Affiliate marketing has joined key digital marketing techniques such as email marketing, paid search, and social media marketing as a top contributor of revenue, website traffic and brand awareness for many eCommerce companies. It’s estimated that affiliate marketing programs will see growth up to $13 billion in 2023 – a 59% increase from 2022 figures. With the high amount of brands taking advantage of an affiliate marketing program for their business, the buzz is growing at a fast rate. But why is this?
What exactly is affiliate marketing?
Within an affiliate marketing program, a company will partner with an affiliate that is willing to promote their brand, and provide compensation based on the results of that marketing. Compensation is measured by the number of sales the affiliate generates by using a unique affiliate link. A very common example is a content creator who posts a TikTok raving over the shirt they just bought from their favorite brand. In the post, the creator (the affiliate) tells their audience, “Click the link in my bio!” When consumers click on that link and make a purchase, the affiliate receives compensation for that sale.
CEO of ByDesign Technologies
The buzz surrounding affiliate marketing can be attributed to the attractive benefits it provides for both merchants AND affiliates. By leveraging affiliate marketing, merchants have the opportunity to increase their brand awareness and drive revenue at a low cost. With each affiliate having their own unique audience, brands have the potential to reach new markets and gain a larger customer base; while only paying only for results. From the affiliate’s perspective; they have the opportunity to earn revenue themselves as a result of spreading the word about brands they love. Additionally, affiliates have flexibility in terms of their schedule, along with the products and brands they’re going to support. With these opportunities available, the pool of affiliates continues to grow by the minute.
Now, you might be wondering how this differs from influencer marketing, which might not sound appealing to some companies as it can involve high costs and/or risks. The main difference is that while influencers can receive compensation for simply promoting a product or brand, affiliates only receive compensation when purchase is made. In short, an influencer’s purpose is to increase brand awareness, while an affiliate’s purpose is to increase brand awareness and sales.
How can companies benefit from affiliate marketing?
Increasing brand awareness and sales can be done in many different ways. So, why should a company want to incorporate an affiliate marketing solution like Freedom into their strategy?
Affiliate marketing provides merchants with the opportunity to reach new customers and drive sales without the need for expensive advertising campaigns. By partnering with affiliates who have a pre-existing audience, merchants can tap into new markets and gain exposure to a wider customer base. Furthermore, affiliates only earn a commission on actual sales, so merchants only pay for results and are able to reap the benefits of having a higher reach while avoiding the cost of new customer acquisition.
With an affiliate program, not only are you increasing your brand awareness, but you are simultaneously boosting your brand’s reputation through the power of word-of-mouth. When affiliates promote your product or brand through stories, they are essentially providing verbal product reviews. Consumers LOVE to know what others are raving about and why; so leveraging affiliates in order to drive site traffic through positive reviews and/or promotion is one of the easiest ways to reap all of the benefits.
So, you love what you’ve read so far and want to launch an affiliate program. Where do you start?
In order to implement a new strategy in any aspect of your business, you must first take a close look at the current state of its operations, and identify the target areas to focus on; what areas are you aiming to grow in?
First, you’ll want to establish what goals you want to achieve with an affiliate program and determine what type of affiliate would be a good fit for your company to achieve those goals. This also requires analyzing your target audience and market. Are you attempting to reach a new target audience? Do you want to stimulate your current target market? What are your competitors doing; how can you make your program better? Identifying and understanding these things will create the foundation of your program.
Next, you’ll want to determine exactly how you plan to pay for affiliate driven sales. For example, will you be paying a flat/single payment for the initial order? What about subscriptions/ongoing orders? Do you incentivize the first order more than future ones? It’s also important to keep in mind that this market is extremely competitive and it’s important to have an attractive compensation plan in order to increase your ability to acquire affiliates.
Beyond the direct affiliate compensation for referring new customers, how do you plan to acquire new affiliates? Many companies are finding success by leveraging a multi-level compensation structure to incentivize affiliates to refer other affiliates to sell/promote their products; driving overall growth in the affiliate base. This is an important area to consider as you build your overall compensation model and map out your allocation of funds.
Now the big decision: choosing an affiliate marketing software
You need a software that is capable of tracking referral links to actual completed sales in order to measure the performance of your affiliates. Beyond tracking of referral links; your software is critical to combine the other elements of your business – from generating payouts, providing reporting/insights, and enabling growth/duplication.
When evaluating affiliate software; there are several additional must-haves that should be considered. These might be: the ability for affiliates to enroll online, automated activity tracking, accurate compensation calculation, and robust reporting and visibility into performance and growth. When you integrate your program with the right software, you’ll possess a simplified sales process, create financial momentum, and empower your business with better performance insights.
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