Here’s a brief introduction to the topic of affiliate marketing. We cover this in greater depth in our book, so this is a sneak peek.

Affiliate marketing is the concept of retailers or manufacturers partnering with various agents (called ‘affiliates’) who will promote the company’s products, refer potential customers, and then collect commissions from any sales coming as a result. Those affiliates could be bloggers, advertising professionals, publishers, independent sales people, or just about anyone who has an audience of people who may be interested in buying the company’s products. For a merchant, it can be a very scalable way to quickly increase the scale of a product’s promotion. As a merchant, you give up a piece of your margins and in return can get a large team of marketers to take risks and help you acquire customers.

One key aspect of all affiliate programs is tracking which customers were referred by which affiliate, and which of them resulted in sales. There are a variety of different ways to track referrals, such as:

1. Browser cookies. This works great if transactions are mostly handled online (ie: the affiliate is referring customers to an e-commerce store). As the customer clicks on the affiliate’s link, a cookie is placed identifiying the affiliate, and the e-commerce store then references that whenever the customer completes a transaction. In many cases the process of placing the cookie and processing transactions is done by a third party (an ‘affiliate network’), which makes it easier for the affiliate to trust that transactions will be tracked accurately.
2. Unique phone numbers or extensions. If transactions involve the customer needing to contact the company by phone, the merchant and affiliate can together setup a unique phone number for customers to call. The merchant will then know that any calls to that number will come from people referred by that affiliate.
3. Promotional codes. If it’s not feasible to setup a unique phone number for each affiliate, another option is to ask people to mention a promotional code on the phone in return for price discounts, freebies, or other benefits. For example, the affiliate might advertise: “mention code ABC when you call and get a 5% price discount”. The merchant will then use that promotion code to distinguish which customers were referred by which affiliate.

The above methods are used to track referrals by affiliates. After that initial customer contact it then becomes the merchant’s responsibility to internally track which of these referrals ultimately result in sales. Sometimes for e-commerce stores this can be done in a transparent way technically, othertimes it requires that the affiliate trust the merchant.

Affiliates often bear most of the risk in these partnerships. They need to invest time and money in promoting the products and only get a return if they generate sales. Therefore, to win over a large network of affiliates, a merchant needs to convince them that the product will sell well, which can be difficult as a new company without much of a sales record yet. Some best practices:

1. Provide a marketing kit to your affiliates, such as sales texts, ads, and other media to help them promote. Make it as easy as possible for them to get started.
2. Find ways to quickly establish trust that you will accurately track and report sales and pay commissions on time, especially if you’re not using a third-party affiliate network. That may involve investing extra time in making your communications with potential affiliates very professional, and giving them reporting and testing features to make sure your tracking system is working properly.

To get going with affiliate marketing, you can choose between joining one of several affiliate networks or creating your own.

1. Creating your own affiliate network can be relatively simple to technically implement.  However, establishing trust and getting your name out to potential affiliates can be challenging and time consuming.
2. Joining an affiliate network has higher up-front and transactional fees, but reduces technical overhead and is often the fastests way to gain large numbers of affiliates. One key downside: many affiliate networks don’t deliver search-engine optimization value, meaning the links placed by affiliates to your website don’t help improve your search-engine rankings because the links first pass through the affiliate network’s intermediary servers.

In our book we’ve covered this in more detail and also listed a set of criteria to consider when deciding which affiliate network to join. We offer a money-back guarantee on the digital version of the book, so if this topic interests you, give the book a shot, and if ultimately you don’t think it was worth the money, just ask for a refund and keep the book.