How Affiliate Marketing Works in Customer Acquisition
Updated: Jun 20, 2018
Affiliate marketing is playing an increasingly important role in digital marketing. For example, big companies like Amazon practice it very much. The reasons are obvious:
affiliate marketing offers you a whole range of unique marketing advantages. It does not require high startup costs, offers you an efficient way to gain new customers on the
Internet and increases your brand visibility on the Internet. But how exactly does affiliate marketing work? What is important to note, which tips promise success and which
costs should you expect? I answer this and more in my article today.
How does affiliate marketing work for companies?
The term "affiliate marketing" originally comes from the USA and is often referred to as referral marketing or partner marketing. This is an internet-based collaboration between two parties: one company ("merchant" or "advertiser") and one (or more) publisher or "affiliate".
The affiliates earn money for the marketing or dissemination of the company's products, services and offers, preferably on the Internet, for example through a blog . For this, advertisers provide them with certain advertising material (eg advertising banners, links, etc.). Once a customer clicks on these banners, they will be redirected to the company's website. The special feature: Each advertising medium contains an individual and unique "Affiliate ID". With this, the merchant always knows through which affiliate he won which customer (or a specific action was performed) - and to whom he has to pay the appropriate remuneration.
Such a form of targeted word of mouth marketing offers many benefits for both merchant and intermediary. Not infrequently, affiliates provide their viral reach, eg through blog marketing or gaining traffic via Google Ad Words. Companies benefit from increased brand visibility and publisher reach. It gives you the opportunity to reach customers and generate leads that they would not have come to you normally. You only pay success-based commissions.
What Affiliate Marketing brings to Entrepreneurs?
In marketing, visibility and reach on the Internet is an important factor to succeed. If your offer is difficult to find by your target audience and prospects, it will be difficult to be successful in the long term. Affiliate marketing helps you as well as influencer marketing to increase the reach and turnover of your website or online shop. Best of all, most of the costs are only paid in case of success, because affiliate marketing is based on a commission model.
Affiliate marketing thus offers a whole range of unique advantages. Above all, the fact that no traditional advertising costs are incurred makes affiliate marketing interesting for entrepreneurs and companies that only have a limited online marketing budget . You only pay a commission to the affiliate when it actually generates a certain number of clicks, leads or sales.
In addition, it is an advantage that in principle anyone can become your affiliate partner. No extensive technical skills are needed to create and publish a banner or marketing links. Also, setting up an affiliate program is pretty simple and straightforward. There are a large number of affiliate networks (eg Rakuten Linkshare, TradeTracker, Tradedoubler, CJ, Webgains, Performance Horizon Group, Effiliation, Publicidees, MoreNiche, Optimise (formerly OMG), Admitad, AWIN, Affilinet, etc.) that give everyone the opportunity to start their own affiliate program quickly and easily. Thus, winning new customers with this strategy is relatively easy for you as an entrepreneur.
Success Factors in Affiliate Marketing
There are many different factors that determine success and failure in affiliate marketing. Of course, the basic requirement is to be able to offer an attractive affiliate program that provides enough incentives for potential mediators to enter into an Affiliate Partnership. This also means: you have to find suitable partners who offer your offer on the right advertising space and address the right target group. So do an accurate audience analysis , so that you address them specifically. Only then can you generate clicks, increase traffic, generate more leads and boost your sales (new customer acquisition). Just as important is the way you integrate your content. Especially popular, next to good content, are classic marketing banners and text links. The latter have the advantage that they are often not to be identified as advertising, but give the impression of a conventional recommendation.
How much does Affiliate Marketing cost?
All in all, the question of the costs of affiliate marketing cannot be answered, because too many different factors play a role. In total there are 3 types of costs:
1. Fixed costs (one-off network fees, creation of advertising material, special costs, etc.)
2. Maintenance costs (eg agency fees)
3. performance-related costs (eg affiliate commission).
Factors and costs that you should consider are, for example:
• Average sales value
What is the average sales value of your advertised product or service? And the amount of average shopping per customer?
• How many competitors are there?
How many competitors are there in your market that already have affiliate marketing? This plays an important role, since with much competition the publishers usually have to be offered a higher commission in order to win them for your affiliate program. To answer this question, you can search through platforms like Affilinet and look for offers from the competition.
• How is the affiliate program managed?
Will you manage your affiliate program in-house or hire an external marketing or advertising agency ? Should the latter be the case, of course additional costs will be added. An affiliate agency usually demands a monthly amount that depends on the success of the affiliate program.
• Which networks are used?
In which networks should your affiliate program run? Depending on which network you choose, the one-time setup payment varies. At Zanox, for example, this is up to 5000
euros, while it is significantly lower for Affilinet. Usually, however, the fees of a network or advertising agency amount to around 30% of the compensation paid to the affiliates.
• What is the commission?
Of course, compensation also plays a role and is determined by you individually. For example, you can decide if there are fixed commissions or if they depend on the sales
value. Of course, your average sales value and the profit margin also play a decisive role. How much money can your marketing affiliates make to help you make a lucrative
business? After all, you also want to earn money in the end.
