How Affiliate Marketing Works

Understanding a Complex Channel

versa marketing affiliate works

Affiliate Marketing is a type of performance based marketing where a company compensates an affiliate partner for customers they generate through their own marketing efforts.

Affiliate marketing will impact $70 billion in sales by 2020.

Forrester Research, Inc.

The Parties Involved

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In the affiliate eco-system, a company who is looking to acquire new customers or leads, is known as the advertiser. An advertiser can be a company selling clothing, software, electronics, accessories, etc., or a company generating leads for their insurance, mortgage, legal or other services based business.

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Affiliates, also known as publishers, are individuals or companies that promote an advertiser’s product or service in exchange for a commission. This is how they monetize their marketing efforts. These marketing efforts can include a blog, content, review, or shopping comparison website, or an affiliate who is generating traffic from paid search, email marketing, display advertising, social media presence, etc.

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The most important party to both the advertiser and affiliate is the consumer. The consumer is the one who clicks on an affiliate’s ad, reaches the advertiser’s website and makes a purchase or completes a lead, thus generating revenue for the advertiser and affiliate.

Network or Platform?

In order to facilitate the relationship between an Advertiser, Affiliate and Consumer an Affiliate Network or Affiliate Tracking Platform must be leveraged. The primary responsibility of these networks or platforms is to track clicks and conversions and attribute them to the appropriate affiliate. This is done through the use of tracking links, cookies and conversion pixels. In addition to the technical benefits a network or platform provides, they are also used for media hosting, commission payment processing, program reporting and/or other affiliate program elements.

The Process

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1. Consumer clicks on affiliate's link

Tracking cookie is placed on consumer’s browser.

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2. Consumer reaches the advertiser

Website, landing page, microsite or hosted from.
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3. Consumer completes an action (purchase, subcription, lead form, etc.)

Tracking pixel is “fired” on the advertiser’s website.
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4. Network or tracking platform logs the action

Credit is given to the appropriate affiliate.

An ADVERTISER acquires a CONSUMER and the AFFILIATE is rewarded!

Things to Consider

When launching a new affiliate program or reviewing your current program, it’s important to review and consider the components that affect your success in the channel.

  • Goals for the channel
  • Program restrictions
  • Multi-pixel management
  • Consumer promotion strategy
  • Affiliate segmentation
  • CPA network partnerships
  • Cost per customer acquisition budget
  • Cookie duration
  • Internal reporting needs
  • Affiliate newsletters
  • Lifetime value (LTV) of your customer
  • Affiliate vetting process
  • Brand monitoring
  • Conversion rate and EPC
  • Geographical restrictions
  • Approved content usage
  • Direction program options
  • Direction program options
  • Affiliate recruiting strategy
  • Mobile readiness
  • Affiliate bonus structure
  • Product review component
  • Affiliate payment processing
  • Tracking integration methodology
  • Commission reversals
  • Traffic funnel process
  • Attendance at affiliate conferences
  • Competitor’s affiliate programs
  • Data feeds
  • Competitive analysis
  • Lead quality management
  • Program management resources
  • Affiliate network selection
  • Number of occurrences
  • Commission structure
  • Program media

Affiliate marketing is an extremely powerful channel that should be leveraged by every company selling a product or service. When launched and managed correctly, it has proven to have higher returns than virtually every other marketing channel.

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