Friday, July 05, 2013

A Brief Overview of the Affiliate Marketing Channel in Online Marketing for Ecommerce

The following is a guest post from +Evan Weber, CEO of Experience Advertising and our Affiliate Panel Moderator for the upcoming SFIMA Educational Event on Thursday July 11, 2013.

Affiliate marketing is one of the most exciting and burgeoning channels in digital marketing, however while it holds a tremendous amount of potential, it is also a very misunderstood and underutilized marketing channel for the majority of ecommerce websites. In this post, I will discuss some of the benefits of running a productive affiliate program for your website, the various types of affiliate marketers, how to recruit affiliate marketers, as well as some of the issues and problems associated with affiliate marketing.

One of the most attractive aspects for companies about affiliate marketing is that it’s strictly “performance based,” which means that affiliate marketers representing the company on their websites are compensated with commission payments only when they generate a sale or lead for the company they are promoting, known as the cost-per-acquisition or cost-per lead models. Another beneficial quality of an affiliate program is that it allows the company to diversify their traffic sources with many new referring sources over time. As an affiliate program grows with more members and active participants, the amount of website traffic and sale referrers that are cultivated grows and becomes more diversified. These factors in themselves can help a company grow their revenue by building up an army of diverse traffic referrers, which can ultimately make up a significant amount of revenue over time for the company if leveraged properly.

Having operated and run affiliate programs for over 10 years, the beauty of affiliate marketing in my opinion is how utterly diverse the industry is. In that, any type of Internet-based entity could potentially act as an affiliate to generate additional revenue from their online presences or databases. Here are some of the common types of affiliate marketers:

- Webmasters - people that own website of various types, in various niches
- Bloggers - people that run general or niche bloggers about a particular topic
- Email list owners - people that can email blast a newsletter or solo email to their database.
- Facebook Page owners - someone with a following on Facebook that can post about the company they are affiliating with. This applies to Twitter users as well.
- Loyalty Portals - these are membership-based website that people join to earn points or get cash back on their online purchases, i.e. Upromise, Market America
- Incentive models - this is a varied group of websites and membership sites that offer prizes, points, or other incentives to purchase from companies they are affiliated with.
- Companies or Corporations - many companies of all sizes can act as affiliates to monetize their audience, traffic, or membership base.
- Coupon Portals - these are websites designed specifically to offer coupon code based discounts to people looking to make online purchases.
- Toolbar “Publishers” - these are membership based entities that have their users install browser based toolbars which “light up” to offer deals when their users go to a website in their affiliate network.

One of the most common questions related to growing a successful affiliate channel is: How are affiliates going to be recruited? There are many sources and strategies for recruiting affiliate marketers to represent the company, some of the the most common are as follows:

Affiliate Networks - Launching on an established affiliate network with a large database of affiliates of various types. Often times, large affiliate networks have recruiting tools that can be leveraged to grow the program.
Search Engine Advertising - Advertising in the search engines for keyword phrases associated with affiliate marketing, such as “florist affiliate program.”
Website Contacting - Directly contacting relevant websites in a particular niche or niches related to the merchant’s website.
Social Media Ads - Advertising your affiliate program information page on Facebook or Twitter based on targeting people that are interested or involved in affiliate marketing or blogging.
Utilizing an Agency - Tapping into a 3rd party source, such as an agency, that runs a lot of affiliate programs and therefore has access to affiliates that can be prospected from.

However, the affiliate marketing channel is not without inherent issues, and if not run properly by competent, experience affiliate marketing managers, can bring a company a litany of issues and problems. Some of the more common pitfalls associated with affiliate marketing are:

Tax Nexus Legislation - State tax legislation issues that can affect the entire website’s revenue model by requiring charging sales tax in states with affiliates present.
Transparency - Knowing exactly how each affiliate is generating their traffic and sales.
Rogue Affiliates - Affiliate marketers using unscrupulous means to generate traffic and/or sales to a merchant’s website, i.e. pop-up page traffic, cookie-stuffing, and illegitimate sales or leads.
Affiliate Fraud - fraudulent or false website orders or lead information being submitted.
Spammers - Email spam issues resulting from non-compliant email marketing practices by affiliates
Brand Bidders/Hijackers - Trademark infringement issues related to an affiliate misrepresenting themselves as the company themselves.
Cookie Stuffers - these are affiliate that will “stuff” their affiliate tracking cookie into the user’s browser on the page load as opposed to the click-through.

Motivational Strategies for Increasing Production:

- Performance Incentives - affiliates’ commissions will increase as they exceed sales or lead plateaus, i.e. generate $5000/month in sales and get a 2% commission increase.
- Vanity Coupons - these are coupon codes assigned to a particular affiliate’s website, i.e. the code “couponcraze” for 10% off would correspond to
- Sales Contests - running sales contests where prizes are awarded (iPad, Kindle Fire, TV, etc) is a great way to add excitement to the affiliate program. Awarding prizes to affiliates that increase their sales over and above their current levels can be effective. Awarding random prizes to affiliates that have produced at least 1 sales in the contest period is effective.
- Holiday Gifts - sending holiday gifts to some of the affiliates that produced sales during the year is a great way to build loyalty in the vast sea of affiliate choices.

Affiliate marketing is one of the most exciting online marketing channels because it holds a tremendous amount of potential to grow traffic and revenue by establishing a vast network of websites and other Internet entities that refer sales or leads on a performance basis. However, if not orchestrated and managed by competent, proactive affiliate managers it could do very little, and even hurt the company’s image and infringe on positive-ROI producing online campaigns.  

Evan Weber
Evan Weber has been in the online marketing world since the late 1990s. He spent 5.5 years as the Marketing Director for a successful health portal, before launching his affiliate management agency, Experience Advertising, in 2007. His skill set includes: social networking, SEO, paid search, conversion rate optimization, affiliate marketing, article marketing, and more.

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