What is Affiliate Marketing? Everything You Need to Know

What is Affiliate Marketing? Everything You Need to Know
Affiliate marketing can be a great way to generate a secondary income stream for your business. Check out our guide to learn more about affiliate marketing for beginners.
by Square Oct 06, 2020 — 12 min read
What is Affiliate Marketing? Everything You Need to Know

You may be familiar with the term affiliate marketing, but do you understand what the term means? It sounds technical. You may even think it sounds complicated. Whether it is or isn’t, it is an excellent way to generate a steady income stream, whether you’re looking to build a business or want a secondary income. Let’s jargon bust the most common terms so that even beginners can get a handle on what affiliate marketing is.

What is affiliate marketing?

To begin we first must answer the question – what is affiliate marketing? It’s based on the idea you can make money from official connections or affiliations to a business or organisation. As an example, you promote a product, and if someone purchases that product because of your promotion, you receive a commission from the brand.

The best way to break it down is that it’s a revenue-sharing model. You profit from the brand’s sales because of your marketing activities, and the brand profits from an increase in cash flow because of those marketing activities. You don’t have to invent, create, or purchase the product. You don’t need to invest in holding stock or purchase anything. You are receiving a share of the sale, and it benefits both you and the brand you promote. Assuming you have an engaged audience, brands benefit from the access you provide them with.

How does affiliate marketing work?

Affiliate marketing works because it spreads the responsibility across several parties. Each party brings their unique skills to the table to make a product a success, and they share the profits as a result. With different parties involved, there is a more effective marketing strategy and it works because of the specific parties involved.

Parties involved

There are several parties involved in the affiliate marketing process. There’s the brand, the affiliate partner, the customer, and the network. The question now is what does each party involved do and how do they work together to share the value? At the most basic level, there are three key parties involved.

  1. Sellers/Creators
  2. The advertiser/affiliate
  3. The consumer

1. The seller

You could also call this party the brand, depending on who you are dealing with. It could be a solo creator, a vendor or a major retailer. Likewise, the product being sold could be a physical one or a service. In the affiliate marketing world, the brand itself isn’t actively involved in marketing. However, they may engage in other marketing campaigns and profit from affiliate marketing. For example, a creator might be in eCommerce, and they want affiliate websites to market their drop-shipping business.

2. The affiliate

The affiliate, advertiser or publisher might be an individual, but it could also be a company that markets products to potential customers. The affiliate is essentially the marketer. They do the job of persuading potential consumers that the product is beneficial or valuable. The affiliate is the hands-on salesperson who closes the deal. And if the potential consumer becomes an official customer by making a purchase, then the affiliate receives a cut of the revenue. This can be anywhere from 5% up to 30%, on average. The commission depends on the brand and the product itself.

Affiliates typically market to a specific audience. For example, a kayaking website will market products specifically related to the world of kayaking. They may branch out into other water sports, but they stick to what their audience knows. A photographer may have a website showing off their snaps and link the equipment they used to capture such stunning pics. When an affiliate has a personal brand or a niche, they have a better chance at attracting the consumer who will act on the offer.

3. The consumer

The consumer is the purchaser who is driving affiliate marketing. Without the consumer, there can be no sale. When an affiliate shares a product on their blog, website, or social media platform, consumers have a choice as to whether they purchase said product or not. They may base this decision solely on the product itself, but certain affiliates carry more clout than others. For example, a well-established kayak website recommending a piece of kit is going to have more weight than a random Instagram account that has mentioned kayaking once. And, a person with a strong photography portfolio will be seen as a trustworthy source for photography equipment recommendations.

This is why many affiliate programs do some vetting before they sign on. Some affiliates are open with their readers that they receive a portion of the sale, while others keep it quiet and consumers have no idea.

Consumers who do purchase an affiliate product will likely pay the same price they would if they had purchased from a retailer. The price includes the affiliate’s share. The purchase process unfolds the same in affiliate marketing as it does through standard means. The difference is simply they are following a link provided by an affiliate.

How these roles work together

There is a fourth party involved in the process. The network is the liaison between the affiliates and the brand. The network handles the terms and commissions to ease the process for everyone involved. So, the way it works is different in every situation. Affiliates can approach brands to apply for their affiliate program. Many brands with affiliate programs have a section of their website dedicated to applications. Likewise, brands may approach an affiliate. This is common for social media users with large followings who fit the brand’s ethos. Alternatively, a network can match products to affiliates.

The affiliate is given a unique URL to use in their marketing, which allows them to keep track of who is responsible for each sale. The affiliate uses their platform to promote the product using their unique URL and when a customer clicks on it, the affiliate is credited with it. If the customer chooses not to purchase at that moment but goes back to purchase at a later time, the affiliate will still receive credit as the initial visit stores a cookie on their viewing device. Once a sale is complete, the affiliate will receive their commission. The network will also receive part of the commission if a network was involved in the process.

