Why Affiliate Marketing?

Welcome to Why Affiliate Marketing

Why use affiliate marketing?

This site answers the question why use affiliate marketing?

The site includes:

A comprehensive definition of affiliate marketing.
Impartial information on the various ways of using affiliate schemes.
The advantages and disadvantages of the types of affiliate scheme available.
All of this from the perspective of a merchant or affiliate.

Please make your selection from above to continue.

Affiliate Marketing in Detail

The concept of Affiliate marketing is simple, the affiliate promotes your website and you give them commission on the sales they generate or the click through's they send. The most popular model by far is giving affiliates some form of commission on the actual sales then generate on your site. This is known as performance based marketing. The ways in which an affiliate promotes your site can vary dramatically, from simply adding a text link or banner on their site pointing to yours, all the way to having specific pages on their site detailing your products or services and linking directly to them on your site.It's also possible for affiliates to promote your web site offline with posters, flyers, etc, and still track their commission.

The difficult part is accurately tracking of all of the visitors and sales that the affiliate sends. This is known as affiliate tracking. Their are two main options a merchant can choose to start and affiliate program and track visitors and sales generated by affiliates. The first is by developing or purchasing affiliate software that they can run on their own hosting or rent from various providers.The second is by joining an affiliate network, where the network provides the affiliate tracking.These options are described in more detail below. Both options work from the same principle of generating unique affiliate tracking ids that are applied to banners or links. Every time an affiliate’s link to your website is clicked, the software tracks which affiliate is responsible for sending the visitor. The affiliate tracking is also tied in with your ordering system, so that it knows if a visitor sent by an affiliate makes a purchase.

In order to fully understand affiliate marketing you need to appreciate how it fits in to Internet marketing strategies as a whole.

Internet Marketing Strategy - in brief (for more detailed information visit cosmicmarketing.com)

In August 2004 37% of men and 28% of women who accessed the internet had made an online purchase within the last 12 months. Into 2006 the figure had more than doubled to 86% of men and 84% of women. This continuing trend of online purchasing has lead many businesses to start trading online with different stragies in an attempt to gain a market share.

Internet marketing strategy is any form of on or offline means to increase visitors to your website. The main strategies are:

Online Marketing

Affiliate marketing: discussed in detail below, where others promote your website in exchange for commission on the sale of goods or services. A form of performance based marketing where you only pay for results.
Search engine optimisation: The cheapest (unless you hire someone) but most time consuming strategy. This is where you manipulate your web page to include relevant content and specific keywords that rank well with search engines. The higher the rank, the more frequent your website is displayed on the search engine results, the more traffic you get. Using META tags and the correct headings in your html code you can tell search engine robots how to view and list your page. If you are entering a market with a lot of competition you may still be able to gain a good page rank with a specific keyword term. For example, you're setting up a laptop sale and repair shop in Bristol. If you type laptop in a search engine you get about 250 Million results, to get a good rank with this keyword alone would take years and a massive marketing budget. Try running the search again using specific keywords of "bristol laptop" and you should see just under 2 million results are returned, "bristol laptop repair" returns under 65,000. The more specific your keywords the better your chances are of getting a higher page rank for that term, meaning that you will get visitors who are looking for your service. It can also help if your website is W3C validated. This ensures that the code you have used is tidy and more search friendly.
Email Marketing: Many companies have built up huge databases of Name and email address details. If people on the list have opted in to receive promotions over email it is possible to buy their details and send out details of your product or service, The cost of the database varies with the quality and the amount of detail you get. You can also build up you own mailing list perhaps by offering a free download for a software trial or information pack but this can take time and depends on the number of visitors your website recieves.
Directory Submissions: Search engines add more importance to your website if it has more links to it as more links = more interest. By submitting your website to directories you build up the number of inbound links to your website. Although these have less value than they use to it is still a worth while exercise to help increase your page rank. Some directories charge for the service, other offer a free listing or want a link exchange.
Pay per click: The fasted and most expensive way to get your website promoted. Many search engines offer this service where you pay to be featured in their sponsored links section. You setup the target keywords, content of the advert and link to your website. You bid against others who have the same keywords to have your advert displayed. Once the user types the keyword into the search engine, and if you have bid an amount that is greater than other advertisers or if your keyword is more relevant, your advert appears. If the user then clicks on your link you get charged. Some sites also display sponsored links on behalf of search engines, although choosing to advertise this way could lead to you featuring on a competitors site. The cost of PPC can vary massively depending on the area you advertise in.
Link building: The more links you obtain, the higher interest a search engine places on your website. This can increase your page rank. A two way link where you advertise their site and they advertise yours, is rated less than an inbound link without the reciprocal link back. Webmasters are now keen to develop 3 way link building so that the links count for more, this can only work if one of the interested parties has more than one site. For example you have site A you link to site B the owner of site B also ownes site C, with site C he links back to your site A.

