This article explains affiliate marketing from two different perspectives: that of a business using affiliate partners to market their products and services; and that of affiliate marketers earning commission by marketing another business’s products and services. You may wish to skip some sections of the article, based on which of these two categories describes you best.

What is affiliate marketing?

In affiliate marketing, a brand is helped with its marketing by external partners called affiliates. When an affiliate’s actions complete a brand’s marketing goal, by selling a product or attracting a new subscriber or visitor, the affiliate receives a reward, usually in the form of a commission payment.

Affiliate Marketing with Amazon

Online affiliate marketing emerged in the early 1990s, and has steadily grown in prominence since then. Affiliate Marketing pioneer Amazon grew a very successful early online Affiliate marketing programme. The Amazon’s Associates Program became the web’s first open-participation affiliate scheme upon its launch in 1996.

How does affiliate marketing work?

How affiliate conversions are tracked

Affiliate marketers use a variety of marketing tactics to channel leads, meaning potential customers, to the websites of their partner brands.

When a lead converts into a sale, or completes some other targeted action, the brand is required to reward the affiliate with the agreed commission rate.

There are two popular mechanisms for attributing marketing conversions to affiliates:

  1. The affiliate adds a tracking cookie to the buyer’s web browser, before they visit the brand’s site.
  2. The affiliate uses a unique tracking URL to link the buyer, visitor or subscriber to the brand’s site.

Since the GDPR and associated changes to best practices around third-party tracking cookies, more brands have resorted to the second of these options, unique tracking URLs, since webmasters now have less free rein to install cookies on visitors’ browsers.

Two types of affiliate-brand relationship

In some cases, affiliate partners are facilitated directly by the brand. The brand develops the technological and operational capacity to run its own affiliate marketing program, manages its own affiliate partners and takes full responsibility for compensating its affiliates. This usually involves providing each affiliate with either a unique tracking URL that links through to the brand’s site, or the capacity to install a cookie on the lead’s browser.

The alternative is for affiliate marketing to be powered by an affiliate network, which acts as an intermediary between brands and affiliates, and provides the tracking URLs or cookies required for affiliate marketing. The key benefit of affiliate networks is that they enable brands and affiliates to start affiliate marketing straightaway, with limited start-up requirements and teething problems. The downside is that affiliate networks charge money for their services, potentially leading to elevated costs for brands or diminished incentives for affiliates.

Three types of affiliate

Many affiliates start out as regular customers, who are encouraged to refer their friends and family to a brand in exchange for credit, discounts or cash incentives. This type of affiliate typically shares their affiliate link via email and social media posts.

Meanwhile, professional affiliate marketers use all the methods of digital marketing to earn commission, including PPC, display ads, SEO, influencer campaigns and content marketing. The most prolific of these marketers are sometimes referred to as ‘super affiliates’.

Publishers such as newspaper websites, blogs and YouTube channels can also earn affiliate income, by adding affiliate links to their content. Against the backdrop of declining newspaper and magazine sales, affiliate marketing has grown into an important alternative revenue source for publications including The Independent, The Evening Standard and BBC Good Food.

What are the main types of affiliate marketing?

Affiliate marketing schemes are usually categorised according to how affiliates are rewarded, or what exactly they are rewarded for.

CPA affiliate marketing

One of the most widespread forms of affiliate marketing is CPA. In CPA affiliate marketing, the affiliate gets paid a fixed fee whenever someone clicks an affiliate link and performs a specific action, which will have been agreed between the merchant or network and the affiliate. This gives us the initials CPA, meaning ‘cost per action’ (although some marketers call this type of marketing ‘cost per acquisition’ instead).

Common targeted actions in CPA include clicks-through, service enquiries, form completions, installs and downloads, or simply website visits. This type of affiliate marketing relies on affiliates’ ability to bring leads into the merchant’s sales funnel; it does not require the affiliate to identify leads with a high likelihood of making a purchase. As such, CPA affiliates can target their marketing very broadly, without fear of low commission rates resulting from a low conversion rate. It places the burden of conversions on the partner merchant.

Cost-per-sale affiliate marketing

Similar to CPA is CPS, ‘cost per sale’ affiliate marketing, where the targeted outcome is always to sell one of the merchant’s products or services.

For merchants, the benefit of this setup is that you’re only paying for marketing leads that turn out to be valuable – the ones that convert into sales. The downside is that you’ll generally be expected to pay high commissions, relative to CPA, usually as a percentage of the item(s) sold.

From the affiliate’s perspective, CPS places added importance on the quality of leads referred to the merchant. You could be sending thousands of visitors to the merchant’s site – but you’ll only earn commission on the leads who buy something. CPS also requires the affiliate to trust in the effectiveness of the merchant’s landing page(s). 

The higher the conversion rate of the landing page, the more commission you’ll be likely to make on the leads you refer. For this reason, CPS affiliates should closely monitor the conversion rate of their referrals, which means the percentage of leads who make a purchase, earning the affiliate a commission payment. Over time, the affiliate should prioritise the merchants who turn out to have the best conversion rates.