• Which commission model is used?
In Affiliate Marketing, there are various commission models: Pay Per Click ( PPC Marketing ) pays the compensation for every click on the ad, regardless of whether or not it ultimately leads to a sale. This model is useful, for example, when increased traffic is the primary goal. "Pay per Lead" (PPL marketing) refers to a commission model in which the remuneration for certain actions of the user is paid. For example, for newsletter subscriptions. Another option is "Pay per Order" (PPO Marketing), where the commissions are paid for each purchase.
• Which advertising materials are used?
Are the necessary funds for advertising (eg banner marketing ) already finished or do they have to be created first? If advertising material is first produced by an external agency, of course, these costs must also be included in your planning.
So you can easily start with affiliate marketing
First of all, it is important to commit yourself to an affiliate marketing strategy . Question: What do I want to achieve through my affiliate program? These could be, for example, the following goals:
• Boost the sales of your online shop
• New customer acquisition & customer growth
• Get more registered newsletter subscribers
• Generate more traffic and clicks (eg Facebook Leads Ads and qualified leads)
• Increase downloads of software / apps / ebook etc.
• More qualified contact requests
• and much more
So before you start with Affiliate Marketing, you should define one (or more) goals as precisely as possible. A very good method here is the target planning according to SMART. You also have to be clear about who your target audience is. As in almost every marketing area, a target group analysis makes sense. Best to brainstorm with your team for your marketing strategy .
You still have no idea how to use Affiliate Marketing for your business? Then look first of all what the competition is doing. How do other companies in your industry use affiliate marketing? For this you can use affiliate search engines, such as Affilinet.
Does affiliate marketing make sense to you?
Please note: Affiliate marketing does not make sense for every company. How can you find out if such marketing is right for you? Ask yourself the following questions:
• Is your product or service profitable enough to pay commissions and still make a good profit?
• Are there any competitors in your market who already operate (successfully) Affiliate Marketing? (Attention: this depends on the situation and can be both a plus and
a minus!) How high is the commission of your competitors on the platforms? Can you keep up?
• Does your offer or similar products play a role online? Is it already being searched and bought on the internet via pull marketing ? Is it rated online?
• Are there online comparison portals that compare your products / services or similar offers?
• Are there any websites or blogs that are thematically appropriate?
• Do you operate Newsletter Marketing ? Are newsletter subscribers important to you?
• Do you receive qualified online enquiries?
• How do your customers reach your site - via mobile devices? Does your website have a good responsive design ?
• How important is your brand visibility?
• Do you own an online fanbase? Do you use social media marketing , for example on Facebook, Twitter or Instagram?
• How much of your sales is generated online, how much offline?
• How much is a qualified lead, request, customer growth, click or sale worth to you?
This is how you find your affiliate partner
Once you've answered the questions above, it's time to design your individual affiliate program. Try to take the view of the publisher and put yourself in his role. Is your affiliate program really attractive enough? Would you join as an affiliate? If not, it will be hard for your referrer to win customers on the internet for you.
To develop your affiliate program, you can also get the help of a marketing agency specializing in affiliate marketing.
The last hurdle to overcome is to find suitable Affiliate Partners with a good reach. This can be quite time consuming depending on the industry and rarely happens overnight. There are different ways to find suitable partners. You can search for yourself and actively go to appropriate publishers or promote your affiliate program on relevant sites, such as Affilinet or Digistore24.
Ways to Find Affiliate Partners:
• Use affiliate networks like Affilinet, Belboon, TradeDoubler, Zanox or Digistore24 and introduce your affiliate program. Affilinet alone has more than 3,500 advertisers and more than 700,000 affiliates. However, that also means that you have to be competitive and offer attractive terms.
• You already have your own website, blog or online shop? Then you can also advertise there your affiliate program, for example in the footer or under the menu item
"Jobs" on the website.
• Promote your affiliate program in affiliate marketing groups on social media platforms. Especially recommended are XING , LinkedIn, Google+, Facebook or Twitter with
the appropriate hashtags .
• Visit conferences and affiliate events. Networking is the magic word.
• Find out where your competition is promoting your affiliate programs. Maybe that makes sense for you too?
• Register on different affiliate portals
• Make sure your affiliate program is found in affiliate search engines
• Search for suitable affiliates yourself. Look for leading social media influencers in your market segment. Research relevant blogs or YouTube channels and write
directly to people.
As soon as you have found suitable affiliates, you should continue to develop your relationship with the affiliates and try to bind them to you in the long term. Try to
identify the most promising affiliates and keep them up to date with new information, changes and tips. Make them an active part of your marketing efforts. For example, let them know about current promotions and discounts, your top sellers, or the times of day when your conversion rate is the highest. Basically, the more commitment you show, the better your affiliate feels - and the more likely it is long-term success. In the end, make sure that responsive design is respected, so that the link is also suitable for mobile devices.