Last year, £3bn worth of sales was produced by affiliate marketing. But who are these virtual salespeople, and how can you get in on the action?
When you spend money on advertising, it’s often a bit of a gamble. Even if you know your audience inside and out and your messages are highly targeted, you still can’t be sure that your investment will boost sales. With affiliate marketing, the risk is mitigated. This form of performance-based promotion means you only pay out when you make a sale, offering a transparent return on investment. We spoke to some industry insiders to get the lowdown on how to get the most from affiliate marketing.
How does it work?
“We see the affiliates as your extended salesforce,” says Jen Brain, senior affiliate manager at marketing agency, Bigmouthmedia. Essentially, this is a form of online marketing where website publishers (affiliates) drive traffic to merchants (usually online retailers), earning a commission if this leads to a sale or specified action taking place, such as filling in an application form.
Unlike most other forms of web marketing, it works on a cost per action (CPA) model. “They’re not getting paid for every click they drive to a merchant, or every impression of a banner. They only get paid when they generate a confirmed sale,” says Samantha Leigh, head of communications at Affiliate Window, an affiliate network.
Affiliates range from content sites dedicated to specific types of products, to price comparison sites, voucher code sites, and blogs. They use many promotional methods to drive traffic to merchants, including text links, banners, emails or even video content – each with a piece of tracking integrated to monitor whether a click-through results in a sale.
As a marketing method, it’s typically undertaken by business-to-consumer companies, often online retailers, although financial services firms are increasingly using it for lead generation.
“The only real area that currently struggles with affiliate marketing is B2B,” says Leigh.
“That’s because affiliates tend to be in contact with consumers, and there isn’t really anywhere that businesspeople meet online. LinkedIn could potentially become an affiliate, driving traffic to sites that offer B2B services.”
Getting started
In the UK, the affiliate landscape is quite unique. According to Brain, there are 10-12 good sized affiliate networks, more than most other countries. The US has around three major players. Different networks have their own niches. Some are multinational, for example Tradedoubler has a strong European presence. But they all run programmes for every type of merchant, and all have their own tracking technology.
“If you don’t have a trusted technology platform, affiliates aren’t going to trust your model,” says Brain, who adds that when choosing a network it’s important to look at how many affiliates are active. “The networks will often say ‘we’ve got 250,000 affiliates signed up,’ but only 20,000 of them are actually driving traffic.”
Affiliate programmes can be set up in a number of ways. “One of the concerns merchants sometimes have is, ‘I don’t know where my brand is going to be appearing’,” continues Brain. However, if managed effectively you will have control over this.
The amount of control you have depends on how you run your programme. Brain says there are three main models: open, where anyone can sign up to promote your brand; approval-based, where you can approve them first, or a closed group, where you don’t put it out to market, but invite individual affiliates to join.
At Affiliate Window, the network has a consultation with new merchants to determine who their audience is and the type of people they want using their website. They then recommend affiliates with a strong history of driving traffic in that sector.
They will advertise new merchants on their blog, the industry forum (Affiliates4u.com), their weekly newsletters and even on Twitter. “But you can’t force an affiliate to work with a merchant,” stresses Leigh. “Affiliates make a decision as to whether they are going to sign up to that programme.”
Online gadget retailer Firebox works with a number of affiliates. “They range from gadget blogs, to reward schemes, to affiliates who only promote us through Google pay per click. Lots of them are experts in their particular area, so it’s great to have them promoting Firebox,” says online marketing manager, Naomi Brown.
As well as using two networks, Affiliate Window and Affiliate Future, they also recruit themselves. “We’re active on affiliate forums and attend events to encourage new affiliates to talk to us and start working with Firebox,” Brown adds.
The benefits
One of the biggest benefits at the moment is the lower risk. “With the nature of the market at the moment, people are moving to more of a CPA model, because they know they’re only paying when they get the acquisition,” says Brain. “But it’s a twofold thing – you’re also getting branding out of it, but essentially, you get the branding free of charge unless you’re making the sale.”
Managed effectively, it can also be extremely successful. The industry consensus is that well run affiliate campaigns boost online sales by an average of 15%. However, 20-25% of sales at Buyagift, an online gift retailer, come through affiliates.
To put that into context, turnover was more than £15m last year. The business has around 4,500 affiliates, although not all are active and it’s often a case of a small number driving most of the sales. They range from content sites, where people write about the gift experiences, which is “great for the search engines”, to loyalty sites, pay per click and bloggers.
