BCL Doing Business Online - Affiliate Marketing

Affiliate Marketing is becoming a dominant business model for advertising on the internet. 

Affiliate Marketing - What is it?

Affiliate marketing on the internet provides a pay-for-performance model for merchants (those trying to sell goods or services online) to form commercial relationships with affiliates (those who have the audience who might buy the goods or services). The payment is usually on a % of sale, per lead or per click basis. 
 
For merchants, affiliates are a bit like commission-only salespeople - with all the benefits and drawbacks of commission-driven salespeople.  
For affiliates with websites, merchants are their advertisers. 

Affiliate Marketing - Benefits to Advertisers

1. You only pay for advertising that works by paying commission on sales or a fixed amount per lead or per click.
2. You can advertise on a variety of websites without having to negotiate lots of different prices. You make an offer, and the publisher decides whether to take it up. The more attractive the offer, the more likely the best affiliates will start to promote you. The more they promote you, they more you sell.
3. You can save money that you'd otherwise spend on building the extra content and search engine optimisation needed to try to build traffic to your site. In the offline world, you'd place an advertisement in the newspaper or magazine rather than fund a whole new publication just to carry your advert, wouldn't you?

Affiliate Marketing - Benefits to Publishers

1. You can earn money from your website.
2. You can access a wider range of advertisers without having to negotiate lots of different prices for different pages and positions. You decide whether the merchant will fit your audience and if their offer is good enough, and you place the advertisements where you think they will work best. The better you do this, the more money you make.
3. Using a network can save time and worry collecting payments from lots of individual advertisers.

Affiliate Marketing - PPC Affiliates

Some affiliates don't have websites. Instead they buy traffic from PPC search engine advertising and lead it to the merchant's website. Their profit (or loss) is the difference between the cost of the traffic and the commission they make from the merchant.

Affiliate Marketing - How much does it cost?

1. Cost of affiliate program software and management varies. Most companies outsource their programs to affiliate networks who operate as third parties, providing software and statistics and co-ordinating payments. Some networks charge monthly or annual fees. All networks charge a percentage on top of your payments to merchants.  
    
2. Commissions vary, depending on the industry. For example percentage of sale ranges from 3% or 4% to 40% or more. Obviously you don't want to go too high, but if it's too low, publishers will be attracted to your competitors' sites.  
    
3. Changes to your website are adding a single line of code to your "thank you" page, and perhaps adding a page inviting web publishers to join your affiliate program.

Affiliate Marketing means Pay on Performance for both

It is a common misconception that if affiliate marketing doesn't work out, that the affiliates or the affiliate networks have failed. However, it is not as simple as that. There are three parties - the merchant, the affiliate network and the affiliate - and all have to perform.

1. The affiliate has to find a way to send the target market to the merchants website at the right time.
2. The network has to provide reliable tracking and good reporting.
3. The merchant has to have a site that is designed to convert potential customers into sales.

Pitfalls of Affiliate Marketing

The anonymous and tiered nature of the industry means that it can take a lot of time check up on affiliates' methods. If you want to try affiliate marketing with the BCL.com.au sites rather than on the open networks, please see OEPL Performance Marketing.

More on Affiliate Marketing

• BCL Business Blogs has a section on affiliate marketing which explains many of the common terms used in affiliate marketing, has tips on working with affiliates, etc