Cashback and voucher affiliate marketing

Some merchants incentivise affiliate referrals with discounts or cashback on their products and services. When the affiliate logs a conversion, the merchant refunds some of the cost of a prior purchase, or provides a discount on a future purchase.

This form of affiliate marketing is generally aimed at ordinary customers, rather than professional affiliate marketers. The potential benefit for merchants is that customers may accept lower-value rewards than a professional affiliate marketer would. The downside to this type of affiliate marketing is that through discounting their products, merchants risk devaluing their brand.

Cashback Affiliate deal example from Quidco

Customers who get used to the discounts available through the affiliate arrangement may not be willing to pay full price in the long term. Nonetheless, affiliate marketing based around cashback or vouchers can be a great way to promote a new or little-known brand and to acquire new customers who otherwise would not have heard of you.

One-time vs lifetime commission

Before we conclude this section, we’d like to highlight a component of affiliate marketing programs which can profoundly affect an affiliate’s earning potential, or a merchant’s affiliate costs.

Some CPS affiliate setups pay affiliate partners a one-off fee for their conversions; others pay lifetime commissions on everything the referred lead buys from the merchant.

As an affiliate, participating in a CPS affiliate marketing campaign with lifetime commissions can be an excellent long-term source of passive income.  From the merchant’s perspective, paying lifetime commissions to affiliate partners can be very costly, but is also a great way to motivate affiliates to prioritise the merchant over others. If your brand is offering lifetime commission on affiliate leads, you should be aiming to make that fact known to expert affiliates.

Affiliate marketing from the affiliate’s perspective 

Most of the active players in an affiliate network or program are the affiliates themselves. These are the people who work to earn commission by promoting something on behalf of a merchant or network operator.

Affiliate network or brand’s own affiliate program?

As an affiliate marketer, choosing the right networks or programs to join is crucial to the potential for success.

There can be significant differences between participating in an affiliate network and the alternative option of participating in the bespoke affiliate program of a specific brand. The following pros and cons are often applicable:

 

Affiliate network   Brand’s own affiliate program  
Pros Cons Pros Cons
●  Slick affiliate marketing systems ●  Lower commissions are likely ●  Potential for generous commissions ●  Affiliate marketing systems may be unproven or unreliable
●  Proven track record ●  High competition between affiliates in high-profile networks ●  Opportunity to promote unique or underpromoted products ●  Affiliate marketing may be a relatively low priority of the brand
●  High level of accountability (network’s reputation rests heavily on affiliate experience)   ●  Potential to become a key affiliate of a brand  

To put it simply, affiliate networks tend to offer the safest return, while brands’ own affiliate programs can offer the greater rewards (although not all of them do). We would advise new affiliate marketers to sign up to a few affiliate schemes of each type, then see which works brings the best results. 

A day in the life of an affiliate marketer

The first step in an affiliate marketer’s workflow is likely to be research into which product or service types to target with their upcoming marketing. Good starting points include:

 Competition metric in Google Ads: this metric of the PPC ad platform rates how much advertisers are willing to bid for their website to show up with a certain search query. This can indicate which product types are the biggest earners. 

● Search volume and other search metrics: use an SEO tool to identify fruitful topics for your content marketing. Try to find topics with high search volume, where existing high-ranking content can be improved upon.

● KPIs from previous campaigns: there’s always something useful to learn from studying data from previous campaigns.

Another fixture of an affiliate marketer’s work is campaign planning and execution. The specifics of this will depend on the chosen marketing channels and tactics of the affiliate. These may include:

● Planning, creating and publishing articles on a website or blog;

● Ad management on PPC platforms such as Google Ads, or social media advertising;

● Social media post planning, creation and scheduling;

● Creation of videos or podcasts to publish on relevant online channels.

Affiliate schemes tend to differ in their features and processes. Most are centred around a few key components, such as personalised dashboards, and databases of participating merchants and products to promote. Successful Affiliates who have a close relationship with an affiliate scheme may have a regular point of contact who represents that scheme.

Which affiliate products generate the best commissions?

Anyone starting out in affiliate marketing will soon realise there are certain types of product which tend to earn attract a better conversion rate or higher commissions than others. These products tend to be things customers are likely to order online, and which they are unlikely to be able to try for themselves before they buy.

Target Internet’s content writer, who works extensively with affiliate marketers, has noted high performance metrics across the following product categories:

● Mattresses

●  Smart home devices including security cameras

● Cordless vacuum cleaners

● SEO tools for marketers

● Fridge-freezers

● VPNs

● E-learning products

These examples are intended as an indicator of the types of product which can earn good affiliate commissions, rather than as a list of product categories for you to go away and target.

The best policy is always to target product types that relate to topics which are relevant to the marketing channels you own, or channels you can access and use in your affiliate marketing. An Instagram influencer specialising in fashion could have authority in the fields of fashion and lifestyle, because their audience likely believes that to be so. A digital marketing blog might have the authority to discuss marketing and B2B products for the same reason.

Some product and service categories have higher earning potential for affiliate earnings than others – but the best earning potential only exists where the affiliate or one of their partners has earned the authority to talk about the relevant topics.

