Affiliate marketing is a partner program between the merchant (advertiser) and the affiliate. This sales concept is primarily characterized by a success-related brokerage commission (remuneration) that the merchant pays. The merchant and his partner, the affiliate, mutually decide how high this commission is. This is responsible for the affiliate portal and operates the advertising space. Affiliate marketing can be implemented both online and offline.
Functionality
Affiliate marketing is a method of online marketing that companies can use to promote their products or services. The companies look for affiliates, i.e. sales partners, who place advertising in the form of links or banners on their own pages. The advertising material is provided by the company, the “merchant” and the “affiliate” acts as the advertising medium. Payment is based on various cost-per-action models listed below.
Affiliate programs can be designed by the merchants themselves in cooperation with specially selected affiliates. As an alternative, however, there are also affiliate networks, which provide the merchants with a large selection of affiliates for a fee. Such networks often support both partners in campaign development and regulate the payment of commissions.
Merchants and Affiliates
The merchant, also known as the seller or advertiser, is one of the two components of the affiliate marketing partner program, which describes the cooperation between sales and network partners. This is the component that offers a partner program and provides advertising material.
As an online retailer, the merchant cooperates with a website operator, also known as a publisher or affiliate, who usually makes their website available to them as advertising space for the advertising material offered, mostly in the form of advertising banners.
Through this cooperation, the merchant can ensure that his product is presented to a larger circle of potential customers and thus creates a reach on the web. In order to operate the partnership as effectively as possible, the merchant should choose his advertising partner in such a way that the publisher’s website can have a high level of awareness. In addition, the interests of the respective target groups should not differ too much in order to be able to fully exploit the advertising effect. The counterpart to the merchant is the affiliate, who, as a sales partner, benefits from the merchant’s advertising campaign because he is paid for providing the advertising space.
Billing variants
There are many billing models available such as Pay Per Click, Pay Per Lead, Pay Per Sale, Pay Per Click Out, Pay Per Link, Pay Per Print out, Pay Per View, Pay Per SignUp, Pay Per Install, Lifetime Remuneration or airtime compensation. “Pay” is often replaced by “Cost”.
The most commonly used models are:
Cost Per Click (CPC)
If the Cost Per Click (Pay Per Click) billing model is used, the advertiser does not pay the affiliates a flat rate, but a certain amount is due for the advertiser when a user clicks on the corresponding advertising banner. With Cost Per Click, payment is only due if the user actually clicks on the advertisement and is thus forwarded to the advertiser’s website. This method ensures that the company only spends money if the user has actually noticed the advertising material.
Cost Per Lead
This method is also called contact remuneration. The billing is based on the costs per lead. Each lead is usually a contact address obtained. This model often occurs in areas where a direct sale to an anonymous customer is uncommon, such as insurance brokers. However, leads can also be gained through catalogue requests or newsletter subscriptions.
Cost Per Sale
With the CPS billing system, billing is done every time a purchase is made directly through the advertising banner. With the help of Unique Identifiers (UID), the actions of the user can be traced and thus it is ensured that the purchase was made directly after the advertisement. This system is also often called Cost Per Order (CPO), whereby there is a fee for each order.
Other models that do not fall under cost per action are, for example, cost per thousand/mille (CPT/CPM) or cost per impression (CPI).
Conclusion
Affiliate marketing brings benefits to both parties. For the advertising company, this means cost-effective customer acquisition and an increase in awareness. Above all, the affiliate system gives sales partners the opportunity to increase their own sales. With the right use and a sensible selection of affiliate partner programs, you can generate significantly more sales with your own website. However, using affiliate marketing effectively requires patience, planning and inventiveness, because the better the advertising is designed, the more clicks you get.
Affiliate marketing can also be very useful for blogs, for example when cheap arbitrage deals are used to generate traffic.