I'm pretty sure you've heard of affiliate marketing, but haven't fully understood how it works, how people make money from it, and more generally what affiliate marketing is.
In a very narrow, succinct and short definition, affiliate marketing is a marketing business model in which your customers and/or readers become your sellers.
How is that? Today, we're going to cover all the questions you have about affiliate marketing, including:
What is affiliate marketing?
What are the links in affiliate marketing?
What are affiliate networks?
How can I join?
How do I become a merchant?
Clever? Let's dive.
What is affiliate marketing?
Affiliate marketing is a form of pay-for-performance marketing in which an affiliate sells items on behalf of a merchant at an agreed price or percentage of the sale.
It's a great form of advertising for eCommerce stores, since funds are only exchanged after a sale is complete, but it works for all business models out there.
As long as you have a product to sell, or can find a product to promote, you can engage in affiliate marketing.
What makes this form of marketing stand out is that it benefits everyone involved. As for customers, they can find products they might not have found on their own and get endorsement from someone they (presumably) trust.
Whereas on the marketing, merchant, and network side (more on that later), everyone enjoys a piece of the sale.
81% of brands have an affiliate program.
And that doesn't look like it's going to slow down anytime soon. Affiliate marketing revenue has increased nearly 23% year-over-year since Q2 2017.
Sometimes known as a partner program, affiliate marketing programs come in all shapes and sizes to fit the many businesses they are associated with. For example, you can see the Mailchimp program below:
And another affiliate program from The Vitamin Shoppe:
Affiliate programs can work for you, even if you're not a big name. Entrepreneurs across the web are using affiliate marketing programs to sell their products.
And in some cases, their sales are enough to create million-dollar markets, like Poster Gully.
So what is affiliate marketing?
A system that, at its best, works for everyone involved and moves more products to more customers. Accessible and comprehensive, affiliate marketing is a great option for anyone looking to increase their profits. Whether you are the seller or the merchant.
None of this tells you exactly how affiliate marketing works. To understand that, you have to dig into the relationships involved in affiliate marketing.
What are the links in affiliate marketing?
Affiliate marketing is about relationships forged between people. The relationship between the client and the affiliate needs the same foundation as the relationship between the affiliate and the merchant: solid trust, fair conditions and transparency.
By the way, transparency is not just a suggestion. It is a legal requirement in the United States.
In the most basic version of affiliate marketing, there are three parties involved:
The client (audience)
The affiliate (promoter)
The merchant (owner)
Here's a great visual summary of the sales cycle in affiliate marketing:
With affiliate marketing making up to 16% of all ecommerce sales, this cycle represents the primary process from an affiliate's point of view.
First, the affiliate finds a product and connects with the merchant behind it. The affiliate and the merchant then agree on a certain commission rate – either a flat rate or a percentage – when the affiliate makes sales on the merchant's behalf.
The affiliates then promote the product to their audience, often using a special link to track their sales and referrals. After the transaction is complete, the merchant hands over the commission.
Wash, rinse and repeat for the lifetime of the affiliate.
If you prefer visual learning, here's another look at the process:
The commission rate for affiliates varies between individuals, industries and companies. No standardized rate is agreed upon as the best, although 30% is the upper limit in all cases.
But it is by no means a rule.
For example, 3dcart offers a much higher commission rate. Around 100 times higher:
But this type of fee will not work for everyone. Paul Jarvis had to shut down his affiliate program when a 50% commission rate became unsustainable for his bottom line.
So, as a word of caution: be aware of the company behind an affiliate program because if they can't afford it, they're going to shut it down.
Still, offering higher fees is a good practice for building relationships, which are at the core of what makes affiliate marketing work.
Focusing on relationship building helped an affiliate program go from $2,000,000 to $14,000,000 in two years.
It also helps your affiliate page convert at a rate 4.4 times higher than your average site visitor.
That's how important relationships are to affiliate marketing.
So be fair, be transparent, and remember that affiliates are not your employees or employers. They are your companions. And they can do great things together.
As long as they can get together, which is where the next question comes in.
What are affiliate networks?
