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Frequently Asked Question!
Affiliate marketing is, first and foremost, a marketing model. What makes it unique is its pay-on-performance compensation structure and its reliance on high-value relationships between multiple players, including:
- Brands: Companies that sell a product or service.
- Affiliate Partners: Individuals and companies that promote brands’ products and services.
- Affiliate Technology Providers: Companies that provide technology that makes it possible for brands to track and measure the performance of their affiliate program as well as accurately and efficiently pay their partners.
- Affiliate and Partner Marketing Agencies: Companies that oversee and manage the day-to-day operations and strategy of an affiliate program on behalf of brands, including partner relationships, partner recruiting, activation and optimization.
- Consumers: The audience that brands and their affiliate partners look to influence, be that to make a purchase, submit a lead form, sign up for a newsletter, test out a service, become a new customer, etc.
The term “affiliate” actually applies to many different types of partners, including individual people, companies and organizations. The affiliate model allows companies to manage these partnerships at scale and only compensate their partners after they’ve delivered on an agreed-upon outcome (e.g. driving a sale, generating a high-value lead, bringing on a new customer, etc.).
Affiliate partners include:
- Content creators (bloggers, social media posters, influencers, etc.)
- Product review websites
- Shopping sites
- Mobile apps
- App-to-app marketing platforms
- Mass media sites
- Coupon sites
- Influencer networks
- Loyalty/Rewards sites
- Other brands
- Technology platforms
- Sub-affiliate networks
Affiliates are compensated when their promotional efforts generate a conversion; a specific action that’s been decided on by the brand. Typically this desired conversion is a sale, a new customer or a high-quality lead.
Compensation can include a commission based on the percentage of a sale, join incentives, blog post bonuses, flat fee plus commission or free product, flat fee for a high-value lead, etc. Payments owed to affiliates are typically paid out via the affiliate network or Software as a Service platform that the brand’s affiliate program is hosted on.
Typically, commission rates to affiliates – which are set by the brand – are based on a percentage of the total sale (e.g. 10%) that they’ve driven for a brand. Commission rates can also vary depending on the type of website and/or promotional channel they use (e.g. content, coupon, loyalty, mobile, etc.). Affiliates can review the commission rate(s) established by the brand when they sign up for their affiliate program and can also negotiate commission rates with some brands in exchange for added/incremental exposure.
Brands in almost every industry vertical imaginable have affiliate/partner programs. From enterprise-level companies with billions in revenue to direct-to-consumer brands who’ve matured beyond doing the traditional paid marketing, companies of every shape and size leverage the affiliate marketing model to grow their business.
- Subscription Service
- And many others
Affiliate programs are run either on an affiliate network or a Software as a Service platform. These technology providers are what make it possible for brands to track and measure the performance of their program as well as properly pay their partners in an efficient, timely way.
There are many facets that go into efficiently and effectively managing an affiliate program. Most brands, especially those that have moved beyond the start-up stage, simply do not have the resources, expertise, capacity or capability to manage their affiliate program in-house. As such, they hire an affiliate marketing agency to do that for them. Here’s a snapshot of some of the elements that go into efficiently and effectively managing an affiliate program:
- Full staffing to cover all aspects of management: Strategy Development, Partner Recruiting/Development/Optimization, Reporting, Compliance, Forecasting, etc.
- Ensure the affiliate program protects the company’s brand while optimizing it to align with the company’s goals.
- Knowing the platform capabilities of the various affiliate networks and technology platforms and how to use them to best accommodate the needs of a program.
- Cultivating relationships with partners once they’re approved into the program and optimizing with them to improve performance.
- Monitoring and preventing all aspects of fraud and compliance within the program.
- Creating and executing a communication strategy for partners to share programs and promotional updates.
- Analyzing performance to help drive strategy, including weekly, monthly, quarterly and yearly deep dives, as well as campaign debriefs.
In affiliate marketing, cookies are key to tracking the performance of affiliate partners and the actions they should be compensated on.
For example, if you visit an affiliate’s website – say a product review site – and you click on a link within their content, a cookie is placed on your computer or device. That cookie is used to remember the link or ad that you clicked on. Even if you leave that affiliate’s site and don’t make a purchase until a later date – even 30 days later—, that affiliate can still get credit for the purchase and receive a commission.
Cookie length is determined by the brand and is based on their needs, strategy, business model, products, average order value, and their customer’s average purchasing decision time. Some cookies can be for 24-hours, a few days, a week, even 30 days or longer. The most common cookie length for an affiliate program is 30 days.
E.g. A brand has a 30-day cookie length set on their program. An affiliate writes about a brand’s service and includes their affiliate link within the blog post. If a visitor to that affiliate’s site clicks on that link and then purchases the brand’s service at some point with 30 days from clicking on the affiliate link, that affiliate is compensated.
A product data feed is a file of all products a brand advertises online that is uploaded to either the affiliate network or SaaS platform for affiliates to use. The product data feed will include important details such as prices, images, descriptions, categorization, keywords, etc. When a brand uploads a product data feed to the technology platform, affiliates can then download the full feed or select one-off products to feature on their site. Anytime someone clicks on a link from a product data feed, they’ll automatically land on the product page on the brands’ site.
While the affiliate has control over the general information and content they share to their audience, the brand has control over what information the affiliates within their program share related to their products and services. They do this through their brand terms and conditions. Brands may also have specific branded terms, trademark names and phrases that they prohibit their affiliates from using in their promotional efforts. These details are typically outlined in the brand’s affiliate agreement.
The Federal Trade Commission (FTC) requires a disclosure statement within any and all pages, blog/posts or social media posts where affiliate links are used in an endorsement or review, and where it is not clear that the link is a paid advertisement. Affiliate’s disclosure statements should be clear and concise and state that they may be compensated if the user makes a purchase. E.g. “This post contains affiliate links and I will be compensated if you make a purchase after clicking on my links.” For more information about FTC disclosure requirements, please review the FTC’s “Dot Com Disclosures” Guidelines and the FTC’s Endorsement Guidelines.
Affiliate program management varies from brand to brand. Some brands choose to manage their affiliate programs in-house or have it managed by affiliate networks. Whereas other brands choose to partner with an affiliate management agency to manage the day-to-day requirements of an effectively-run program.
There are also brands, particularly enterprise brands, who take a “hybrid” approach to the management of their program where they oversee elements of it in-house (e.g. high-level strategy, performance and program budget) and partner with an agency to manage the day-to-day aspects.