What is Affiliate Marketing? A Guide to Increasing Revenue

How much does your brand spend on advertising? 

While marketing your products or services to your target audience is necessary in order to generate as many sales as possible, it can also be expensive—as well as time-consuming and labor-intensive. 

But what if we told you that you can get other people to market your business for free, and you only pay them every time they drive a sale? We refer to this type of promotion-based marketing as affiliate marketing.

After all, self-promotion can only get you so far. Affiliate marketing is a way to reach more people, make more sales, and gain credibility within your industry and with customers.

In this complete guide, we’ll show you step-by-step how to set up an affiliate program for your brand and start generating passive income for your business.

What Is Affiliate Marketing

Affiliate marketing happens when a person promotes a company’s product or service and gets paid a commission for any sales they drive to the company’s website. The person doing the marketing is the affiliate. They’re usually a blogger, social media user, podcaster, or someone else who has an authoritative presence in your industry. 

Online affiliate marketing is so common, that without even knowing it, we see it on a daily basis.

Think about the emails that you get and the newsletters that you’re subscribed to. Have you ever noticed the people sending them are sometimes promoting other people’s products?

And how about posts on Facebook and Instagram?

You may follow influencers who promote clothing, cars, vacation rentals, food, or any other branded items that they themselves don’t manufacture. You can spot these posts by an  #ad or #sponsored hashtag in their posts and a link leading to the brand’s website or product page.

Or maybe you’ve read a blog post about a topic you’re interested in, and, as you’re reading, you come across a link, leading you off the page to another website when you click on it.

These are examples of affiliate marketing hard at work. This performance-based marketing encourages bloggers, social media creators, and other internet users to create engaging content that encourages click-throughs. 

And the best part is, that benefits your brand as well as the affiliate. 

In addition to increasing your audience reach and profits, affiliate marketing can enable you to build relationships with people in the same industry, find out what offers are and aren’t working, generate leads, increase website traffic and search engine rank, and boost endorsement and credibility. 

Affiliate Marketing Examples

So how does your brand know when a site visit or product sale has come from one of your affiliates? The answer is tracking links. 

Here’s how it works:

Let’s say Joe Biceps is a fitness influencer, and he was approached by Nike to promote its new sneakers. Nike wants him to send out an email to his email list of 10,000 people and post a picture of himself on his Instagram account wearing Nike products to promote them. Nike is offering Joe a 15% commission on each sale he drives. The shoes are $100, so Joe will make $15 on every sale he pushes.

In this case, Joe is now an affiliate of Nike.

Nike will give Joe a trackable link to use in his emails and social posts so they know how many sales came from Joe. The URL of the link contains a code, such as Joe’s username or a specific string of numbers, that identifies the link as coming from Joe’s email. 

This is a win-win situation for both parties. Joe makes $15 on each sale, and Nike gets more exposure and sales through Joe Biceps.

Take a look at these real-life success stories of brands that utilize affiliate marketing too:

Myprotein partnered with 150 social media fitness influencers to increase brand awareness and boost endorsement in the highly competitive protein market. The social media ambassadors used content, targeted hashtags, product giveaways, and coupon codes to promote the brand’s products. The results included a 35% average increase in sales and traffic as well as a 25% decrease in cost of sale for ambassadors vs. traditional affiliates.

A global travel brand website wanted to know what types of customers are driven to its business through an affiliate channel. Specific data points were tracked—such as hotel location, check-in date, and number of guests—and then analyzed to optimize the selection of ideal affiliate partners. By narrowing down its choices:

• The efforts of three ideal partners resulted in a combined increase in revenue by 63%. 
• A brand awareness campaign, which was previously run by a small partner, resulted in a 734% boost in bookings and 552% increase in revenue for the brand.
• Revenue increased by 60% and new customer bookings rose by 6% as a result of targeted campaigns with affiliate partners that were more established.