Offline marketing

Press Release: You may be able to get press attention to help your Marketing campaign if your site is of interest to your local community.
Local newspaper flyers and posters: Using traditional methods of advertising can help increase visitors to your site also.

Considering the other forms of on and off line marketing affiliate marketing can be the most cost effective means of online promotion as you only pay for results.

Why Use Affiliate Marketing

Affiliate marketing is a favored web marketing strategy, as it can have a significant impact on increasing the amount of traffic to your site.It can be cost effective, and you can benefit from gaining links from established web sites and online marketers. Top affiliates, or super affiliates as they are sometimes referred to as, have spent years developing and promoting websites so are aware of all the tips and tricks to create an online presence.

Do you still need convincing that affiliate marketing is a tool you should use? Just look at the success of others:Back in 1996 Jeff Bezos a book seller set up an online book store. Amazon implemented an in house affiliate scheme, and since then has become one of biggest online stores on the Internet today.

An affiliate scheme helped an auction site grow to what it is today. The ebay in house partnership scheme was set up in the late 1990s and resulted in a massive increase of sign ups.

Many large travel companies rely on affiliate schemes to generate their revenue, and funding for price comparison sites is also derived from affiliate schemes. With many successful online companies using the power of affiliate marketing. it is a tool any serious online trader should implement.

What are the Affiliate Marketing Models

There are three main types of affiliate models, although different terms are used to describe them, they usually fall into these three categories.

Pay Per click also referred to as cost per click. You pay every time your link or banner is clicked on from the affiliates site. Mainly based on unique clicks but sometimes raw clicks are used to calculate the cost to you.
Pay per Sale also referred to cost per sale, or commission on sales. You only pay the affiliate if a sale or sign up has been made. This way you are never out of pocket which makes this model the most cost effective way of online marketing.
Pay per Lead also referred to as pay per action or pay per performance. Similar to pay per sale, except it is a step back in the sales process. If you are promoting a product or service that cannot be sold online (such as a company offering bespoke building work, or a mortgage advice service) and needs to have some form of face to face, or telephone contact before a sale, the affiliates are paid for generating the lead.

Affiliate tracking methods

Whether you use an affiliate network or your own in house software the affiliate tracking methods generally follow the same principles.

