There are 7.5 billion people on earth. The number of internet users is almost half of this number and it is increasing rapidly. The web is a vast and endless world because the online presence allows each individual to benefit from thousands of services worldwide.
For a company, the goal is to reach through the web all the users in the world potentially interested in its products. But, in reality it is (almost) unthinkable to fully succeed. Only global giants of the caliber of Coca-Cola or Apple have the strength to reach every corner of the planet. And, even then, you can’t be sure that the latest product fresh from the factory can be advertised everywhere. Promoting and reaching a large audience is a complex and costly operation that requires huge economic resources and an adequate technological infrastructure. It is in this context that the concept of affiliate marketing was born.
Affiliate marketing is a promotional strategy that consists of recruiting affiliates to promote the product and reach the potential customer instead of the company. With its due proportions, both in terms of technology and capillarity, affiliate marketing can be likened to the old word of mouth. Mind you, this is not a new concept that has revolutionized the marketing world. A similar idea dates back to the pre-digital era, when a hairdresser would offer a discount to a customer if they brought a friend.
With the introduction of the computer and the Internet, this marketing strategy came to the forefront and has been consolidated over time. Amazon’s first affiliate program dates back to 1996, two years after the company was founded. But even before that, it was (and still is) widely leveraged in the digital channels of the porn industry. However, it’s only in the last decade that affiliate marketing has found its footing within the user acquisition funnel in web marketing. Today, no matter what a company is doing: sales, work, etc., this affiliate strategy remains practical.
For a detailed explanation of how affiliate marketing works, there are some tricky technical issues that need to be addressed: from using ADV platforms, to tracking via Pixel or Post Back, to preparing for creative with certain features. Every funnel has a path and this does not necessarily require the use of all the elements mentioned so far. Only, before getting into the field to advertise particular sales or services, it is important to know the three fundamental concepts.
The main advantages of affiliate marketing
Promoting a product or service and reaching a large audience is a complex and costly operation that requires significant economic resources and an adequate technological infrastructure. The first great advantage of affiliate marketing is to fill this gap. With this web marketing strategy, it is no longer necessary for your brand to reach all the users. It is up to the affiliates who participate in the work. Just be aware that this is just an additional channel to accompany the daily operations, it should not replace them.
Usually, when it comes to affiliate marketing, most companies refer to a performance model. Sometimes they work on performance only; in other circumstances (especially for more complex and long-term strategies) they introduce a hybrid scheme, where several factors come into play: from volumes to conversions, from duration to available budget.
The advantages of affiliate marketing are numerous and remarkable. This way of promoting products and services allows an extreme capillarity, without waste. When there are results, there is a financial expense, which must of course be agreed upon in advance. If, on the other hand, the conversions do not arrive or those that are there are not validated (for whatever reason), the company must not recognize any commission.
How does affiliate marketing work?
The way it works is very intuitive, a company goes through an intermediary (affiliate) to reach a customer. If the sale is concluded, with the money collected, you pay a commission to the intermediary who put the two actors in contact. If, on the other hand, the transaction does not materialize, no commission is received. What has just been described is a particularly simplified general example.
Based on a performance model, affiliate marketing needs tools to properly count and track user behavior on the web. Then it is necessary to determine when and how much affiliates are paid. Depending on the objectives set, the channel established and the materials used, it is possible to work with CPM (cost per thousand), CPC (cost per click), CPL (cost per lead), CPA (cost per purchase – fixed at the sale and independent of the price) or CPS (cost per sale – percentage at the sale). Hybrid benefits can be used in certain circumstances. For example, for abstract sales. But, they give a good idea of how it works. The reasoning behind hybrid formulas can be the most disparate.
Why does affiliate marketing work?
What has been described so far outlines a mechanism that can reach a large number of users, but at the same time do so without any waste of resources. Companies that operate affiliate programs know exactly where they are investing their savings, how much they have earned and what results they have achieved.
It’s a winning formula because it benefits everyone involved. A brand, through its affiliates, reaches more users. The affiliate can earn money without actually having a product to sell, but simply by connecting supply and demand. Finally, potential customers also benefit because they are made aware of an offer that may interest them.
From the publisher’s side: affiliate programs
Affiliate programs exist in thousands around and of all kinds. Some are extremely serious, others less so. Some even promise avalanches of money without effort. The reality of the matter is that sharpening your skills allows you to make money where there is work to be done. To get people to convert, you must first have clean traffic and study a suitable funnel. Then, you need to push users in the desired direction.
Of course, before you even begin this process, you need to have a product to promote. Amazon, for example, allows you to affiliate and market over a million products, so you can choose the one that best suits your target audience. Another famous affiliate program is Apple’s iTunes, where you can get commissions on Mac Apps, iBooks, movies and in general on all products distributed by Cupertino.
There are also companies that specialize in affiliate programs. These are real affiliate networks whose job is to find online advertising campaigns and recruit publishers to deliver them. The advantage for affiliates is that they can count on a wide range of areas in which to venture, often combined with advantageous payments that far exceed the classic AdSense.