We've been skirting this topic until now for a reason.
Well, for two reasons:
Affiliate networks, in our humble opinion, are not the best option.
They are not necessarily viable for smaller companies.
Affiliate networks fit between the affiliate and the merchant, adding a third party to the sales mix.
In many ways, they make life easier in affiliate marketing. The networks connect affiliates with products they might not find on their own and offer merchants a vast database of potential partners to work with.
But, as you can probably guess, that comes at a price.
The terms of your affiliate program are subject to network policies, and you can expect a significant portion of your out-of-pocket change to go toward your monthly maintenance.
Most of the big brands are part of an affiliate network. Rakuten Marketing and ShareASale are two particularly well-known examples.
For example, Walmart uses Rakuten Marketing for its affiliate program.
Brit + Co, an online course and content site popular with millennial women, uses ShareASale.
Other more accessible affiliate networks also include Amazon and Skimlinks. Their greater accessibility is likely why, despite not being used by big companies, they both top the market share charts.
Amazon, in particular, has become a strong competitor to bloggers and review sites interested in affiliate marketing.
The WireCutter, an electronic review site that was acquired for $30,000,000,000 in 2016, uses the Amazon program for the majority of its revenue.
And, a blog with no more than one birthday to its name managed to pull in close to $3,000 a month with Amazon's affiliate program. Even though this was back in 2016, it's definitive proof that an affiliate doesn't have to be years behind to earn a decent monthly income.
Therefore, affiliate networks are not that bad. We still choose to build our own site rather than work with someone else, but if you have the budget to spare and want to get up and running as quickly as possible, it's worth considering the vast pool of potential affiliates a merchant can connect with.
How can I join?
OK, we've talked a lot about the people involved in affiliate marketing, but we've saved the best person for last.
So let's talk about how to fit in with affiliate marketing.
If you are a blogger, you have options. The larger your audience, the more opportunities there will be.
But it doesn't have to be too big. In fact, an audience on the smaller side puts you in the realm of "micro-influencers," and companies love micro-influencers.
Micro-influencers offer better engagement and cost less than larger-scale influencers.
Naser Alubaidi, the rising marketer behind Venngage, says this well:
“In the past, affiliate marketing was limited to influencers who have a large audience reach. However, thanks to social media, and specifically Instagram, Snapchat, and Twitter, anyone can be an affiliate (and an influencer)."
That being said, you still need some measure of leverage.
You can build yourself in a year, as the example we looked at above demonstrated, but you could be in the game for five years and never make an ounce of affiliate income if you haven't identified and researched your niche.
Narrowing down in your niche should be the next step after creating your WordPress blog.
Here is the summary.
Step 1: Join a network and/or partner program
Or, start your own. We've mentioned a few networks you can already join, but others worth considering include CJ Affiliate and VigLink.
If you prefer not to go that route - I understand - you can find partner programs with a quick search. What is your niche? Use that to find potential programs you can apply to join.
For example, if you're creating a beauty blog, you might want to start with cosmetic distributors. Check out the big names first to see if they have a show for you.
For example, Ulta has a show you could join.
But if none of these programs work for you, a simple search for "beauty affiliate program" can lead you to hundreds of potential avenues in a few seconds.
The same process would apply to food blogs and travel blogs. Whatever your niche, use it to find relevant programs, apply to be a partner, and then move on to the next step.
Step 2: Choose the relevant products
Just because a retailer fits your niche doesn't mean every product is going to be right for you. You have to work on selling these products to earn a commission, so it's important to find products that really resonate with your audience.
For example, your niche would probably be much smaller than "beauty products for women." If you're selling beauty products from abroad, you'll want to find affiliate products that meet this criteria.
Profitable, niche-relevant products are the key to getting sales pages that look like this:
It's even better if it's a product that you personally believe in and can vouch for. Becky Mollenkamp, an online entrepreneur and small business owner, has made hundreds in the past few months thanks to her advocacy for a product she truly believes in.
Once you have these two steps out of the fight, you have the hard part. But now it's time for the rush, also known as promotion.