Session tracking: Is combination of cookie and IP tracking as discussed below. The software logs the session and applies any relevant sale to the affiliate.
Cookie Tracking: When a visitor to an affiliate site clicks on your link a cookie is loaded into their browser. This cookie logs information on the affiliate so when they buy from your site the affiliate software picks up this information, and logs the sale to that affiliate. The cookie can be set to be valid from a few days to months meaning that if visitors don't buy straight away, but come back in a few days time the sale is still log against the affiliate.
IP tracking: The affiliate software logs the IP address of a visitor who has clicked on an affiliate link. If the visitor makes a purchase on your site, the software compares the IP to that of those recorded, and from this can determine which affiliate has generated the sale. Instead if the information coming from a user's browser it comes from the software's database so their is no issue if cookies get wiped. The drawback with this is that visitors may not have a fixed IP address, so if they visit the site at a later date the software will not find a match, which results in the affiliate not be credited with generating the sale.
Secured Socket Layer (SSL) tracking: Used by most shopping carts the secure ID is generate by the browser and the web server. SSL is needed for secure cookie tracking, many online stores need ssl cookie tracking depending on their shopping cart or order system setup. The session is left open long enough to complete a transaction.
Customer ID tracking: This form of tracking Generally requires the user to register on the website. This can be when they purchase or for a newsletter or just to receive a free download. From this they are given an ID or on sites that do not use customer id's it is common for the customer's email address is be used. This is because most people do not change their email address very often. Every time the user logs in and makes a purchase the affiliate is credited with generating the sale. This method is useful for offering your affiliates ongoing or lifetime commission (below).
Access code tracking: This method is where a customer is given an access code to log in to your website. The access code is attributed to an affiliate so any resultant purchase will be logged as being generated by them.
Discount coupon: An offer code is issued to a buyer at an exclusive price, by the affiliate. Any visitor who uses the code will have the sale logged as being generated by the affiliate. This method can be harder to implement and depends greatly on your shopping cart or order system.
Replicated webpage: Using this method you create a template website. When an affiliate signs up they are given their own replicated pages which they can often edit to include their own phone number, email, etc. All orders made from the affiliates website can be tracked directly to the affiliate. Such systems are not very common these days as it is difficult to implement anything more than the simplest or replicated sites. It can also prove very difficult to keep all the replicated sites up to date.
Recurring commissions: If you want to offer your affiliates a better deal you may wish to offer recurring commissions from repeat customers. This method usually works better by lowering valued products that buyers will require several times a month e.g supplements or subscription services, such as monthly site membership. By offering a recurring income stream through out the year more of an incentive is given to affiliates to join your scheme.

Options for starting an Affiliate program

You have two choices for starting up an affiliate program, through a network, or in house. For each method you still need to actively manage your affiliate program for it to become a big success. For those merchants with a more substantial budget they can look are hiring a dedicated affiliate manager.

Affiliate program management involves

ensuring affiliates are paid the right commissions and on time.
Create banners or text links to your site that affiliates can use to promote your website. Some affiliates prefer a text link that describes your product and provides a bit of information about your site. Others may prefer a banner with animation and graphics. Some will insist on up to date product feeds that they can download and parse into their site.
Vet the affiliates site to make sure they are appropriate. If your site is aimed at a young audience there is no point having it promoted through an adult orientated site, as your site could be attracting the wrong visitors.
It's also good to keep your affiliates up to date with a regular news letter. For larger affiliates it's worth contacting them privately by email and phone to negotiate better placement of your adverts on their site.

Through a network

Main selling points through a network

A Network can increase you sales fast! Networks have a group of affiliates on their database. When a new site joins the network an update is sent out to the affiliates so your scheme is marketed to them straight away. This saves time in having to build an affiliate base from scratch.
Payments are made on your behalf so you just make a single payment to the network who distribute your finds.
The network's supply the software so you don't have to worry about maintaining it.
The affiliate network branding can increase the number of affiliates who sign up as they recognize and trust the network.

Behind the propaganda

The affiliate network branding promotes the affiliate network, not your own site, so if the affiliate signs up to your program and is offered a better site to promote the chances are you would have lost out.You will have a listing in the network right next to any competitors who are also a part of that network. If your brand name isn't as recognizable then you'll have to offer much better commissions in order to attract the affiliates. You can also quickly end up in a commission battle with other merchants on the network each trying to offer a higher commission. This can have a bad effect taking profits away from your affiliate sales.You face massive charges not only do you have to pay a setup fee and monthly fee you also have to pay commission on each sale to the network as well as the affiliate. This also prompts the question as to why do you have to pay a monthly fee if the network will be taking commission from your sales each month, since the networks are confident your sales will increase? The answer is that in case your sales don't increase they want to cover their costs. This doesn't inspire much confidence.

If your affiliate program is successful, the fees can quickly add up to the equivalent of you having your own dedicated affiliate manager. The network will always have it's interests at heart and it's merchants as a whole not individually. Running an in house program with a dedicated affiliate manager would have only your companies best interests at heart.

