or takes an action determined in a pre-established agreement, so they’re effectively only paying when they’re able to make money themselves. Affiliate programs can do what other marketing strategies can do, but for less.

Know the Laws and Regulations of Affiliate Marketing

Before you dive into an affiliate program, it’s important that you know that there have been some significant pieces of legislation governing the way this type of marketing functions. But fear not! Saying compliant with your program is easier than you might think and should definitely not hold you back from ?exploring affiliate marketing as a viable option for your business?. Most likely, the only thing you’ll need to do is make sure that your contract with the affiliate outlines their obligation to inform their readers that you may pay them a commission for their promotion.

In 2009, the Federal Trade Commission (FTC) ?began enacting a series of guidelines governing testimonials and endorsements online?.It has since expanded greatly, requiring what are called “dot com disclosures” to companies that advertise online. To put it simply, these laws require your affiliates to disclose that they are being paid to sell a certain product to you. Most likely, you’ve seen these disclosures yourself when browsing the web for advice on certain products or services or when scrolling through your social media feed.

According to the FTC, the disclosure language must be “clear and conspicuous,” but there does not need to be any lengthy or complicated legal jargon. As long as the people you’re paying to endorse your product are transparent and up-front with their readers that they earn a commission from you, you’re on the right side of the law. At the end of the day, this is good practice not just to stay legal but also to ensure that your company remains ethical and authentic?—?two things the modern consumer desires anyway.

Writing a Solid Affiliate Program Policy

Before launching your campaign, you’ll need to come up with an affiliate program policy. This serves as a contract between you and your affiliates and outlines proper rules, responsibilities, and policies as it pertains to your relationship. Having a solid policy in place can help prevent disputes and keep your program clear and professional. Be sure to ?reference our guide to creating your affiliate program policy?. This will help you come up with a well-crafted program that keeps you compliant and prevents issues.

Note that we are not lawyers and can’t provide legal advice, but we are happy to help guide you to the resources required to make this process easy, legal, and hassle-free.

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