Affiliate Marketing Basics
You don’t need to be a marketing pro to know that brand awareness is everything, but in today’s day and age, fighting for customer attention is a little trickier than it used to be — especially for DTC brands. Let’s face it, our attention spans are shorter than ever, and in the online space (where information overload and oversaturation are inevitable) traditional marketing techniques lose potency quickly. Not to mention, paid marketing costs seem to get steeper with time. What to do? Go back to the basics of course.
You might have forgotten about affiliate marketing, but this tried and true technique is making a comeback—and for good reason. It’s estimated that nearly 81% of brands have incorporated affiliate marketing as part of their marketing strategy in recent years, and those that do, see revenue growth upwards of 30% (HostingTribunal, 2020).
In recent years, the affiliate space has grown substantially, and while there are still plenty of textbook use cases, the proliferation of influencer marketing and ‘deal’ sites have made it much easier to cash in just about anywhere. Affiliates, or publishers, as they are typically known, tend to fall into a few key categories:
- Coupon/Deal sites: These are small and large sites that aggregate coupons for various brands and products. A well-known example is retailmenot.com; the site has both brand sponsored, as well as user sourced deals, that anyone can post to make sure other deal-hunters are in the know.
- Loyalty/Cash Back: These tend to be the large players like Rakuten (formerly Ebates) and Honey. These types of sites don’t give the consumer a direct discount, however, they ‘pay them back’ with a % of the product price. That % is determined by and funded by the brand that the consumer is buying
- Content: This is where influencers start to also bleed into this area. Content sites can be as simple as a regular person’s blog (think of that last recipe you clicked to from Pinterest) or it could be a YouTube video review, unboxing or how-to guide. It could be a list write up or could be an Instagram post.
How to Start Affiliate Marketing
One of the most attractive aspects of affiliate marketing is that it’s a pay-for-performance channel. What this means is that you only pay if orders are actually placed, making it a no-to-low risk option from an investment standpoint. As your affiliate program grows, it will probably account for 10-15% of revenue. And while not every order is fully incremental, the net result is more revenue and a low Cost-Per-Acquisition (CPA).
Ask yourself these 3 questions:
- Do you have a target CPA in mind? If not, you should start lower than your gross margin. So, if you sell your product for $50, and it cost you $20 in landed costs (product costs plus associated shipping costs), then try for a target CPA of
- What will the offers be? Affiliates almost always need a promotional offer. Exceptions are Loyalty – in which the ‘offer’ is cash back to the consumer, or specific influencers.
- What’s my commission budget? For any publisher, you will need to be prepared to pay a commission. Typically there is a commission to the site the link was clicked from, and a small commission to the affiliate platform for management. Those commissions can range from 1% to 20%+; setting a goal of 10%-15% is generally healthy depending on your margins.
Your CPA will be comprised of the commissions you have to pay out, plus any other management fees. You may want to include additional discounts or freebies as well
Keep in mind...
The space can be a bit unpredictable at times. Trends, competition, etc. can change, and as a result publishers may give you more or less exposure, and that can have a material impact on performance.
Now that we’ve covered the basics, let’s review the ABC’s of a successful affiliate marketing strategy:
(A)sk for help... from an affiliate platform. If your brand is big enough, work with an affiliate platform like Pepperjam. There are several partners out there that help make it easy to distribute your content and promotions to hundreds, or even thousands, of publishers at once so you don’t have to source them all on your own. Be sure to spend a little time on strategy with your affiliate agency, platform or manager to set the right guardrails so that you can react quickly as opportunities come up.
(B)e creative! You can leverage offers or stock you have to help control other metrics, such as:
- Gift With Purchase (GWP) on order values $100+ (increase AOV)
- Tiered discounts - spend more save more
- Product specific deals – either a particular product or category that has prices slashed and can be promoted as 50%, 60%, 70% off
- Special online only bundles
- Straight % discounts always work too!
If you’re using a platform, refresh offers monthly. It’s good to have a variety of offers that publishers can choose from and they (and your customers) love NEW deals.
(C)hannel your customer traffic. When working with content publishers, do everything you can to have them link directly to your site rather than Amazon. When a purchase occurs on amazon, you, as the brand, do not own the customer info – so try to get those links back to your main site. Consider offering higher commissions to publishers than what they get from Amazon to entice them to link to your site. It will be better in the long run, even if the orders are a bit more expensive.