What is affiliate marketing?

Published: 30/12/2020

As a small business owner, you’re no doubt aware of the importance of marketing - it’s how you let consumers know about your business, attract new customers, and ultimately boost your revenue and sales.

In the marketing arena, there are tonnes of tools at your disposal, from email and SEO to social media and pay per click, and with so much involved in the day to day running of your business, it can be difficult to keep up with the latest marketing trends. 

Don’t know where to start? Don’t sweat it, we’re here to help with our guide to one of the fastest-growing marketing tools of the moment - affiliate marketing. We’ll tell you what it is, why it’s so popular, and how you can start using it to benefit your business today.

What is affiliate marketing?

Affiliate marketing is an arrangement made between a retailer who sells online and an ‘affiliate’ who advertises their products or services in exchange for payment.

The payment is typically a percentage of the sale price, but in some instances can be a ‘pay per click’ arrangement whereby for every lead they drive to a business’ website they’ll be rewarded. 

How does it work?

Let’s take a look at affiliate marketing in action. For the purposes of this example, we’ll use a made-up business called ‘GiftsRus’.

  1. GiftsRus creates a custom tracking link and gives it to their affiliate marketer.
  2. The affiliate marketer advertises their products online and shares the link. 
  3. A customer clicks on the link and is taken to GiftsRus’ website. 
  4. They make a purchase.
  5. The tracking link shows GiftsRus that their affiliate marketer drove the sale.
  6. The affiliate marketer receives a commission. 

Does affiliate marketing work?

Affiliate marketing is taking off big time in the business world right now and for good reason.

  • 81% of brands have or are in the process of developing an affiliate network.
  • In the UK alone the yearly business spend on affiliate marketing is £1.6 billion.
  • Affiliate marketing is responsible for generating 16% of all online orders. 
  • In some sectors, this figure reaches 30%.

The takeaway? Affiliate marketing efforts have been shown to be remarkably effective in driving sales and ultimately helping businesses thrive.

Why is affiliate marketing so effective?

The research so far suggests affiliate marketing is equally if not in some cases more effective than other marketing channels, including emails and paid searches - both of which cost businesses more, but why? 

Reach more consumers

One of the major draws of affiliate marketing for businesses is it allows them to exponentially expand their reach, and we all know the more people who hear about your business, products, or services, the better.

Think about it, if you share an advert to your own social feeds and you have 10,000 followers, no matter how good the advert is that’s as many people as will see your ad.

Now let’s say you have two affiliates each with 30,000 followers on social and they both share your ad - you’ve increased your reach sevenfold without the time-consuming task of organically growing your follower base. 

User-generated content

User-generated content is super important in today’s marketplace. It’s essentially content promoting your business but by people outside of your business.

Why is that so great? Because 92% of consumers turn to friends, family, colleagues, or influencers for product recommendations. 

Shoppers have grown wary of businesses bigging up their offerings, after all, it’s just a tad biased, isn’t it? They’re much more likely to believe what a peer or ‘real’ person has to say, and user-generated content does just that. 

Social proof

Social proof is everything when it comes to business in this day and age. It’s the psychological concept that people are inherently programmed to change their behaviour based on what other people are doing. 

The likes of word of mouth marketing, customer reviews, and people outside of your workforce advocating for you - yep, affiliate marketing - all constitute social proof, and it’s mega impactful for businesses.

  • More than nine in ten 18-34-year-old consumers trust customer reviews just as much as they’d trust a personal recommendation from someone they know.
  • Over half of consumers will only consider spending money with a business if they have at least four out of five stars in reviews.
  • After reading a positive review, 50% of shoppers will head to a company’s website.

Is affiliate marketing right for my business?

Despite all the pros associated with affiliate marketing, it’s not always the right fit for every business.

First and foremost you need to have an online presence to engage in affiliate marketing so you can accurately track the performance of your affiliates. 

Secondly, in order for affiliate marketing to make sense, you need to have large enough margins on your products or services that you can afford to pay a commission. If margins are tight, you’d essentially be eating into your own income by paying an affiliate. 

How to get started

There are a handful of ways to put affiliate marketing in action for your business. 

  1. Using an affiliate marketing programme. A quick Google search will show you there are heaps of options on the market - big names include Amazon Affiliates, Shopify, and eBay Partners. Do your homework and find the one that’s the best fit for your small business. 
  2. Reach out to influencers yourself. This one will require more work on your end, you’ll need to work out which influencers are best suited to promote your offering, reach out to them and negotiate an affiliate deal. You’ll also need to create your tracking link yourself (or employ someone to do it for you.)
  3. Coupons and promotions. Affiliate marketing is not always about a person or people promoting on your behalf, but can also be third party websites. Groupon is a super successful example of affiliate marketing in action. Consider reaching out to one of the big names and getting yourself listed on their website. 

Top tips for success

Before we go, we want to share our top tips for affiliate marketing to set you up for success.

  • Be specific. When working with an affiliate it’s important you’re crystal clear on what you want them to say when advertising your business. If you’re not you put yourself at risk of them diluting your business message and going off on tangents you wish they wouldn’t. Creating a template or breakdown of acceptable content is a great way to avoid this.
  • Reward top performers. If you end up with multiple affiliates it’s important to keep your eye on their performance and reward them accordingly. If you don’t, your star affiliate might decide to advertise for someone else, and given how popular this method of marketing is, you’ll want to keep hold of talent.
  • Build trust. If an affiliate feels an affinity to you and your business, chances are they’re going to work that bit harder for you to make it a success. Acknowledge their successes and show your appreciation - it could be monetary or simply by sending a Christmas card or thank you note. 

For more great resources designed for small business owners, be sure to check out our choc-a-bloc blog.

Bryony Pearce

Bryony Pearce

Copywriter

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