If the scheme is not popular with affiliates you may not receive this feedback from the networks, as they are happy making money from the monthly fee while your site has a low sign up rate.Most importantly, any promotions you do outside of the network to promote your affiliate program, will essentially be promoting new affiliates to the network and not just your affiliate program. I've seen a poll that suggested around half of affiliates that signup to a companies affiliate program and find they are part of a network, end up promoting someone else instead.

If you pay your affiliates only after their commission exceeds a certain amount e.g over £50, you could end up putting some affiliates off. Also if your payments are ran every month but your competition has one every week again you could lose out on attracting affiliates. Setting the payment trigger is important factor of your affiliate scheme, if this is left in the hands of a network you could miss out on attracting super affiliates. Many organisations who have long been running their affiliate programs on networks are starting to set up their own affiliate schemes as they see the benefits of doing so out weigh being on a network. Link to ebay article

In house

Main selling points

One off payment for software then optional support contract.
Full control of how the scheme is run.
White label product so no co branding.
Custom made product features.
Direct contact with Affiliates for vetting and incentive generating, allowing you to offer top performing affiliates better commission rates.
Usually no extra charges on commissions leaving more commission to be paid to affiliates.
You can run the program with your interests in mind, not for the benefit of an affiliate network.
Direct feedback on your scheme from affiliates.
Multi tiered commission possible.
Set when and how a pay period run is performed. You have control over an important aspect of you affiliate scheme that can determine the caliber of affiliates you attract.
Choice of payment options, you chose whether to pay electronically or by cheque or on an individual affiliate basis. You can also allow your affiliates to choose how they get paid giving greater flexibility.

Behind the propaganda

If you are on a budget hosting package you may have to upgrade or use the software providers hosting to get the software to work.There are some very cheap affiliate software products with some very big claims. There products are more likely to cause your hosting problems and not track properly. It's important to go with a more reputable software provider, you generally get what you pay for.If you do not pay for the software to be setup you may end up spending a lot of time and effort trying to set it up yourself.You will need to build up your affiliate base yourself, if you currently have little or no visitors this can take time. Although with many software solutions having no monthly or ongoing fees, taking time to build up your affiliate base isn't costly.You'll have to install the software and security updates yourself or pay for the software provider to do it for you.If you go beyond 3rd tier commission structures you could put off some affiliates as they may see this as a multi level marketing scam. Recently pay pal have closed accounts of merchants who offered beyond second tier commissions, also some directories will not list your scheme, if they see it as a Multi level marketing program.If you have a mixture of payment options you may find it time consuming to administer.

Affiliate software

Before you make a choice on whether you sign up with a network or decide on an in house scheme it is important to consider the different features of affiliate software.

Features

Brandable: the software allows you to change the look and design of it so that it fits in with your website.
Operating system: Unix or similar, and (or) Windows servers anything else and you may be paying extra for the hosting.
Export data: whether you need your data in csv or to be sent to a specific accounts package, This feature is a must to track your scheme.
Import data: If you need to import details from a CRM or any other type of system.
Multi tier: capable of 2,3,4,5 tiers etc.
Commission payment basis: You need to consider these features depending on the type of scheme you choose to run: Multi level commission basis number of tiers required (affiliate of affiliate etc), Pay per Click (PPC), Pay per lead (PPL), Pay per Sale fixed amount, Pay Per Sale % of sale, Bonuses payment depending on performance, Commission level changes the more sales achieved, Lifetime Commissions, Manual Commission override.
Affiliate contact: through bulk email or individually, automated sign up, approval before sign up, email templates.
Affiliate console features: Sales statistics, impression statistics, sub affiliate list, sub affiliate contact, Page Replication, activity report - historical and to date, commission earnt - historical and to date.
Auto link generation, banner generation, custom banners
Software support: monthly contract, annual contract, email, IM, skype.
Tracking technology: as discussed earlier cookie, ip etc

The basic questions to ask are when buying affiliate software

On top of any specific features you require it is also important to ask the following before making a software purchase.

