What Is Affiliate Marketing?

What is Affiliate Marketing, and does it have a place in your marketing mix?

Affiliate marketing is an online marketing/advertising/sales channel in which advertisers (online merchants that sell products or services) pay publishers (independent parties that promote the products or services of an advertiser via the internet… sometimes called “Affiliates”) only for results. The publisher is not compensated unless the referred visitor completes a qualifying transaction (purchase or lead submission, for example), making affiliate marketing a low-risk option for expanding market presence and driving sales or lead collection.

This “pay-for-performance” model is, in essence, the modern version of the “finders’-fee”, where individuals who introduce new clients to a business are compensated. The difference in the case of affiliate marketing is that advertisers only pay their publishers when the new client introduction results in a sale or a lead, making it a low-risk, high reward marketing vehicle for both parties.

There are many different ways in which publishers promote products and services. Here are a few examples:

Coupon Sites
PPC Companies
Loyalty Sites
Mall Sites
Blogs and Niche Sites

Should Affiliate Marketing have a place in your marketing mix?

The answer depends on a number of factors. An Affiliate Marketing program is likely to be successful if these key conditions can be met:

1.     Successful, experienced program management is available internally or via outsourcing

2.     The product portfolio presents a combination of volume and price that will justify the expense of an affiliate program

3.     The product can be purchased via a trackable means. Tracking technology is evolving rapidly and includes support for text links, banner ads, and telephone calls (a recent mainstream development), among others

When eMerchants meet the above criteria, there are verdant supporters of the effectiveness of Affiliate Marketing programs. According to Mike Abolafia, e-Commerce Director at Taylor Gifts, “Affiliate marketing should be a main component of the online marketing strategy for any online business selling goods or services. With a fixed cost it has the least risk and can generally allow you more room to spend on other channels.”

Affiliate marketing is a relationship based marketing channel with a steep learning curve and a variety of options for implementation. Solutions range from full-service Outsourced Program Management (firms that do this are called OPMs) to completely in-house hosted and managed solutions.  Selecting the right solution for your company can be challenging due to considerable false or questionable information circulating on the internet. However, online merchants that fail to exploit this marketing channel run the risk of losing business to competitors that build strong affiliate program.

While there is no cookie cutter answer to whether an online merchant should invest in an Affiliate Marketing program, the above criteria give a fairly clear indication. With thoughtful selection of an Affiliate Marketing solution merchants have a low risk means to protect their existing online sales, and extend their market reach dramatically.

Contributor Jeff Cress helps eMerchants implement Affiliate Marketing programs with an eye towards maximizing ROI. Jeff can be reached at jeff.cress@mgecom.com, 919.439.0013, or via twitter at @AffiliateMgt.