6 min read

What Is Affiliate Marketing? And How Can It Benefit Your Business?

🕒 August 13, 2022 by Reham Omar - 6 min read

Affiliate marketing, also referred to as associate program or referral program, is the process of affiliates earning a share of profit in the form of commission on each sale made by promoting products of companies or persons to potential customers. This program benefits both the seller and affiliate partner – aka publishers; the former benefits from the cost-effectiveness of this marketing method and the latter through earnings from converting opportunity to sales. Today’s digital environment allows the affiliates to work for various affiliate marketing programs globally.

The Concept Of Affiliate Marketing

Affiliate marketing is a referral marketing model in which you pay an affiliate partner, who runs the websites for promoting the products or services of the seller, to attract prospects to the affiliate partner’s website that highlights or promotes your products and services. The affiliate website has hyperlinks that redirect the prospects to your website leading to successful lead conversion. If the website of the affiliate partner can generate leads and convert them successfully and regularly, the affiliates will earn a steady and significant income. Affiliate marketing is the one marketing channel that always delivers a 100 % return on investment and allows you to incur expenses only after sales happen.

How Does Affiliate Marketing Work?

When potential customers want to buy something, they mostly search online to find the best product or service that meets their requirements and offers the best value for money. An affiliate website that comes up in search results provides relevant information, insight, and recommendation about the products you have searched for. When the prospect buys the products or services shortlisted and recommended by the affiliate website, the seller pays the agreed incentive to the affiliate partners for each successful referral.

This program that involves hiring people or engaging companies to promote your product for a commission is an effective marketing strategy that brands leverage, along with other customer outreach strategies if required, to improve the sales revenue. For online and e-commerce businesses, the affiliate partner uses a unique link that tracks traffic that is redirected to your website to help calculate the volume of sales made through each affiliate partner and the commission due to them. 

Here are six steps that would explain quickly how does affiliate marketing work:

  1. The affiliate and the seller enter into an agreement
  2. Affiliate shares a unique link to product and service with their network directly or on their website
  3. The potential customer clicks the shared link
  4. The prospect is redirected to the landing page of the seller’s website
  5. The customer selects the product to purchase and completes the purchase transaction.
  6. The business gets customers and sales, and the affiliate partner receives a commission.

There are several affiliate programs across the globe, and the best affiliate programs include Amazon associate, Flipkart affiliate, Shopify, Fiverr, and eBay partner network, among others.

How To Benefit From Affiliate Marketing?

The pay rate to affiliates typically ranges from 1% – 25% of the successful conversion of lead into sales from a given link. Most affiliate referral programs offer one-time payments. However, some programs may earn recurring income depending on the product or services sold. The recurring payment is mostly relevant to subscription-based products and services.

To start earning from any affiliate program, follow these steps:

  • Create a website or a landing page
  • Write good content relevant to your product
  • Embed your affiliate links within the content
  • Share your content on social media platforms to promote the product

The potential buyers who come across the content promoting your product on media click the link to redirect the buyer to the relevant pages to complete the check-out process.

How Can Affiliate Marketing Affect Your E-Commerce Business?

Online and e-commerce businesses are the biggest beneficiaries of affiliate marketing. Let us take a look at some of the benefits you can gain from engaging affiliate marketing partners to selling your products:

Low initial cost

Setting up an in-house marketing team takes a lot of resources, money, and time. Engaging an affiliate partner to run a marketing program removes the pain of setting up an internal marketing team. The affiliates will create the marketing content to generate leads and convert them to customers. One major reason affiliate marketing is becoming a popular marketing channel is the little or no effort required, other than the initial effort of selecting and impanelling affiliates. Once the relationship with the affiliate becomes comfortable, you can let them pursue marketing the product or services of your business with minimum or no supervision.

Cost -effective

Since you need to pay affiliates only for their sales, this marketing strategy involves upfront or recurring cash outflow. This model allows you to manage your cash flow comfortably as you need to pay the affiliates only after realizing cash from their sales. Because of these reasons, affiliate marketing is one of the most cost-effective marketing channels that you can employ for your business.

Low risk

Spending money in advance involves business risk. The risk of loss of money is very low or nil in using affiliate marketing services since you pay only when a lead is converted to sales. Payout in the affiliate program occurs only after cash is received from the converted sales. You need not invest money up front and wait for uncertain results.

Targeted Traffic

An affiliate program ensures that the visitors who come to your site are potential customers looking for a similar product or service. This is so because the affiliates you partner with come with the industry, product knowledge, and a network of people who will find use in your brand.

Flexible marketing

One advantage of an affiliate program is that this marketing channel allows you to tailor to the requirements without incurring much expense. It also provides you with a method to scale up your marketing to suit the growing needs of your business without much of an investment.

Better ROI

Businesses have realized that affiliate marketing gives a much higher return on marketing investment compared to other marketing strategies. This is because you can reach the targeted audience through an affiliate because of their direct access and influence over a relevant audience that is keen to know about the products you offer.

Concluding Note

Affiliate marketing has become a critical marketing strategy for many businesses, mainly because of the cost-effectiveness compared to other strategies. Statistics show that the affiliate marketing industry is expected to reach an estimated worth of $12 billion by 2022, and according to Statistica, it is expected to reach $8.2 billion in the US alone by 2022. As the market, particularly online and e-commerce, continues to grow, businesses of all sizes will see the benefits of employing affiliate marketing strategy and making it an integral part of the marketing scheme of any organization.

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