How do affiliate marketers make money

Before you learn how to start affiliate marketing, you need to learn how affiliate markets make their money. It’s supposed to be a simple, quick, and affordable way to boost your income without the complication of selling products. The question is how they make their money. There isn’t one answer because there are a variety of ways in which affiliates make money. It all depends on the program(s) they sign up for because different brands measure affiliate sales in different ways. However, there are three typical ways affiliate marketers make their money.

Per sale

The standard method by which affiliate marketers make their money is pay per sale. This is as simple as affiliate programs get. The brand will pay the affiliate a percentage of the sale when a consumer purchases it because of the affiliate’s marketing efforts. This is where unique URLs come into play. As soon as the consumer clicks the link an affiliate provides, it ensures the affiliate receives credit for the sale. The affiliate receives the compensation once the consumer completes the purchase.

Per lead

There is a newer, more complicated affiliate program emerging now and it’s pay per lead. This is compensation based on lead conversion. There is a desired action and it’s up to the affiliate to ensure their readership visits the website and completes that action. It might be joining a trial, downloading an eBook, completing a contact form, or even subscribing to a newsletter for a discount off of their next purchase.

Per click

Pay per click is an affiliate program that incentivises affiliates to direct consumers from their platform to the brand’s website. When the brand experiences an uptick in web traffic because of the affiliate’s work, they receive their compensation.

The benefits of becoming an affiliate marketer

Hands off

The affiliate is the marketer. There is no need for the affiliate to deal with consumers directly. They don’t need to provide customer service or support. That part of the program is entirely down to the seller or brand involved. As the affiliate, your only concern is accurately marketing the product and ensuring you are fairly compensated for concluded sales. Complaints belong to the seller.

Cost-effective

One of the scariest parts of starting a business is the startup costs. Then you need to worry about finding a drop-shipper or securing a space to store stock and the cash necessary to build your stocks. You don’t need to worry about all of that with affiliate marketing. There are few costs involved and you can get started quickly and easily. Your only fees will be related to the running of your website if you pay for a domain. All you need to get started is a platform, and it could be social media if you have a decent following.

Passive income

Most money-earning efforts require a lot of time and energy. Affiliate marketing is a real opportunity to create passive income. You need to invest some time and energy into the program at the start of your journey, but you can automate it thereafter and make money while you sleep, eat, or work another job. Who wouldn’t benefit from an additional stream of steady income? If you’re incredibly successful, it could replace your day job.

Work from home

Perhaps one of the greatest benefits of becoming a successful affiliate marketing is that you can work from home. When you reach the point you earn enough to leave your day job, you can do it all from bed if you want.

Flexible & convenient

When your affiliate marketing journey is up and running you are establishing yourself as a freelancer. It means you get the flexibility and convenience of working for yourself. You set the goals, you choose your path, and you get to select the products you believe in. You can focus on straightforward product campaigns or you can opt to diversify once you have some wind in your sails. There are no bosses to answer to or restrictions to worry about.

Performance-based income

Your income is solely based on your performance. So, rather than dedicating 60 hours of your week to a job that pays you the same salary regardless, you can work as many hours as you want. With affiliate marketing, you get what you put in. You can use your skills to improve your revenue and get paid for the work you do. The benefit, of course, is that once you’re up and running it becomes even easier to sell and you continue to earn income based on the initial performance you put into setting up your campaigns.

There is a side benefit of sorts. Search Engine Optimisation is an excellent tool and you can drive a lot of organic traffic to your site or platform if you get it right. The black hatting of yesteryear is a quick way to get a site banned so, the playing field has been levelled. Rather than keyword stuffing in hopes of climbing the ranks, you can use pointed keywords and great content to build a strong audience. People use search engines multiple times throughout the day to find the information they need. So, all affiliate marketers should familiarise themselves with keyword research, link building, and the basics of SEO. With the right balance, you could end up on the front page for product reviews or best products lists.

How to get started with affiliate marketing

Now that you understand the basics of affiliate marketing, how can you get started?

1. Identify your niche

The digital marketplace is a highly competitive field so, if you want to make the cut in affiliate marketing you need to identify your niche. Once you know your niche, you can set yourself up as an expert to sell the product to your audience. It’s equally important that you get to know your competitors, which includes other affiliates and similar brands. This will give you the best chance at success.

2. Choose your platform

There are a variety of platforms you can use to build your audience. You will find affiliate marketers across all platforms, from YouTube to blogs to Instagram. The key is to optimise your platforms for product searches. This is where SEO comes into play. With the right keywords and topics, you are going to rank higher on the search engine results page. So, there is a great benefit to SEO and producing great content that people want to engage with.

