How does Affiliate Marketing Work?

Are you on social media? If so, you’ve probably seen an account promoting a product with a discount code or link.

This is an example of affiliate marketing – where a third party sells a product or promotes a brand on behalf of the owner. Let’s take a closer look at who is involved and how the model functions.

Who are the Stakeholders

Basically there are 3 key players in an affiliate marketing program:

  • The business/enterprise who owns the product
  • The affiliate who markets the product
    • Influencers, bloggers, YouTubers
  • The buyers/customers/consumers
    • The audience which marketing efforts are directed at

The Affiliate Business Model

Affiliate marketing usually involves online purchases. The business/enterprise provides the affiliate a link, this allows tracking and attribution to the affiliate when actions or sales occur.

Sometimes businesses provide instructions to the affiliate on how it should be marketed to the customer. These may include specific creative materials, points to mention, specific platforms to be used, and so on.

The affiliate can be remunerated through different revenue models:

  • Pay-per-impression
    • Based on impressions like the number of views
  • Pay-per-action
    • Click: When the customer clicks into the business/e-commerce site
    • Lead: Trigger of desired action involving lead creation, such as consumer signing up for an email newsletter
    • Sale: Standard conversion where a sale is made

What are the Benefits of Affiliate Marketing?

Affiliate marketing is a popular way to promote in the online space, and for good reason. It leverages the online connections and relationships that form a huge part of how our interactions on the web.

In fact, advertisers generate between 15% and 30% of all sales from affiliate programs.

Affiliate marketing is cost-effective. It utilizes a performance-based model, you pay only for when a previously agreed upon action takes place. Unlike traditional ads, you don’t need to pay if there are no results!

Another benefit of using affiliates is that you can reach potential customers that fit right into your target market. Affiliates can make segmenting easy for you as they each have their own niche following. This also offers the opportunity of expanding your customer base internationally too!

For small businesses, affiliate marketing can be a way to boost your reputation and credibility. It also allows you to scale quickly by exposing your business to a large audience which would otherwise be costly and time-consuming to reach from scratch.

Now you’ve got an idea of what affiliate marketing is and what benefits it serves, check out how to get started here.