Step 3: Promote the products
Blogging is a fairly easy way to get started with product promotion, although it's not as simple as plugging in a product and telling people to buy it. You have to produce high-quality content (which usually means long form) to make your case.
Longer blog posts can take longer, but they can generate up to nine times more leads, so they're well worth it for an affiliate.
NerdWallet, for example, makes most of its income from its partnerships. Almost all of his posts, even his reviews, exceed the 1,000 word mark.
Like this 6,000-word article on the best credit cards of 2018.
Loaded with affiliate links, but focused on providing a use for the reader – rather than just making sales – this piece is a good example of how to do an affiliate blog right.
It's also a great example of how to use long-tail keywords to drive traffic to your affiliate links. Long-tail keywords like “best credit card of 2018” helped one affiliate earn $16,433.
If you're not familiar with long tails, you can read more about them in our SEO checklist.
In the meantime, here's how to find the best of them.
First, bounce to LongTailPro.
Scroll down to reveal the dropdown menu with the free trial offer, then click it and sign up for an account.
Once you are done with that, you will be taken to the dashboard
Search for long-tail keywords by entering a few seed keywords in the box provided. In this case, let's search for keywords related to digital cameras.
Here are our results. By default, you will only see 20 results or less, but you can change the parameters to get more.
These are already strong suggestions that give us a clear idea of how to create content for these types of products, but there is more we can learn from this tool. Let's sort it by volume to see how the competition stacks up.
“Digital cameras” are going to be too expensive for us to bother competing with (as are the next two options), but the competition is down a lot and still has decent volume behind it.
Let's take a closer look at “Panasonic digital cameras”. Click on the link to see more information.
With mostly organic results and decently manageable competition, this could be a viable long tail for someone trying to create content around digital cameras.
But that is not all that this tool can show. Scroll down to see the competition.
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While blogging and SEO would be our first suggestion for promoting your products, you should take advantage of your email list and social media, too. Marketing on Twitter is a unique art in itself, but if you already have an audience there, it's worth a try.
Step 4: Gain
This is a bit ironic, but after joining a program, finding a product, and promoting it, there's only one thing left to do: profit from it.
Affiliate marketing is that simple. At least in theory.
How do I become a merchant?
Becoming a merchant in affiliate marketing is a bit more difficult than becoming an affiliate, although it shares many of the same steps. If you are already an established eCommerce store, you can skip steps one and two.
If not, go full steam ahead.
Step 1: Identify a niche
If you remember, affiliate marketing depends on the relationships involved. As a merchant, you have an additional relationship to maintain: one with your customers.
And if you want to create an affiliate program or e-commerce store that brings more than pocket change, you need a niche. You will get fewer leads with a niche market, but with a much higher conversion rate.
A mass market can work for certain products, like Apple's, but for a store that is interested in generating sales as quickly as possible, a niche is the way to go.
It is also vital if you want to work with affiliates that have a lot of influence with the public. Which means you're going to need someone who has their own niche of attraction.
You can identify a niche in two ways.
Start with a product.
Start with an audience.
If you already have a product that you want to sell, you should devote your efforts to finding a market need for it with a specific audience. Instead of looking at demographics like location, look for audiences by psychographic attributes.
After all, 57% of shoppers have made a purchase with a retailer far away from them. If you limit your clients to one location, you are also limiting your funds.
Examples of psychographic attributes could be hobbies, family life, and tax philosophy. The graph below provides a great breakdown of how it differs from the traditional demographic.
So if you were trying to sell a product like an online course in finance, your niche audience might have psychographic characteristics like:
Lower levels of financial literacy.
Owners of small businesses or start-ups.
Ordering of values.
If the product you want to sell meets the needs of people with those attributes, you've found the audience you need to serve. If it doesn't, you have to keep looking.
Keep in mind that most eCommerce stores follow the second model – starting with audience – and then find a product, using the same market need parameters.
The specific circumstances in which you might start with a product are those in which you are creating something unique and new, at which point your goal will be to create demand, rather than respond to it.