Benefits of Affiliate Marketing

Affiliate marketing is loaded with benefits for your brand. Take a look at some of them:

• Low cost. Affiliate marketing does not require you to have a marketing team or pay for ads. Aside from any fees you might put into paying for optional marketing tools, your start-up and ongoing costs are minimal. Your affiliates also bear the responsibility of any content creation costs. The only required cost you’ll incur with affiliate marketing is the payout to your affiliates. But this is commission-based, so you only spend money after you make money.
• Low risk. You only pay your affiliates when they make a sale. Because of this performance-based marketing model—as opposed to paying per click or paying per post—you minimize the risk of losing revenue. Plus the commission that you’ll pay your affiliates is established upfront, so there are no hidden costs or unpleasant surprises.
• High ROI. A well-planned affiliate marketing program can increase revenue by 30%, according to Hosting Tribunal. This marketing strategy has a much higher ROI than most other marketing strategies, largely because your target audience is directly exposed to your products or services when you partner with an affiliate who is in your niche.
• Targeted traffic. Affiliate marketing lets you hand-pick affiliates who will spread the word about your brand, and they’ll be reaching people who follow them closely on their blogs, social media, newsletters, and so on. When you choose an affiliate whose audience demographics closely match your brand persona, their efforts are more likely to result in sales.
• Broader reach. The more affiliates you partner with, the more eyes will be on your brand. Even partnering with one affiliate increases the number of potential customers you gain. Partner with affiliates who have large followings and high website traffic for the broadest reach.
• Detailed analytics. One of the most helpful parts of affiliate marketing for beginners is the availability of affiliate platforms that can help streamline your marketing efforts. When you engage with a trusted platform, you have access to detailed analytics that can help you assess how your campaigns are performing and make adjustments midstream when needed to optimize success. 
• Increased brand awareness. Your affiliates will expose your brand name to a broader—and potentially more diverse—audience, which can increase exponentially as new audience members share social media posts, blog posts, coupon codes, and so on with others.
• Low effort. Your affiliates are responsible for most of the work involved in online affiliate marketing, including creating videos, photos, podcasts, emails, newsletters, blog posts, and social media posts; responding to comments and questions from their audience members; running contests; and so on. Your efforts include finding affiliates, providing affiliate links, keeping track of analytics, and refining your campaign as needed.
• No sales. People don’t like to be sold to. Instead, most consumers like to discover the things that will meet their needs and be educated about the pros and cons of a product or service. They also rely heavily on the endorsements of people they trust as well as customer reviews. Affiliate marketing checks all of those boxes.
• Higher organic traffic and SEO. Affiliate marketing is built on backlinks—in this case, links to your website placed on other people’s websites and social media posts. As users click on affiliate links that drive them back to your site, your website rises in SEO ranking, placing you higher on search results. 

The benefits of affiliate marketing don’t stop there, though. It’s also good for affiliates, making the strategy a win-win situation. Affiliates are eager to provide quality content for you and spread your brand’s message because:

• It provides passive income for the affiliate.
• It’s easier than building their own brand.
• Costs to the affiliate are minimal—or maybe zero if the affiliate has already established a website or other Web presence.
• It provides the affiliate’s audience with useful information about products and services that can benefit their lives.
• It’s convenient and flexible for the affiliate.
• Rewards are based on performance, so the more effort an affiliate puts in, the more they can benefit.
• It can drive traffic to their sites, which can grow their audience, improve site ranking, and expose potential customers to their own products and services.

How to Start an Affiliate Marketing Program

The process of how to start online affiliate marketing is pretty straightforward. We’ve laid out seven steps to get you started.

Step 1: Set Your Goals

All good marketing campaigns begin with clear goals. Knowing what you want to accomplish will set the stage for choosing the affiliates who will be most effective in helping you reach your goals, as well as how many affiliates you’ll want to work with. Your goals will also determine which key performance indicators (KPIs) you’ll want to keep track of so you know if your campaign is succeeding or if you need to make some changes along the way.

Most likely, your main goal is to increase sales. If so, determine what your sales are now and what you want them to be by the end of your campaign. For instance, an example of a measurable sales goal is, “Increase sales by 5% within 60 days.”

Other goals may also be important to you. Objectives that are directly or indirectly related to helping you increase sales through affiliate marketing include:

• Conversion rates (click-throughs) of affiliate links
• Earnings Per Click (EPC) of affiliate links
• Earning Per Lead (EPL) of affiliate links
• Average order value (AOV) driven by affiliates 
• Unique affiliate sales rates
• Number of impressions achieved
• Leads generated through affiliate links
• Web traffic
• Email open rates
• Percentage of active affiliates

Step 2: Pick Your Channels

The channel you choose to promote your brand should be where your audience is. And you can use multiple channels as well. 

Here are some examples of affiliate marketing channels to choose from:

Social media channels, such as Instagram, Twitter, Facebook, and LinkedIn provide a large audience and copious social media influencers eager to promote your brand. Social media creators place your affiliate links within their posts.

