Affiliate Marketing Overview - American Marketing Association

Affiliate Marketing Overview


	By Declan Dunn
	Declan Dunn is CEO of ADNet International, a marketing services provider. Since 1996 ADNet has developed strategies, promotional campaigns, and full business development for major clients like Network Solutions, Travelocity, and MyPoints.

	1. Introduction

An affiliate marketing program is a technique to build traffic, and e-commerce revenue, by working through a network of related Web sites to actively promote a particular product or service.

The system works by creating a sales force network rather than an expensive media or advertising campaign. The affiliate either shares in the revenue generated by sales, or earns revenue for providing sales leads. As a result that affiliate has a business interest in the success of the sales promotion.

Benefits of Affiliate Marketing

Leads

Generating leads from affiliates on the Internet begins by targeting high traffic sites, and niche sites with a loyal following. A Web site with an online magazine mailing list, or considerable daily traffic, is a huge asset.

Example: A few years ago Edmunds.com, a Web site with detailed information on automobiles, generated leads for Auto ByTel. This was an early affiliate, lead-generating model. The shopper went to the Edmund’s information site to find out about the car. They filled out a form at the site -- a sales application -- that was forwarded to Auto ByTel and than to a local automobile dealers to start the sales process.

Edmunds used its traffic to generate leads and charged Auto ByTel per inquiry. Because these inquiries were qualified, the price charged was higher than a simple clickthrough would get. Edmunds not only generated leads, they became a primary source of AutoByTel’s business.

Questions to Consider:

How much do you pay per lead?
How many free leads do you get from affiliates?

Sales

The first months will often provide the biggest returns. Exceptions include commodity products such as books and music CDs, and repeat purchases such as airline tickets or investment products.

Questions to Consider:

How many sales are your affiliates generating?
Can you reward those who generate more with better margins?
Do you offer training and support for all your affiliates to give them a chance?
The first month an affiliate joins your network is critical. Do you make the effort to keep them active, interested, and thriving?
Do you track your affiliate’s performance monthly and seek ways to improve it?

Return on Advertising

Affiliate networks should increase the value of advertising space on the Internet. In reality few sites really sell any advertising because selling it is a full-time job.

The wealth of dead advertising space makes affiliate programs a long-term solution for both parties. If you can generate continual sales from a Web site, it only makes sense for the affiliate to keep you on the site.

For example, Brian Clark of ReveNews, an affiliate information site, participates as an affiliate selling software. He receives almost $37 CPM for selling that software through an affiliate program. If he were to sell the banner ads alone, he would be lucky to get $15 CPM.

Questions to Consider:

Are you increasing the CPM of the affiliate’s site?
How does your CPM from affiliates compare to actually buying advertising?
Would your marketing costs be better served by clickthrough, affiliate networks, or traditional marketing?
Can you incorporate any off-line resources into your affiliate program?

Branding

Amazon.com is a great case study of a brand developed through affiliate networks. Brand identity demands mass exposure, which is a great reason to sign up many affiliates. Administration costs should be measured against this over time.

Amazon.com obviously benefits from administering its huge network of affiliates. Since it benefits the Web site owner to sell books, and to get perceived credibility for offering this well-known bookstore’s offerings, Amazon.com has signed thousands of affiliates. More importantly, Amazon.com developed a whole brand through this strategy.

Questions to Consider:

Will the branding of your business help people remember your company’s name?
Will the branding of your business enhance the credibility of other Web sites in your network?
Can you insist that affiliates choose you over your competitors by competing on profit margins, training, and developing good will?

Affiliates as Customers

The final key is one most overlooked by many affiliate networks. The affiliate salesperson is likely your best customer.

Why do so many affiliate networks fight the natural urge of affiliates to buy through their own network? For example, if you buy a book through your Amazon.com affiliate network, it is literally against their policy and if they catch you, they can revoke your right to sell books.

This makes sense if you look at the affiliate strictly as a salesperson. The 20 percent of affiliates who do the selling are the folks least likely to engage in this kind of trickery. Making money does give you a form of loyalty.

For the other 80 percent, buying through their own network is one of the only ways to make it a viable enterprise. By saving money, they benefit from being an affiliate.

Does that mean Amazon.com should pay them 15 percent off of qualified books? Perhaps not, but it wouldn’t be a bad idea to set up a special buying deal for affiliates so they could get some discount on qualifying purchases. Why not encourage them not only to sell, but also to buy?

Questions to Consider:

Are you realizing the full value of your affiliate network or simply looking at them as salespeople?
Can you encourage them to buy through you, for their friends or their network?
Customer loyalty programs will be a natural outgrowth of affiliate networks. Why not start now by allowing your affiliates to save money, as well as make money?

Page 1 of 4	Next Page >> Last Page
2001 MarketingPower.com Inc. Contents used by permission of the author.

Table of Contents

1.	Introduction
2.	Building Affiliates
3.	Managing Affiliates
4.	Supporting Affiliates