Step 2: Create your Affiliate Program Terms
We have touched on the need to offer competitive commission rates. As a general rule of thumb, your commission rate should start at 10%. But to get started on the right foot, look at your competitors to set their affiliate commission rates. What do they offer? See if you can offer something better.
Affiliates have to get to work selling their product – creating social media posts, blogs, hosting webinars, etc. – so it has to be worth doing.
Also, make your terms clear from the start. The more advanced the commission rate, the better. It will help you weed out people who want too much and save time for both parties by keeping everyone on the same page.
When we launched our own affiliate system, which is pretty good at offering the highest payouts in the industry, we kept all of this in mind. Specifically, for every Kinsta hosting plan someone refers, they receive a one-time sign-up bonus:
If someone you refer signs up for the starter plan, you get $50.
If someone you refer signs up for the Pro plan, you get $100.
If someone you refer signs up for any of the business plans, you get $150.
If someone you refer signs up for any of the Enterprise plans, you get $500.
And affiliates receive a 10% monthly recurring commission for each referral, in addition to the sign-up bonus.
But if you think I'm biased too, I can tell you that BigCommerce is a good example to keep in mind as well:
Other terms to consider regarding your own affiliate program:
whether it is a one-time payment or recurring income (for example, with a subscription service).
if you want to create assets for your show, such as banners, social media templates, and logos. I know, this requires more time and resources, but the more you give affiliates to work with, the easier it is for them to make the sale on your behalf.
if it can be configured with an affiliate platform or with a WordPress plugin. Rewardful is a particularly user-friendly platform for a new affiliate merchant:
Once you've established your terms, post them on an easy-to-find page from your website (most people keep their links in the footer area) and attach a contact form. Then promote it on your blog, social channels, and optimize it for search engines.
Or, if you prefer a more proactive approach, continue with step three.
Step 3: Find Relevant Influencers
Letting affiliates find you is an easy way to navigate, but if your business is new, it's not going to get you traction any time soon.
So instead you have to go to them.
One of the easiest – and cheapest – ways to find relevant influencers is by searching for blogs in your niche. Start by running a long-tail keyword like “financial tips for small businesses” through Google.
This is what you get
Then follow the links and look for a “partner with us”, “work with us” or “advertise with us” page. The first result gives us this in the footer.
Breaking it down, we come to their partner page with their terms, which aren't bad:
And because they were the first result for a long-tail keyword that is relevant to the example niche, they have already shown that they are in a good place to reach organic traffic with our target audience.
So what should you do now? Fill in your details and start the conversation. Keep repeating this process until you have gathered a handful of affiliates that you trust.
As your audience grows for you, your own affiliate page should start to see some momentum as well. Which means our last step is pretty straightforward.
Step 4: Gain (again)
Just like an affiliate, your last step as a merchant is to profit from your hard work. Track your sales through your plugins or platform, continue to expand your product offerings, and feed your affiliates with convenient payments.
After all, if you treat them right, they will become your star sellers. And those are people worth incentivizing, right?
Summary
Affiliate marketing is a type of pay-for-performance marketing in which an affiliate sells a product on behalf of a merchant. In return, the affiliate receives a commission for the sale.
There is nothing more important than the relationship between affiliates and merchants. Remember that they are not your subordinates or your boss: in an affiliate system, they are partners working to help each other.
Do this well enough and you can build a business from the ground up while putting tidy piles of money in your own pocket.
If you don't know how to find an affiliate or merchant to work with and want to get started as soon as possible, affiliate networks can take a lot of the work out. But they put the same cut on your control and bottom line, so consider this option carefully.
As a real world example, Amazon has worked well for many bloggers.
The steps to become an affiliate are not complex:
It takes an audience, but it doesn't have to be on a superstar scale to make a difference. Even newborn blogs have made waves with affiliate programs.
Then join a program, find a product that suits your audience, promote the product, and make a profit.
If you do it from the merchant's point of view, the process is similar. Start with a niche, create your affiliate program terms, find relevant influencers, and of course, make a profit.
Affiliate marketing is hard, but there are many possibilities. Ready to dive in?
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