Affiliate marketing is a dynamic industry that continues to gain momentum and for good reasons. The performance-based marketing method has proven to increase brand awareness, generate new leads, and deliver strong ROI. For those looking to enter the affiliate industry or optimize their existing affiliate programs, CAKE has created the ultimate guide for affiliate marketing in 2024.
In this guide, we’ll cover the basic, yet fundamental, questions of affiliate marketing to get you one step closer to understanding the industry and making the most out of your marketing efforts. We’ll also dive into the must-know elements for getting started with an affiliate marketing program.
Let’s get going!
Here’s what you’ll find in this guide on affiliate marketing for beginners
- What is affiliate marketing?
- How does affiliate marketing work?
- What is an affiliate network?
- Affiliate marketing statistics
- How to use affiliate software to drive revenue
- How to select an affiliate commission model
- How to find affiliates
- How to prevent affiliate fraud
- How to manage affiliates
- How to choose the right affiliate marketing software
What is affiliate marketing?
Affiliate marketing is a form of performance marketing that enables advertisers to pay partners based on the performance of their marketing campaigns. The advertiser (or brand) defines the desired action they’re looking for and then pays the affiliates when that action has been completed. The action might include submitting a form or completing an ecommerce transaction.
Affiliate marketing programs are used by companies across numerous verticals such as ecommerce, retail, financial and legal services, real estate, gaming, and so much more. In fact, 90 percent of advertisers consider affiliate programs to be a significant part of their marketing strategy.
How does affiliate marketing work?
The goal of affiliate marketing is to drive customers to advertisers’ landing pages so that affiliates can earn a commission on the sale. For advertisers, affiliate marketing extends their resources and reach, and ensures they only pay for verifiable impressions or conversions, rather than for ads that may simply have been served up and ignored.
Affiliate marketing glossary — Key terms to know:
Advertiser: A company that markets and sells goods or services. It is the company that owns or is brokering the offer.
Affiliate/Publisher: These individuals are the partners running traffic to an offer in lieu of a commission.
Here’s how affiliate marketing actually works:
Third-party partners (commonly referred to as “affiliates” or “publishers”) are leveraged to promote offers and drive web traffic on behalf of an advertiser. Essentially, the advertiser “outsources” the responsibility of finding customers to their affiliates, who already have relevant audiences that align with the advertisers’ customer criteria. These affiliates leverage various channels to acquire customers, including search, email, display, social, and mobile. Once the affiliate returns a qualified lead that takes an action, such as filling out a form or using a coupon to purchase a product, the affiliate is paid a commission by the advertiser.
What is an affiliate network?
An affiliate network serves as an intermediary between the affiliate and the advertiser. Affiliates participating in networks can easily find suitable affiliate programs and offers that are a good fit for their audience and are most likely to result in a conversion or impression for the advertiser. This in turn generates income for both parties.
Additionally, companies offering affiliate programs benefit as they can reach all of the affiliates participating in the affiliate network, and determine which affiliates and campaign types work best for them plus quickly expand their reach.
While 83 percent of advertisers tend to utilize affiliate networks to connect with affiliates, advertisers don’t always need to work with a network. They can develop direct relationships with affiliates that circumvent pricey network fees, plus ensure their best performing affiliates and campaigns are well optimized. This is especially significant considering that 90 percent of a brand’s traffic is derived from 10 percent of its publishers.
On the flip side, however, there are scenarios where an affiliate is actually required to go through an affiliate network to even be eligible to promote a specific product.
Affiliate marketing statistics – The landscape in 2024
Affiliate marketing growth
- Global affiliate marketing spend is expected to grow to a $15.7 billion industry in 2024 (up $2.7 billion from 2022). (Influencer Marketing Hub)
- Globally, the affiliate industry is projected to reach a $27.7 billion valuation by 2027. (Authority Hacker)
- Affiliates drive on average 23 percent of a brand’s total revenue. (Colorlib)
- Affiliate marketing programs generate 15-30 percent of all sales for advertisers. (Authority Hacker)
How to use affiliate software to drive revenue
The use of affiliate marketing technology benefits advertisers, networks, and affiliates as insights become easier to access and the entire process is more efficient. For affiliate marketing to be successful, advertisers must accurately track key data points so they can verify actions, such as clicks and conversions, and identify the offers and affiliates that actually performed.
Below, we share three key technology capabilities that should be considered in today’s affiliate marketing world. Incorporating them into an affiliate marketing program will result in what will always be essential – increased revenue and strong company growth.
Precision: Accurate, real-time monitoring and reporting
Insights regarding traffic trends, such as spikes or declines, allow you to avoid paying for traffic that cannot be monetized. It’s also critical to immediately detect fraudulent traffic, since one fake click can cost a company thousands of lost dollars.
Additionally, real-time visibility about clicks and conversions is important for managing profit margins. Key elements to monitor include:
- Region – Traffic must be acceptable for any client with a global presence and be routed properly.
- IP – Fraudulent IPs should be spotted and blocked immediately.
- Referring URL – Clicks need to be monitored to ensure they are coming from approved sites with approved call-to-actions.
- Volume – Something as simple as tracking the volume of clicks and conversions offers insights on questions regarding monetization such as, ”Can we support and afford to pay out on the traffic?” or ”Is the payout an appropriate price per lead?”
Payment control: Understand the value of a lead and reward your high-performing partners
With access to important data through technology, each partner’s true contribution can be examined. A partner that consistently generates high-quality traffic should be incentivized with a higher commission. Or vice versa.
Having the ability to control payments at a granular level is also key. Below are tips to keep in mind:
- Every affiliate is different, so determine payment based on individual affiliate performance.
- Tiers allow you to get creative. When partners generate a certain number of sales, incentivize them with a higher CPA.
