Blog Post

What is Affiliate Marketing

by: Power Digital June 16, 2021

Table of Contents

Are your social media feeds or favorite websites full of seemingly ordinary users posting gleefully about specific products and services? You may be witnessing the fascinating ecosystem of affiliate marketing. But what is affiliate marketing, exactly? Affiliate marketing is a performance-based system.¹

Third-party affiliates receive an affiliate commission for each affiliate sale from a company to share their products and services and, consequently, drive sales.²

If you’re a business owner looking to create a new growth strategy or someone hoping to build a side hustle, learning the mechanics of affiliate management and marketing can pay off big time.

So how do you start affiliate marketing? Let’s dive in!

How Does Affiliate Marketing Work?

The prominence of social media and digital marketing has been a boon for the world of affiliate marketing. Business Insider attributes 15% of e-commerce revenue to affiliate marketing. That’s because some of the best affiliate marketing programs are easier than ever.

Anyone can create a social media profile or website and build their affiliate network audience, and businesses can access sophisticated software to track affiliate product sales sources and conversion rates. Still not sure about the nitty-gritty of how affiliate marketing works?

Let’s break it down:

Start a Program – If an online company wants to increase its audience and sales, it can start an affiliate program.
Find an Affiliate – They’ll connect with affiliates with established audiences through a blog post, websites, email lists, or social media profiles.
Connect to Your New Target Audience – The affiliate marketer will promote the company’s affiliate product or services on their individual affiliate site or affiliate network and include a unique tracking affiliate link provided by the company.
Make the Sale – When someone clicks that tracking affiliate link that is associated with the affiliate partnership, they’ll be redirected to the business’s website, and the business will automatically record the source of that customer.

If the potential customer makes a purchase, the affiliate marketer receives their affiliate income or commission. That commission might be in the form of a discount, free product, or even five to ten percent of the sale amount.

Both the business and the affiliate share the same goal: to drive affiliate sales. This unified financial benefit creates a promising affiliate partnership.

How Much Money Do Affiliate Marketers Make?

The affiliate income varies widely based on factors like:

The audience
The product or service
The time invested

A full-fledged influencer can make six figures while a niche micro-influencer can make a couple hundred dollars. As a general rule, the more time you invest in your affiliate marketing, the more money you earn.³

Types of Affiliate Marketing

We can divide the affiliate marketing strategy into three main categories:

Unattached Affiliate Marketing – With unattached affiliate marketing, the third-party affiliate has no direct connection to what they promote nor any skills, expertise, or authority regarding the product or service. It’s easy to build an unattached affiliate marketing program; however, the affiliate has no relationship with the customers or product.
Related Affiliate Marketing – Related affiliate marketing is the other side of the coin. The affiliate will have a relationship with the product or service they promote because it relates to their personal brand and identity. Related affiliates can drive more traffic than unattached affiliates because of their authority and their audience’s trust.
Involved Affiliate Marketing – On the far side of the spectrum is involved affiliate marketing. These affiliates have used the product they promote, so their word is trustworthy and genuine. This can help generate more sales; however, it can also potentially backfire on the affiliate if the product or service ever experience customer backlash. Unlike unattached or related affiliate marketing, involved affiliates can make claims about the product or service because they have firsthand experience with it.

If you’re hoping to become an affiliate, you can start with unattached affiliate marketing as you build your personal brand and audience. Businesses can experiment with each of these three styles to find which type generates leads with the highest conversion rates.²

The Pros and Cons of Affiliate Marketing

Like any marketing strategy, affiliate marketing has both pros and cons. Let’s take a look at some of the distinct advantages and disadvantages for the business and the affiliate, respectively.

Advantages For Businesses

Business can enjoy benefits such as:

Low-Cost Advertising – Affiliate marketing programs are a low-cost option, especially because the affiliate carries the potential cost of advertising.
Return on Investment – There is generally a high return on investment because businesses only need to pay the affiliate for traffic that converts to sales.
Creativity – Businesses can enjoy the creativity and novelty brought by their external affiliate partners.
Control – The company will establish the terms for the affiliate marketing program so that they can maintain full control.
Increased Reach – Companies can diversify and grow their audience by partnering with affiliates globally.

