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Affiliate marketing is when an ecommerce site (merchant), pays a finder's fee to individuals or other companies (affiliates) who have agreed to send customers to their site.
The affiliates will be paid either a fixed amount or a percentage of the sale based on the structure of the agreement.
There are three different types of agreement:
1. Pay-Per-Click (PPC) - The affiliate will be paid for each time they send a visitor to the merchant's site.
2. Pay Per Registration (PPR) - The affiliate will be paid for each visitor that registers their details on the merchant's site.
3. Cost per acquisition (CPA) - The affiliate will be paid when a visitor successfully makes a purchase on the merchant's site.
The reason many merchants run affiliate programs is because the affiliate is only paid for results. Consequently, there is always a direct relationship between the revenue made by the merchant and the amount paid to the affiliates.
Creating the right affiliate program requires the following:
- Deciding on an in-house system or an affiliate provider
- Creating the program terms
- Designing adverts (banners, text links, emails, product feeds)
- Recruiting affiliates
- Monitoring performance
- Managing relationships
- On-going program and advertising updates
- Earnings Per Click
The most important metric in running a successful affiliate program is Earnings per 100 clicks (EPC). EPC defines the earnings an affiliate will receive for every 100 clicks they send to the merchant. Logic dictates that affiliates will focus their attentions on merchants that provide the highest earnings.
For that reason, to run a successful affiliate program you will need to get to the top of the EPC chart for your sector. The top earning merchants can receive up to 50% of their total sales from affiliates.
Program Terms
Regardless of the type of affiliate program you are running, organizations should standardize their program terms.
There are a number of parameters which need to be considered:
- Legal parameters - contract duration and minimum commitments
- Financial parameters - such as when the affiliate is paid and how
- Dispute resolution - who has a final decision on affiliate payments
Affiliate Advertising
There are 3 different types of advertising options to consider when managing an affiliate program.
1. Standard banners and emails - These are industry sizes for banners for affiliates to place on their site and email templates which can be used by affiliates to send to their own lists.
2. Product feeds - A product feed is either an XML or CSV file of all your products with prices and links to your product. Affiliates can use this to create a product catalogue on their own sites.
3. Text links - This is a text based link that goes to your site. Affiliates can use this to add text links to their site or to run their own search engine pay-per-click program using these links.
Your affiliate program is competing with other programs for the affiliate's resources and your banners are competing with other content for attention so your advertising creative needs have to be perfect to get the best results.
The more options you offer in terms of advert design and advert sizes the better.
Affiliates can then select the ones most appropriate in relation to the other content on their site. It is also vital to keep your adverts up to date; an out-of-date advert could promote a sale that has already finished or an item you no longer stock, possibly boosting your clicks but at a low conversion rate which adversely affects your EPC.
An additional opportunity is to create landing pages for your top performing affiliates, as the click-through from the advert to the landing page will help conversion rates, in turn boosting your EPC.
Action Steps
1. To run a successful affiliate program you will need to get to the top of the EPC chart for your sector.
2. Organizations should standardize their program terms.
3. The more options you offer in terms of advert design and advert sizes, the better.
Important Points About Affiliate Marketing
- The most important metric in running a successful affiliate program is Earnings per 100 clicks (EPC).
- It is vital to keep your adverts up to date.
- Select your audience and stick to it.
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