- Some metrics are more important than others for your industry. Dive into reporting and leverage industry-specific insights to determine which affiliates are generating what you actually need.
Reliability, security, scalability: Safeguard your data, maintain trust, and pave the way for growth
It’s too risky to base such a vital piece of your business on a short-term solution. So, only depend on a reliable, secure, and scalable platform that you can trust will be around for the long haul. With that confidence, you can then focus on how technology can help expand your business.
Any company aiming to grow should consider these necessities for an enterprise-grade platform:
- Intelligent scalability: The ability to expand your affiliate marketing program across new verticals with flexible traffic volumes.
- Enterprise reliability: 99.9 percent uptime guarantees.
- Protection and security: Strict security audits, with investments in security, backup technology, and maintenance. Commitment to ongoing GDPR efforts and additional security regulations.
- Stable provider: Don’t settle by operating in a risky environment. It is particularly difficult to scale an affiliate marketing program if you need to switch technology platforms because a provider is unsuitable.
How to select an affiliate commission model
A common inquiry people have when looking to start an affiliate marketing program is about how to select an affiliate commission model. Commissions encourage affiliates to assist in the sale of your products. Choosing the best commission structure for your campaigns is vital to affiliate marketing success.
Because each vertical or type of product and service has its own pattern of commission rates, it’s important for you to analyze your competitors’ affiliate programs to remain competitive. Resources such as Offervault and oDigger are helpful for collecting information about existing affiliate offers.
Here are the widely used payment methods to consider – depending on your unique business goals.
- Cost per action (CPA): Of all the payment models, this flat-rate-per-action method is the most popular. The fee is paid to the affiliate once they refer a prospective customer to perform the desired action.
- Revenue share (RevShare): This approach shares a predefined percentage of the qualified referral’s total shopping cart with the affiliate.
- Cost per click (CPC): This model means affiliates get rewarded for each click they receive on their link. When looking to increase website traffic or drive individuals to a landing page, this is a great option.
- Fixed: With this method, a publisher receives a set price. Fixed commission rates are often driven by the publisher as they offer traffic options such as display ad space.
- Cost per mille (CPM): A CPM model pays the publisher per thousand impressions (Mille is a Latin word that means the same as 1000 impressions). This is great for launching an awareness campaign, as long as you track the quality of traffic.
If you’re managing a large volume of affiliates and campaigns, consider affiliate marketing software with these three commission management features to help you keep up with changing commissions.
How to find affiliates
The partners you associate with directly impact your reputation and credibility. So, an early decision you’ll have to make is how to find affiliates, and how to ensure they are the right fit. The three main avenues include:
- In-house: Find and manage affiliates yourself, and develop direct relationships.
- Outsource: Partner with an outsourced affiliate network and management service for a fast and easy setup.
- Hybrid: Implement a hybrid model by leveraging both approaches. For instance, you can use a third-party service for identifying and managing a larger volume of affiliate partners, while using an in-house program to cultivate one-on-one relationships with top-performing affiliates.
Additionally, when growing your existing affiliate base, identify what’s working well and then either look for more of the same or begin diversifying your affiliate base. Recruiting tools such as Publisher Discovery offer information about each vertical, providing advertisers and networks with insights about the most relevant and influential potential partners.
With so many players in the ecosystem that can affect a brand, you need to monitor all affiliate marketing activities to identify the right partnerships and then efficiently manage them.
How to prevent affiliate fraud
Affiliate fraud occurs when an affiliate steals credit for a conversion that wasn’t actually achieved by them in an effort to collect a commission. In this situation, the network or advertiser pays for a conversion that was organic or created by someone (or something) else.
To build an effective fraud management process that eliminates potential affiliate fraud and low-quality traffic, marketers must analyze data about their clicks and conversions. When doing so, they may identify potential red flags such as:
- Conversion rates for certain affiliates are unusually high.
- Click counts are high, but the volume of conversions is low.
- Referring URLs are all coming from the same location.
- Traffic is originating from a previously banned site.
Technology is key for monitoring and leveraging data. Advertisers and networks can identify revenue-impacting affiliate fraud in real time when they receive custom alerts for suspicious behavior and are able to set up traffic controls to create rules for blocking or redirecting traffic at the campaign level.
How to manage affiliates
Once you have acquired the right affiliates, the success of your program depends greatly upon an additional factor – and that is affiliate management. Effective and efficient affiliate management enables you to make intelligent business decisions while ultimately increasing the value of your program.
Here are tips to consider when managing affiliates:
- Properly target customers by gathering and monitoring your program data in real-time.
- Leverage attribution data to understand your marketing spend.
- Implement a feedback loop to evaluate affiliate performance.
- Ensure sales are valid with a proper fraud management system.
Insight into data at every step of the purchase funnel enables you to evaluate each affiliate and reach your target audiences.
How to choose the right affiliate marketing software
As previously mentioned, it’s imperative to monitor the progress of your affiliate program on a regular basis. This is accomplished by utilizing affiliate program software. Choosing the ideal technology solution brings clarity about the performance of your marketing campaigns, enabling you to accurately manage and measure partner performance.
Now, let’s review the following action items to ensure you make an informed choice when selecting the best affiliate marketing software for your needs:
- Pinpoint and prioritize business goals for your affiliate software solution.
- Determine which product features and benefits deliver the capabilities that meet your needs.
- Make a side-by-side product comparison of different providers to select the best solution to drive your business forward.
Purchasing affiliate marketing software is a big decision. Use trusted resources like this step-by-step affiliate marketing software checklist to ensure you choose a solution that will provide everything you need to run a high-performing affiliate marketing program.
Interested in learning more about leveraging technology to grow your affiliate marketing program to achieve maximum profitability? Reach out to the CAKE team at email@example.com.