YouTube creators post videos to educate viewers about your brand or product, or they may mention your brand during the course of the video. They then place affiliate links in the video descriptions for viewers to access.  

Blogs are a pivotal force behind affiliate marketing. Bloggers create articles and place links to your products or services within them for readers to click through and find out more or make a purchase. Partnering with bloggers that create compelling content that is SEO-rich will drive more traffic to your site.

Email newsletters are often used by bloggers to deliver content on a regular basis to their leads. By adding affiliate links to their newsletter, your brand gains more exposure to a targeted audience.

Affiliate marketing websites, such as Commission Junction, Click Bank, and Amazon Associates are set up solely to promote products in exchange for a commission. The site provides a warehouse of brands offering products and services and connects consumers with the items they’re looking for via its search features. Adding your brand to the list can get more eyes on your products, and more click-throughs to your product pages.

Step 3: Create Your System

Here’s where you’ll decide on how your online affiliate marketing campaign will run and what the terms and conditions will be. Create a list of dos and don’ts for your affiliates to follow so they are sure to stay within the boundaries of your brand voice and style. 

At the same time, it’s important to let your affiliate promote your brand in a way that’s organic to them. Their audience will expect genuine content from them—not sales copy—which translates to higher trust in your brand.

Also, consider how long you’ll allow affiliate cookies to remain active. This determines the maximum amount of time you’ll credit your affiliate with a sale after a consumer clicks on the affiliate link.

Often times, affiliates prefer to promote lead magnets rather than sending people directly to a sales page. 

A lead magnet is an incentive that marketers offer to prospective customers in exchange for their email address. This is a great way to generate leads and build your email list. Here are a few examples of high converting lead magnets:

• Webinars
• Free PDFs
• E-books
• Quizzes
• White papers
• Templates
• Any downloadable content

Some brands prefer to streamline their affiliate marketing efforts by using a platform designed specifically to manage affiliates. Examples of affiliate software include Infusionsoft, Tapfiliate, ShareASale, and Post Affiliate Pro. 

Using a platform can simplify recruiting affiliates, setting commission rates, making payouts, and analyzing your campaign data.

Step 4: Determine Your Commission Structure 

Your commission structure should be attractive to affiliates while friendly to your budget. You can choose to pay a set rate for each sale or pay a percentage for each sale, but the latter is preferred by most affiliates and makes sense to your budgeting as well. 

A few factors that can help you determine your commission rate include:

• Production costs and selling price of your product or service
• The commission rates your competitors are offering affiliates
• How much it usually costs your company to bring in a new customer
• The percentage of customers you retain annually
• How much revenue each customer typically brings in

As part of calculating your commission rate, also decide if you’ll provide bonuses for affiliates. First-sale bonuses can motivate affiliates to participate in your program while performance tier bonuses can encourage affiliates to maintain high-level efforts and quality of content.

Step 5: Find Your Affiliates

The best ways to find affiliates are through networking, research, and affiliate marketing websites. Take a look at these examples of organically searching for affiliates to see which might work best for you:

• Add a description of your affiliate program to your website.
• Tap into your existing customers and create a referral program.
• Visit industry forums as well as affiliate marketing forums.
• Reach out to social media influencers and bloggers.
• Create an online ad.

To take the leg work out of your affiliate recruitment, consider signing up for a third-party affiliate site. A few examples of affiliate marketing websites include:

• CJ Affiliate: Formerly known as Commission Junction, CJ Affiliate provides a huge network of professional affiliates from across the globe that it personalizes to your brand. Running for over 20 years, it reaches more than one billion customers and tracks transactions in real-time, even in the absence of CJ cookies. 
• ClickBank: ClickBank offers your physical or digital products on its affiliate marketplace so that their seen in over 200 countries. It helps you remarket your products to previous customers, set up commissions, and streamline payouts.
• eBay Partner Network: Similar to Etsy, eBay partners are content creators who sign up with eBay as affiliates. When you put your products on or have an eBay store, eBay partners can drive traffic to your products through their content off eBay.   
• Zalando Partner Program: Zalando is a shoe and fashion e-commerce site that sells to consumers across Europe. By joining its Partner Program, your brand can sell your inventory to over 32 million customers in 17 markets while taking advantage of its fulfillment and marketing services.