Use Affilitizer to find out which merchants are using an affiliate network

We’d like to introducing you to a great free tool you can use to kickstart your research into affiliate marketing.

Affilitizer is a free browser extension for Chrome and Firefox. With the extension installed, you’ll see a special symbol next to websites that are signed up to an affiliate network or have an affiliate program, whenever you do a Google Search. Here’s what we saw on the top page of search results when we Googled ‘washing machines’ with the Affilitizer extension activated:

Affilitizer extension in action

The results with symbols next to them have been identified by Affilitizer as belonging to URLs that participate in an affiliate scheme. If we were to click on one of these symbols, the extension would show us which affiliate scheme(s) the site is linked to, along with a link to the affiliate signup page for the relevant scheme(s).

In our experience, Affilitizer provides the fastest way to connect with affiliate schemes relevant to a certain product category or merchant. It’s a must-have tool for any affiliate marketer. 

Affiliate marketing from the merchant’s perspective

The first big decision any merchant must make about its approach to affiliate marketing, is whether to join an affiliate network or to set up an affiliate program of its own. Each approach has its own strengths and weaknesses, which can be summarised as follows:

 

Affiliate network   Brand’s own affiliate program  
Pros Cons Pros Cons
●  Affiliate marketing systems are taken care of by the network ●  Affiliate network fees can squeeze the brand’s commission budget, leading to lower incentives for affiliates ●  Affiliates can be given a greater share of the brand’s commission budget, which provides strong incentive ●  Running an affiliate program requires investment in affiliate systems, marketing and ongoing management
●  The network provides instant visibility to thousands of affiliate marketers and publishers ●  Brand has limited control over affiliate relationships ●  Brand has strong control over affiliate relationships, tactics and representation of the brand ●  Brand can be held solely responsible for failures in the affiliate program

Affiliate networks offer merchants a fast, simple route into affiliate marketing, with very low start-up requirements. Meanwhile, setting up a bespoke affiliate program can offer financial advantages and greater control in the long-run, but comes with significant set-up and running costs.

How is affiliate marketing managed within a business?

Businesses which create their own large-scale affiliate programs often employ an ‘affiliate marketing manager’, or ‘affiliate partnership manager’, to handle their affiliate marketing. For detail on the duties of an affiliate manager, see Campaign’s excellent article, ‘What does an affiliate manager do all day?’ 

If a brand does affiliate marketing on a relatively small scale, or solely using affiliate networks, the responsibility for managing affiliate marketing may fall to the marketing manager or an exec.

Which affiliate network should I join?

Affiliate marketers should aim to join affiliate networks which represent brands whose products the marketer is well-placed to promote. For example, an affiliate marketer who owns a tech blog might focus on affiliate networks which represent plenty of tech brands.

Similarly, brands wishing to join an affiliate network should look out for networks that have proven success in marketing relevant products and services.

There are lots of affiliate networks out there, but most affiliates and brands will find they only need to join a few particularly good ones that cover suitable product categories. Here are some prominent affiliate networks you could look at as a starting point:

Rakuten Affiliate Network

Type:Cost-per-sale

UK brands include: Whistles, Hunter, Spartan, Farfetch, Decathlon, Lacoste, Lancôme, Mango, Not On The High Street, Ray-Ban

Rakuten Affiliate Network is one of the world’s leading affiliate networks for fashion and lifestyle brands.

Publishers and marketers who join the network gain access to monthly newsletters with tools and insights, educational webinars and support via phone and email.

A panel of advertisers and publishers ranked Rakuten Affiliate Network #1 in mThink’s Top 20 Affiliate (CPS) Networks 2020.

Join Rakuten Affiliate Network (affiliates)

Join Rakuten Affiliate Network (merchants)

Perform[cb]

Type: Cost-per-acquisition

Perform[cb], formerly known as Clickbooth, is a CPA marketing giant, formed through the merger of several leading networks.

This network has earned rave reviews from merchants and affiliates alike, thanks to its winning combination of innovative features, effective reporting and responsive support.

Join Perform[cb] (affiliates)

Join Perform[cb] (merchants)

MaxBounty 

Type: Cost-per-acquisition

MaxBounty is widely regarded as the leading affiliate network for advertiser experience, thanks to its considerable investment in ad-tracking tech and advertiser support.

With a performance-marketing-based approach, this network is ideal for affiliates and merchants who are interested in using in-depth insights to thoroughly optimise their affiliate marketing strategy.

Join MaxBounty (affiliates)

Join MaxBounty (merchants)

Conclusion

Whether you are an aspiring affiliate marketer or you represent a business which is interested in tapping into affiliate marketing, we hope this guide has given you some insight into this growing area of marketing.

And rest assured, affiliate marketing is growing. In the UK, affiliate marketing now drives over 1% of the country’s GDP, with sales growing at a rate of about 10% a year. Meanwhile, in the US, spend on affiliate marketing is projected to reach $6.8bn by the end of 2020.

Affiliate marketing has long been regarded as the marketing of the future. It’s now looking a lot like the marketing of the present.