As Facebook and Google advertising costs continue to rise, marketers are looking for additional cost-effective and ROI-consistent channels. Affiliate marketing has become one of those key channels, offering excellent results for fast-growing B2C and B2B tech companies. With an ever-changing ecosystem of small and large influencers, content leaders, and media outlets, a single channel that can span all these opportunities is enticing and powerful.
It’s best to consider Affiliate marketing once you have found product-market fit and your margins are clearly defined and predictable. In this guide to Affiliate marketing, we’ve put together the important insights every marketing leader needs to know before deciding to pilot an affiliate program. We include what media and advertising opportunities an Affiliate program might entail, what you need in order to test this channel, how programs typically function, and the networks, technology platforms, and agencies that will help you be most successful. We’ve tapped our own expertise as marketing operators and our insights working with the top marketers in tech to create this Marketers Guide to Affiliate marketing.
The Evolution and Makeup of the New Affiliate Channel
Traditionally, Affiliate marketing consisted of transactional affiliate marketplaces and management platforms that served as a single source for publishers (typically content and coupon sites) to easily connect with advertisers. These platforms make it easy to establish business relationships, share creative assets, track revenue and even handle payouts between the publisher and the advertiser. Two major platforms that are still highly used today include Rakuten and CJ. Today, Affiliate marketing is more broadly and holistically defined as any kind of partnership that can deliver a sizable audience to drive new prospects or new or repeat customers on a pay-for-performance model.
Affiliate partnerships exist in a wide range of categories including content creators, online and offline mass media publishers (e.g. Forbes, CNN, NBC Universal), influencers (large and small), loyalty sites, coupon and deal sites, podcasts, review sites, shopping sites, benefits/rewards/loyalty providers, mobile apps, other brands/companies, registries, referral programs, search affiliates, business development deals, and even online learning platforms and schools.
An effective and profitable affiliate program can consist of 10 of these partners or 10,000. And, while categories of partners may differ, one thing they all have in common is a pay-for-performance model. You can structure these models in many ways — like paying for new vs. returning customers, paying flat rates per lead or customer or a percentage of sales, utilizing sliding scales meant to incentivize volume, and even a custom, tailored rate decided on for each specific affiliate site.
Types of Companies Who Benefit From Affiliate Marketing
B2C ecommerce brands have led the charge in traditional Affiliate marketing, offering an easy way for publishers and content creators to monetize their audiences with appealing creative options. B2C brands also tend to offer a clear, measurable, and predictable revenue model paying publishers a percentage or flat fee for every product that is purchased as part of the affiliate deal.
But Affiliate isn’t just for B2C. Its coverage across review sites, mass media, and niche publications make it a worthwhile investment for B2B brands as well. Affiliate marketing can also benefit B2B businesses because partnerships can include other B2B businesses who may share the same target audience, but be ancillary (and non-competitive). Or, they can even include business development-type partnerships with industry thought leaders who command sizeable audiences that also match a B2B company’s target customer profile.
Even PR firms are starting to utilize Affiliate marketing. Because of Affiliate marketing’s mass media publisher partnerships, PR firms are now using it as a shortcut, or a supplemental channel for their traditional PR efforts.
Things to Consider Before Launching an Affiliate Program
A new affiliate program can often take 6–12 months to start seeing meaningful results, so it’s not a channel that can be tested quickly. Companies need to ensure they have an already-established acquisition program in place so the Affiliate campaign can be given the time it needs to prove itself and then grow. But patience can pay off – the affiliate channel often becomes a major contribution to growth for many companies.
Affiliate programs take time to test for two reasons. First, for certain types of partnerships like influencer relationships or niche blog/podcast partnerships, it takes time to identify partners and to engage and develop a relationship with them. Plus, defining a framework and getting a partnership up and running is no easy task. Second, even for turnkey partners, there is a ramp-up period in which new advertisers compete with legacy advertisers (whose products are already proven to drive revenue for the partner) for placement or priority across an affiliate’s assets. In these cases, new advertisers are not prioritized until they prove themselves to be lucrative for an affiliate in a revenue share model.
Understanding the nuance of your company’s acquisition economics is also critical to the success of affiliate marketing as it is based on pay-for-performance models. It’s important to know your lifetime value (LTV) contribution margins and the maximum Customer Acquisition Cost (CAC) you can afford. And, that CAC needs to include not just the payout to affiliates, but also technology fees, publisher fees, and perhaps agency fees as well. Getting this wrong and having to reduce your payouts can demotivate or even burn bridges with early affiliates.
Affiliate marketing started with affiliate networks. These transactional networks serve as a marketplace for advertisers and publishers (typically deal/coupon and content platforms) and a transactional platform for managing affiliate signup, communication, reporting, and payouts. Partnerships tend to be hands-off, large in number, and publishers will typically be signed up with your competitors as well. The biggest networks include:
Affiliate Management Platforms (SaaS)
These platforms are less transactional and more robust than traditional networks and aim to provide personalized, yet easy-to-use experiences across media management, affiliate signup, communications, analytics, and payment. They are best for companies sourcing their own affiliates, developing more meaningful direct relationships, or for their agencies who may be doing this for them. These platforms also provide built-in marketplaces for finding new affiliates. Leaders in the space include:
An affiliate agency provides the manpower, already-established relationships, and expertise that most companies don’t already have in order to make this channel successful. Experienced, in-house, affiliate talent has become limited as the younger generation of marketers chooses to specialize in other channels. Often to their detriment, many companies assign a junior marketer to test or manage this channel but are underestimating the time, expertise, and experience needed to engage, nurture, and design a mutually profitable relationship with various types of partners. Agencies are tool agnostic and the leader in this space is Acceleration Partners.
Affiliates can become a highly impactful channel for any type of business. While it takes time and some investment to prove this channel, Affiliate marketing’s pay-for-performance model with a more predictable ROI makes it a relatively efficient, low-risk channel. Our article on determining the best way to source resources and talent to manage new channels can also help you navigate execution.
For marketing leaders looking for more information on Affiliate marketing, or other resources on which marketing channels you should be adding to your arsenal, check out our other articles below or contact us at firstname.lastname@example.org and we will be happy to help.
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