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How to Guide


An introduction to Affiliate Marketing

An introduction to Affiliate Marketing

Expert advice from dgm.

Affiliate marketing continues to be one of the fastest growing online channels and has moved swiftly from being an entrepreneurial, almost mystical activity undertaken by a few internet pioneers to a fully fledged online marketing channel.  It has a part to play with most serious online retailers running multi-channel, integrated campaigns.  In this ‘how to guide’ we revisit the basics and find out about the key factors involved.

What is affiliate marketing?

Affiliate marketing at its most basic is like having a virtual online sales force rewarded on commission for the sales they deliver online.  Affiliates are rewarded for delivering measurable actions.  These actions can range from completion of an online sale to lead generation.

Lead generation is particularly relevant for FMCG clients.  Being an online channel, affiliate marketing is entirely accountable, the visibility being provided by the affiliate networks technology.  The success of the channel can therefore be scrutinized and optimised by a variety of online metrics.

What is an affiliate?

An affiliates can be any online publisher who refers traffic and is rewarded using one of the performance payment models like Cost per Action (CPA) or Cost per Click (CPC).  They range from super affiliates, web publishers generating sizeable commissions all the way down to bloggers.  Many are household names including, Nectar, and

What is an affiliate network?

Affiliate networks provide the tracking, serving and reporting technology required by the affiliate and merchant to make the whole process come together.  The network will also usually provide account management expertise.  Campaigns are hosted on the networks technology, and affiliates sign up to them to get their ‘links’.  Links are banners or text links with the network tracking code built in.  Networks also provide financing, freeing the merchant from financial administration.  

Types of affiliate

Affiliates can grouped in sectors of online activity.  These include the following:

•    Loyalty / Incentive – Consumers are rewarded for their loyalty, and so the affiliate publisher can generate significant traffic of ‘in the market’ consumers for their merchants.  Nectar is probably the best known example, offering both on and offline routes to market.
- Cashback affiliate - in this model, the affiliate’s commission is returned to the consumer, who pays a one off annual fee to be a member.  The affiliate can therefore count on significant volumes of return users to whom they can market.
- Vouchercodes – another form of incentive.  The consumer uses the voucher code to get an extra discount or reward.  Very effective for tactical activity.  Myvouchercodes or are good examples of these types of affiliate.

•    Content – acting as influencers, content affiliates attract traffic by providing relevant content like reviews or advice, targeting broad terms and appearing in search results.

•    Comparison  - showcasing all the available merchants in any one sector and providing choice to the consumer.  The affiliates are rewarded regardless of the merchant selected by the consumer, but add value to the consumer research process.

•    PPC – PPC affiliates use paid search to capture ‘in the market’ consumers and send them directly to the merchant’s site, often ‘deep-linking’ to a specific product.  PPC affiliates are speculatively investing in paid search on the basis of greater returns from the CPA.

•    Email – email affiliates capture user data through competitions and offers.  They will tightly target their users to ensure they get the best conversion rates possible for the merchant and optimise their own investment.

Is affiliate marketing right for me?

If you have a transactional website and want to generate greater volume of sales, affiliate marketing is definitely an online channel you should consider.

Even if you don’t, affiliate marketing can still be used to generate valuable leads or databases of potential customers.  Some networks can provide inexpensive options to do this for you.  Have a conversation with an affiliate network and see where they can add value to your business.

Does affiliate marketing work as part of an integrated campaign?

Absolutely.  Other online and offline marketing activities can have a dramatic effect on the success of an affiliate campaign.  Any increase in brand recognition will affect the users online behaviour and increase the visibility of the campaign.

How can I get started with affiliate marketing?

The best way is to speak to a network.  There are several networks in the UK, dgm being the longest established.  Some specialise in specific sectors and have developed tools to generate more sales in those sectors.  The network will help you decide if the channel is right for you and help you identify the sort of results you could expect.

How much does it cost?

Most networks ratecards include a setup fee to cover the upfront cost of integration.  The main form of remuneration is the override, which is a percentage charged on top of the affiliate commission.  This means the network is rewarded against the performance of the campaign.

Example – An affiliate sends a user who spends £10 online.  If the CPA is 10% the affiliate is rewarded £1.  If the network override is 30%, the network is rewarded £0.30p.  
The total cost of sale to the merchant is £1.30.

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