Affiliate marketing: a profitable strategy for startups

Affiliate marketing, also known as performance marketing, is a digital advertising technique that refers to online marketing.

But what exactly is affiliate marketing? How does the remuneration process work? What are the main differences with influencer marketing? Why should a startup choose to do affiliate marketing and how should it do it?

What is affiliate marketing

Affiliate marketing is a commercial agreement that takes place online between an advertiser, who has to sell a product, and an affiliate who will promote the product on his website, earning a commission on the generated sales.

The economic issue between advertiser and affiliate is handled automatically through the use of an affiliate platform or affiliate network.

Let’s get to know the aforementioned protagonists better.

Advertisers

Advertisers, also known as merchants, are customers interested in starting an affiliate marketing program to increase traffic on the site but above all product sales.

The advertisers and their strategy, can be split into three categories:

• Pure Player online: these are customers who do not have a physical store and therefore the only sales channel is the web. Their strategy will focus on price competitiveness, but with the possibility of receiving discount codes. All advertiser activity is online.
• Click & Mortar: these are customers who have physical stores, the web is therefore an alternative way to increase sales and reach. The prices of their products will always have to be in line with the physical stores. The advertiser activity is both online and offline.
• Brick & Mortar: these are customers who own physical shops scattered throughout the area and use affiliate marketing to promote and give visibility to their store. They therefore want to increase awareness by also giving the possibility to download discount codes that can only be used in the physical store. The advertiser activity is almost entirely offline.

In general, the advertisers want to increase awareness, visibility, sales, acquisition of new customers and retention of existing customers

Affiliates

Affiliates, also known as publishers or editor, are those who advertise merchants’ products on their social pages or website. The goal is to monetize with the links traced through cookies that are created with the affiliation.

Basically, when a person exceeds a service or buys the product thanks to the publisher’s advertising, the latter will receive a commission on the sale.

A win-win situation is therefore created: the advertiser earns and increases sales; the affiliate earns having generated the sale thanks to its promotion.

In general, publishers want to monetize their traffic and access many advertisers to obtain the highest remuneration level.

Affiliate platforms

Affiliate platforms, or affiliate networks, are, for the vast majority, international companies that provide publishers and advertisers with all the tools needed to conduct a profitable affiliation campaign for both parties.

In fact, they will provide the technology necessary for carrying out online activities, reporting systems, administrative management of activities, consultancy and experience necessary to achieve the objectives and a large pool of partners to cover all marketing possibilities.

The choice of the affiliate network is therefore really important.

Affiliate marketing remuneration models

From the previous paragraph we therefore understood that advertisers gain in traffic, advertising and through sales. Publishers, in essence, earn a commission on sales or shares resulting from their sponsorship.

 But let’s see what the remuneration models are:

• CPC: Cost Per Click, also called PPC or Pay Per Click, it is the emblem of remuneration for performance. You earn for every click (on the tracked link) received.
• CPL: Cost Per Lead. You earn every time someone, thanks to a tracked link, comes to fill out a form or a subscription to a newsletter.
• CPA: Cost Per Action or Cost Per Acquisition. Allows you to earn a percentage or a fixed price every time someone takes a well-defined action.

Differences between affiliate marketing and influencer marketing

The lowest common denominator between affiliate marketing and influencer marketing is the collaboration with third parties, to promote and sponsor their products and services. The final goal is therefore the same, but in influencer marketing (as the name suggests) we choose an influencer, a person with a lot of following, to whom to entrust the promotion of our products; in affiliate marketing, on the other hand, we rely on affiliates who can be publishers, editors, bloggers, etc.

It must always be borne in mind that the right strategy for our business could be to use both influencer marketing and affiliate marketing.

But, if our funds do not allow it, or for any other reason we want to choose only one, to understand which the best is to achieve our goal, we must consider all the discriminating factors of the two types of marketing.

Reference target

Through affiliate marketing, direct links are created to your products and services, so the ideal audience will find you.

With influencer marketing, you select your target audience right from the start, with the choice of the influencer, who will recommend your products.

Costs

In influencer marketing, the costs of influencers are fixed and usually established based on the number of followers. Together with the fixed rate, the influencer can receive free products from the company.

 Affiliate marketing is a more convenient strategy as affiliates are paid with commissions on sales or actions generated by promotion links.

Methods of measurement and tracking

Affiliate marketing uses cookies and a pixel (located on the advertiser’s website) which will be used to measure the results and allow the calculation of the ROI (return of investment). We can also monitor orders, sales, registrations, the acquisition of new customers, returning customers, the CPA (cost per acquisition) and the average order value.

Influencer marketing relies on the influencer’s website and social analysis to measure the functioning of the collaboration. The parameters that will be measured are audience, social engagement, social sharing, registrations and the acquisition of new followers.

Why a startup should do affiliate marketing

Affiliate marketing is certainly an effective strategy for any type of business, but, when applied to startups, it adapts perfectly to the problem of small budget or lack of funds.

In fact, the choice of affiliation has several advantages to offer to the world of startups:

• Limited costs: with affiliate marketing, the advertiser will pay the publisher’s commission only after the sale has been made. If the collaboration does not work, and does not bring the desired results, the budget, in any case, will not be affected. With this type of marketing the fear of wasting money on ineffective advertising is avoided, therefore it is an extremely low risk strategy.
• Audience and target: by choosing a publisher in the sector, we aim directly at the interest of the right target, taking advantage of the audience and of the already established trust of the affiliate. We also can collaborate with publishers with networks that will allow us to be known (always at low risk) even by the foreign public.
• SEO: thanks to the series of back-links that are created with the affiliate program, you are also rewarded in terms of SEO.
• Awareness: affiliate marketing is a particularly useful tool also in terms of awareness, in fact it allows you to reach a new audience. This is possible thanks to the presence of many types of publishers, who in turn have different types of audiences.
• ROI: The Return of Investment is good. “According to statistics provided by AM Navigator, the ROI of affiliate marketing in the UK is £ 15 for every £ 1 spent. Brands across the country spend £ 1.3 billion a year on affiliate marketing. But that’s not all: over 80% of the world’s brands use it. The channel continues to grow as companies see concrete results and increases in their sales” Awin explains.

Conclusions on affiliate marketing

We hope this article was useful and removed any doubts about affiliate marketing, and about why it is profitable for a startup that should choose this type of strategy, to boost its business, without incurring in excessive budgets.

If you re interested in Affiliate Marketing, please read more on: Affiliate Marketing: top 10 tools for startups

For more information read also the related white paper that you find on this page Digital Marketing for Startups