The concept of affiliate marketing can be somewhat daunting. While it’s not always the first choice for online marketing program, it has certainly proven to yield positive results for me, and a worthwhile venture. I’m often asked exactly how the program works and while I can give a basic run down, an explanation of affiliate marketing is best left to the experts.

This guest post is written by Andy Cantos of Gen3 Marketing. I’ve known Andy for about year, during which time I have come to learn that he is one of those experts. Thanks for the post Andy!

Affiliate marketing is an online marketing channel that, when employed properly, traditionally generates between 10% and 20% of a company’s online marketing revenue.  Given its potential, I am always surprised by how few people know a great deal about the channel.  In an effort to provide more education on the topic, as briefly as possible, I’m going to try to explain the what, the who and the why of Affiliate Marketing.

What is Affiliate Marketing?

Simplistically, an Affiliate Marketing Program is a revenue-sharing arrangement between an online merchant or Advertiser and its ‘Affiliates’, publishers that are willing to advertise the Advertiser’s brand or products and thus becomes its online sales force.  Compensation for an affiliate sales force is solely based on performance, so the Advertiser will only pay a commission for successful efforts, such as the sale of products resulting from qualified traffic the affiliate drove to your site.   As an example, Crocs is an Advertiser that has an Affiliate Marketing Program and pays an 8% revenue share every time an Affiliate that advertises Crocs drives a click that results in a conversion in which a customer buys a pair of shoes on Crocs.com.

Who are the Parties That Make up the Affiliate Marketing Channel?

While Advertisers (companies selling goods or services) sit at one end of the affiliate marketing spectrum and Affiliates (publishers doing the advertising on their sites) at the other, there are often two additional parties that sit in between them to ensure that the channel is optimized.  First, an affiliate Network such as Commission Junction, Linkshare or Google Affiliate Network is utilized to ‘host’ an affiliate program.  The Network is an unbiased third party that enables the Advertiser to set-up shop by posting links and banners and providing a tracking and payment mechanism that Affiliates can use to monitor their efforts.  When an Advertiser launches their program on a Network, they are announcing to prospective Affiliates that ‘we have an Affiliate program that you can apply for access to, you can grab your tracking links and monitor your progress here and you can expect to be compensated for all affiliate programs you belong to through the network.”  In addition to a network, in the cases where an Advertiser does not choose to manage their program in-house, an Affiliate Marketing Agency such as Gen3 Marketing (in the case of Crocs) may be utilized to proactively manage the program.   Where the Network provides the tactical platform required to run an affiliate program, an Affiliate Marketing Agency generally plays a more strategic role with regard to affiliate recruitment, affiliate optimization, promotional outreach, and ensuring affiliate compliance with program terms and conditions.

Why Engage in Affiliate Marketing?

The clear benefit of affiliate marketing over all other types of online marketing is that the Advertiser only pays for successful efforts (i.e. sales) and establishes a strong brand presence on the web with very low initial and on-going costs of marketing.  While CPM advertising and PPC serve a vital role in many companies’ overall online marketing strategies, neither can generally touch the economics of affiliate marketing, where Advertisers only pay a commission when a sale is made, and the Advertiser is the one who sets its own commissions based on its margin structure and the competitive landscape.

To maximize your Affiliate Marketing opportunity, however, you cannot afford to make it someone’s part-time job or put it on auto-pilot. Even if you are selling the best products at the best prices anywhere, qualified traffic will not find you by accident. Only an actively managed Affiliate Marketing Program can generate the qualified traffic you need to deliver sustainable ROI.

How to Succeed in Affiliate Marketing

To succeed with an actively managed Affiliate Program, you need to know who your key Affiliates are, how to spur them into action, where to find more of them and how to keep the relationships strong. You need to forge solid relationships with major Affiliates in key verticals and know how to identify, reach and motivate new Affiliates to promote your brand.

Used properly, Affiliate Marketing can drive an incremental 10% – 20% in topline to an Advertiser’s business.  Hopefully you now have a better understanding of the channel to get started!

Have an affiliate marketing question for Andy? Enter it below.

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