Advantages For Affiliates

Eager affiliates also can look forward to some enticing benefits like:

Increased Income – Affiliates receive compensation for converted sales as well as incentives like free products, services, or discounts.
Growth Opportunities – Affiliates can develop their marketing skills and creativity through affiliate programs to build their online presence and eventually increase their rates.

Disadvantages For Businesses

Businesses can avoid the major disadvantages of affiliate marketing through proper planning and experience. Watch out for disadvantages like:

False Analytics – Early affiliate marketing programs that paid per click or per impression were vulnerable to software that could artificially boost clicks or impressions; however, modern programs are less susceptible to this manipulation.
Potential Fraud – There are still ways to defraud affiliate marketing programs. Tactics include buying misspelled domain names to earn commission on the redirected link, filling registration forms with false information, or purchasing AdWords for high-ranking search terms.
Required Planning – To decrease fraud, businesses need to plan their affiliate programs effectively and clearly define their partnership agreements. Businesses also need to provide extensive details on how they want their brand and products represented.
Additional Manpower – Because affiliate marketing programs still attract fraud, they require the business to monitor affiliates and enforce partnership agreements.

Disadvantages For Affiliates

Unfortunately, some of the advantages for businesses become disadvantages for their affiliates. In particular, consider the:

One-Sided Risk – Affiliates carry the cost of advertising, so the risk for both parties is not equivalent.
Lack of Control – Since the business defines the terms of the affiliate marketing program, affiliates have less control; however, as they grow their brand and audience, affiliates also increase their bargaining power.²

How to Get Involved with Affiliate Marketing

Now that you know the answer to what affiliate marketing is, you can implement this marketing strategy yourself. Whether you’re a business or an individual, you can create an affiliate marketing program or become an affiliate with minimal upfront investment.

For Businesses

Since the advertising impetus is on the affiliate, building an affiliate marketing program as a business is a straightforward process. Consider following these four steps:

Define the Partnership – Start with a clearly defined partnership agreement. Decide what kinds of affiliates you want to work with, how they will be compensated, how they should represent your brand, and how they will be penalized for reneging on your deal. A binding contract will protect you from headaches down the road.
Promote the Program – Find your affiliates. Major e-commerce platforms like Amazon, Etsy, and eBay allow potential affiliates to apply to their program. If you’re a smaller business, you might need to reach out directly to influencers and stakeholders whose online presence aligns with your brand and intended audience.²
Track the Sales – Build your sales funnel. Decide how you will track your buyers’ path from the affiliates page to clicking purchase. You will likely need to invest in a specific service that tracks customer analytics if you haven’t already.
Survey the Success – Audit your program. Are leads converting? Is the commission cutting into your bottom line? Would a different style of affiliate marketing work better? Surveying the success of your affiliate marketing program helps you get ahead of any roadblocks down the line.

For Affiliates

With these five steps, potential affiliates can grow their influence and develop an enviable side hustle. The five steps include:

Develop your Identity – Start with an internal audit. Could you be a fashion blogger? A foodie? An online comedian? Hone in on a major aspect of your identity that you can center your content around.
Know Your Audience – Think about your audience. What kind of content would they want to see? Which social media platform or marketing channel will they respond to best? A clear understanding of your future audience will help you begin to grow your influence.
Grow Your Personal Brand – Focus on growth. Create timely and relevant content that will grow your audience and your organic reach. Develop a social schedule and strategy to increase your influence.
Research Affiliate Marketing Programs – Begin researching potential affiliate marketing programs. Find products or services that align with your personal brand and audience demographics
Create Content – Develop enticing content. Imagine what might convince your audience to purchase the product or service you advertise and invest in organic and paid strategies to capture leads.³

Are You Ready to Enter the World of Affiliate Marketing?

According to Forbes, e-commerce will reach a trillion dollars in annual sales for the first time in 2022.³ Companies and potential affiliates alike should develop affiliate marketing strategies to keep pace with the incredible growth of e-commerce.

The future of shopping is undeniably online, and affiliate marketing will continue to be a major channel for customer outreach and conversion. If you’re ready to start your affiliate marketing journey, our digital marketing company is ready to help. Whether you choose the Amazon Affiliate program or want to learn more about what a Twitch affiliate is, we’re here to guide you through your affiliate journey!

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