What are the hosting requirements?
Will the package integrate with my shopping cart?
Do you offer install support?
Is there a money back guarantee?
How much is the software (configured and installed)?
How much for the support contract?

It is important to remember that you get what you pay for more specifically at the lower end of the affiliate software scale. If you pay $50 for a package that is unsupported, unless you have access to a software programmer it is unlikely it will work very well should you run into complications setting it up.

What is Affiliate Marketing

The concept of Affiliate marketing is simple, you promote a merchants website and they give you commission on the sales you generate or the click throughs you send.There are a number of methods that you can use to make money from affiliate marketing both on and offline. Methods include using your own website, Mailing lists you have built up, ebooks, blogs, video blogs, forums, PPC advertising, local media advertising, and custom software.

Affiliate programs provide you with your own log in area and statistics. You can choose which adverts to use (banners, text links, offline flyers), how many visitors you've sent, and how many sales you've generated. It'll tell you who much commission you have made and possible which affiliates you have referred to the program and what cut of their commission you get. The tracking works by generating unique tracking ids that you apply to your links to the merchant site.

Why become an Affiliate Marketer

You can make a suplementary or even a main income from affiliate marketing, depending on how much time and effort you put into a campaign.

What are the Affiliate Marketing Models

There are three main types of affiliate models, although different terms are used to describe them, they usually fall into these two categories.

Pay Per click also referred to as cost per click. You get paid every time your link or banner is clicked on from the affiliates site. Mainly based on unique clicks but sometimes raw clicks are used to calculate your commission.
Pay per Sale also referred to as pay per action or pay per performance. You get paid for the results in the form of commission, or a set fee, for a sale or sign up. If you get paid for results, the commission can be much higher than achieveing a lower amount per click.
Pay per Lead also referred to as pay per action or pay per performance. Similar to pay per sale, except it is a step back in the sales process. If a merchant has a product or service that cannot be sold online (such as a company offering bespoke building work, or a mortgage advice service) and needs to have some form of face to face, or telephone contact before a sale, the you are paid for generating the lead.

Affiliate tracking methods

Whether you sign up with an affiliate network or your own in house software the affiliate tracking methods generally follow the same principles.

Session tracking: When a visitor clicks on your affiliate link their visit is tracked through session tracking. The session is often tracked using cookies and IP tracking (described below), but sometimes people clear their cookies, or do not have fixed IP addresses. To get round this affiliate software uses a variety of methods to track sales you generate.
Cookie Tracking: When a visitor to an affiliate site clicks on your link a cookie is loaded into their browser. This cookie logs your affiliate ID so when they buy from the merchant's site the affiliate software picks this up, and logs the sale to you. The cookie can be set to be valid from a few days to months meaning that if visitors don't buy straight away, but come back in a few days time the sale is still logged against you.
IP tracking: The affiliate software logs the IP address of a vistor who has clicked on your link. If the vistor makes a purchase the merchant's site, the software compaires the IP to that of those recorded, and from this can determine whether you have generated the sale. Instead of the information coming from a user's brower it comes from the software's database so their is no issue if cookies get wiped. The drawback with this is that vistors may not have a fixed IP address, so if they visit the site at a later date the software will not find a match, which results in you not being credited with generating the sale.
Customer ID tracking: This form of tracking Generally requires the user to register on the first visit to the website. This can be for a newsletter or just to receive a free download. From this either their email address is stored and logged against your affiliate ID. Every time the user logs in and makes a purchase you are credited with generating the sale on a reoccuring commission basis (below).
Access code tracking: This method is where a customer is given an access code to log in to your website. With different codes some offer different pricing structures for products, or for a download or subscription sites the code could offer a free trial. The access code is attributed to you so any resultant purchase will be logged to your account.
Discount coupon: An offer code is issued to a buyer at an exclusive price. Any visitor who uses the code will have the sale logged as being generated by you.
Replicated webpage: Using this method the merchant creates a template website. When you sign up you are given your own replicated pages which can be edited to include your own phone number, email, etc. All orders made from the your website are tracked. Such systems are not very common these days as it is diffcult to implement anything more than the simplist of replicated sites. It can also prove very difficult to keep all the replicated sites up to date.
Recurring commissions: To make their affiliate schemes more attractive merchants can offer recurring commissions from repeat customers. If you are promoting lower value products that buyers need several times a year e.g supplements, you could end up with a good monthly income stream.