3. Find an affiliate program

Now you need to find the right affiliate program. The biggest program is Amazon as there are millions of different products to choose from. However, the program you choose will depend on the type of content you produce and the audience you’re trying to reach. For example, if your focus is on beauty tips and hints, then there are beauty brands more suited to your work. If you are aiming to reach a consumer audience, then Amazon is a good choice because it’s high-volume, low-commission. Whereas, a business audience may respond better to low-volume items, which provide you with a higher commission. You can go directly to the brand in a lot of cases as well. Square offers an affiliate program that pays per successful product promotion.

4. Create high-quality content

The key to driving organic traffic to your website and getting clicks on your affiliate products is to create content that energises your audience. It needs to be high-quality and relevant. The only way you can build trust with your audience is to create authentic content. You can write product reviews, comparisons between the product you’re endorsing and another or even write how to use or how it works content. If you’re focused on the beauty world, then tutorial videos are an excellent way to show products in use and highlight their features and benefits. If you’re endorsing photography equipment, you can write posts that include your photographic works and highlight the equipment you use for each.

5. Drive organic traffic

You can rely on email marketing or opt for paid ads if you have an advertising budget. These are both effective methods to guide an audience to your platform. You can also engage your audience using Square Marketing.

Get Started With Square Marketing

Email marketing that turns occasionals into regulars.

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6. Get clicks

You need to place your affiliate links in easily findable locations. You can make them stand out with tables, buttons, or similar eye-catching tools. Don’t pour on the sales copy or repeat yourself too often.

7. Convert clicks to sales

Once the customer follows your links, they will find themselves on the brand’s site. You no longer have control over what they do. However, you can research the program beforehand to ensure you’ve chosen a brand that succeeds in affiliate marketing.

10 affiliate marketing tips that work

1. Backup offers

You should always have a backup offer in your pocket. You never know when your best performer will get pulled or someone changes payment terms. A lot can go wrong so, having a second option is a must. Use your primary keyword to find a suitable backup. Just be sure to stay true to your audience.

You won’t know where your sales are coming from if you don’t take the time to track your links, which means you don’t know what’s working for you. Link tracking gives you an insight into the keywords that offer the most conversions, which pages convert more, and can also detect fraud. Luckily, some plugins that will handle the work for you. It will assign a tracking ID to each link to keep track of how your content is performing.

3. Retargeting

Marketers abide by the rule of 7, which suggests it takes seven opportunities to solidify a customer. Retargeting is an affiliate marketing necessity. When someone visits your site, a cookie is placed on their device. This allows you to target them with ads everywhere else they go so that your chosen brand or product sticks in their mind until they eventually spend.

4. Q&As

Offering Q&A sessions is an excellent way to boost your search engine visibility, establish authority, and establish trust with your audience. Let them submit questions and make a video addressing the best ones.

5. Product use

Give your audience the goods by showing real-world use of the products you’re marketing. It’s the best way to overcome sceptical audiences and stand out from everyone else. Not only will it increase trust with your audience, but it will also show context and create better content too.

6. Use your personality

Use your personality and your face to sell. People buy into you just as much as they buy into the product. If your face is front and centre, you’re more likely to establish trust with your audience. People buy people; your readers can relate to you, your face increases your credibility, and it’s going to feed your conversion rates.

7. Features & benefits

Features are great. But if you want to close the deal, you need to focus on the benefits. Benefits solve problems and appeal to your audience’s emotions. You can highlight the main features of a product by explaining the benefits.

8. Follow-up

This was briefly touched on in retargeting. However, this is more about following up with additional links to the original product you were marketing. If you use email marketing, think of the first as an announcement about said product or service. The second email should be a pitch that leads to the sale or sign-up page. The third email gives a rundown that gets right to the point, but rather than being sales-driven just enforces what the second email said. In your final email, it’s a reminder that time is running out, but keep it short and sweet. In blog form, you could achieve the same result by writing a series.

9. Alternatives

There are many benefits to offering up an alternative to the specific product you’re promoting. It shows you’re impartial and recommending a superior product and tells your audience you want them to get the best product possible. As a result, it increases your conversion rate and increases your sales.

10. Bonuses

You aren’t the only affiliate marketer out there. You won’t even be the only person pushing the products you choose. You have to stand out from everyone else, and bonuses are an excellent way to do that. What does that mean? It’s an incentive you offer that relates to the product you’re marketing. You can offer a tutorial, guide, or checklist. It’s not a package price – it’s a buy this and gets this for free. Think of how supermarkets offer you a buy one get one free offer to entice you to buy two. This offer plays better than buying two for x price. It increases the perceived value of your offer.

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