Picking the right affiliate scheme

Picking the best scheme is down to personal choice and how well you feel you can sell a merchant's product or service. However you should also consider your relationship with the merchant and whether they can be trusted. Remember if a scheme is offering less commission but has a good reputation, and you have a good working relationship with the merchant, you could be better off in the long run if you choose it. Where as another scheme that pays higher commission, but it is irregular, and the merchant is difficult to get on with may end up costing you more. We have described what to look out for when joining an affiliate scheme below:

Options for joining an Affiliate program

You have two choices for joining an affiliate program, through a network, or directly to a scheme managed by a merchant.

Through a network

Main selling points through a network

The network makes every effort to ensure you get paid as they usually opertate an upfront payment system with their merchants.
You are updated on any new products and any new merchants who sign upto the network so you can make sure you are promoting the site that offers the best commission opportunity.

If you promote several different sites there is just one log in area that covers them all.The affiliate networks can be trusted more than a site that could go out of business after you have spent time and money promoting it.

Behind the propaganda

You can be offered less commission than you get from dealing with the merchant directly. As the networks take their cut of every sale you make, the merchants are left with less profit to pay you from.You may not receive bonuses from individual sites. As the networks control communications from you and the merchants site, you could be their top performing affiliate but only get paid a standard commission. If you dealt with the merchant directly you may get enhanced commission for being their top sales generator.

In house

Main selling points

You can give direct feedback on the affiliate scheme to merchants.
You can be offered more incentives or bonuses from the merchant as they are in contact with you and monitor your perfromance.
You are likely to get more commission for the same products as a network does not have to be paid.
You can get more commission for sigining up other affiliates and a commission split on their sales with multi level marketing features most affiliate software for merchants has. Networks cannot offer this tierd commission as they cannot track who referred who to which program.

Behind the propaganda

If merchants are start up companies you may find that should business levels be too low you may not get paid.

Affiliate Log in area

It is important to monitor how your website is performing and how much revenue you are generating. Any good affiliate scheme should have a log in area where you can track:

Site impressions: the number of times visitors view your site.
Number of clicks: the number of times your affiliate link is clicked.
Number of sales: the amount of sales that are generated as a result of your refferal.
Amount of commission: the amount of money you have made for your efforts.

With the above information you will be able to quickly monitor your campaign performance and deside whether it is profitable. Some more advance software can also allow you to generate specific links for each of your marketing campaigns. This is useful if you have two webpages or choose a PPC campaign with your affiliate link. You can the see which specific activity generates the most revenue.

Stealware

One thing to look out for is stealware. This is software that rewrites affiliate tracking codes and overwrites cookies on the users computer. This results in your hard efforts in promoting a merchants going unrewarded and any commissions you generate being paid to someone else. Stealware can infect a users computer in the same way as mailware and other viruses, and can also be loaded on as part of someother software such as a toolbar or application. It is important to monitor your site traffic and pick up an any descrepancies between visitors sent and how much commission you make.

There are several methods of defence against stealware. One method is for the merchant to monitor affiliate performance and ban users who operate are opertaing stealware tactics. Another is for the affiliate software to only log commission payments if the affiliate ID matches that of their registered website.

Terms

Make sure that you can promote the merchants products or services in the way you want to. Some schemes apply strict criteria on how your site can look and how their products are advertised. This can range from merchants not allowing competitiors to be advertised on the same site as them, to placing a limit on the amount you can bid on a keyword term in a PPC campaign.

If the restrictions involve you changing the content of your site, your page rank can be effected, so consider how important it is to sell the product before chaning your site.