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What is an affiliate marketing program, and how does it work for brands?

Before you can leverage affiliate marketing to grow your audience and revenue, you must first understand how affiliate marketing programs work. When you know what they are, why and how they work for brands, and how brands pay affiliates — you’ll be well on your way to a successful affiliate program.

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Ryan Council, Product Marketing Manager
Ryan Council
Product Marketing Manager
Read time: 4 mins

Affiliate programs traditionally involve two parties: publishers (affiliates) and the advertisers (brands) that pay them to promote products or services. Old school affiliate marketing was fairly inflexible — consisting of online publishers that posted links or banner ads to drive traffic. They earn the same commission as everyone else and often promote goods they didn’t vet.  

Through strategic partnerships, affiliates programs today offer a wide array of online and offline partners, and advertisers reward on a performance basis. This type of partnership (content creators, complementary brands, publications, e-commerce sites, stores, etc.) build strategic relationships where both sides work to grow profits, reach larger audiences, and navigate challenges. 

When adding an affiliate program as a new revenue channel, consider the options for rewarding affiliates and know the ins and out of how to make your program work. 

Why an affiliate marketing program works for your business

Affiliate programs enable brands to recruit partners. These partners receive information and material to help them succeed, and brands reward them for driving leads at any sales funnel stage. This ability to streamline relationships across the entire affiliate life cycle makes affiliate programs more popular (80 percent of brands have affiliate programs) and more effective (affiliate marketing generates 16 percent of all global ecommerce sales).

Commerce content proves to be a popular choice for affiliate promotions — e.g., an affiliate publishes an article reviewing your product and gets a commission for every lead the article sends your way. However, brands can also use affiliate marketing to reach new audiences and grow revenue in many ways:

  • Influencer marketing: Influencers and brands promote your products to their social media followers.
  • Strategic brand-to-brand partnerships: Implementing a co-branding strategy with a similar or complementary business to increase sales, customer engagement, and mindshare for all brands involved. (e.g., when an accounting firm refers accounting software to their clients).
  • Native software integrations: An integration that shares relevant data with partners (or vice versa) to create a more personalized consumer experience. For example, Canva partnered with HubSpot to allow users to create email templates and other visual content directly on HubSpot’s platform. 
  • Commerce content partnership: When brands and publishers partner to create unique shopping experiences with digital content. 
Ultimate guide to affiliate marketing

Want to dive deeper into how to start a successful affiliate marketing program?Download Ultimate guide to affiliate marketing: What is affiliate marketing and how to get started

Get my free guide

How does an affiliate program work for brands?

The partnership life cycle is the core of any successful affiliate program. To understand how an affiliate program works, you must understand how partners are recruited, supported, tracked, and paid. The life cycle consists of six stages:

  1. Discover and Recruit: The first stage of partnership program growth requires brands to find and recruit new partners.
  2. Contract and Pay: After the partners join a new program, they negotiate the terms of their partnership, sign an agreement with the brand, and provide payment information to receive their payouts.
  3. Track: Brands provide their partners with unique tracking information and track their activity related to the partnership terms. 
  4. Engage: Brands must also regularly communicate with their partners and motivate them to enhance their partnership activity. 
  5. Protect and Monitor: Brands keep a close eye on their program activity to protect it from possible fraud, duplicate costs, and unsolicited activity. 
  6. Optimize: Optimization of program processes happens continuously to improve their performance. Brands rely on automation tools to minimize manual tasks and focus on the strategic growth of the program. 

Partnership management platforms, like impact.com, make it easier to tap into the massive potential of affiliate marketing through:

1) Unified management: Control your entire affiliate program through one centralized dashboard.

2) Efficiency: Quickly scale your affiliate program by automating partner discovery, outreach, nurturing campaigns, engagement, payments, and more.

3) Analytics: Use data to identify the partners, tactics, and campaigns that deliver the best results so you can reward top-performers and enhance your efforts.

How do brands pay affiliates?  

The affiliate partner and affiliate program manager negotiate the contract terms that govern affiliate payment. These terms indicate when affiliates receive payment, which conversion event triggers compensation, and the amount. 

Affiliate programs generally follow performance-based payment structures that include:

  • Cost per click (CPC): An affiliate gets paid for the click traffic it sends to a brand based on generated leads or sales. CPC poses a high risk, so brands don’t frequently use this payout type. It can lead to paying for low-quality or fraudulent clicks.
  • Cost per lead (CPL):  An affiliate receives payment for each converted lead. Conversion events include a pre-purchase, newsletter signup, an online form submission, or something similar. CPL shares risk by holding affiliates accountable for the quality of the traffic they refer.
  • Cost per action (CPA): An affiliate receives a payout for each generated sale. All risk falls on the affiliate partner, as the advertiser only pays when the sale generates revenue. The CPA payment model incentivizes affiliates to work harder to promote an advertiser’s links. A major benefit for the partner arises when a popular piece of evergreen content keeps driving commissions for months — or even years.
  • Cost per install (CPI): A CPI affiliate receives payment after each app installation. However, fraudulent downloads may occur when CPI is the sole metric used for compensation.
  • Cost per install plus: Due to the prevalence of install fraud and install attribution fraud, many marketers gravitate toward “verified install.” In other words, they wait to pay out until a user installs an app plus hits a “success event” such as account creation or an in-app purchase.

What are the foundations of an affiliate marketing program? 

The management of the partnership life cycle determines the effectiveness of a brand’s affiliate program. To optimize your affiliate marketing program, craft a strategy highlighting elements like who you want to partner with, how you will nurture partner relationships, and how to measure the effectiveness of your program. Consider the following factors that determine the success of your affiliate marketing program: 

Recruiting quality affiliate partners 

High-quality affiliate partnerships are one of the essential elements of a successful affiliate program. The best affiliate partners are people and brands who:

  • Have (or can get) the attention of your target customers.
  • Have authority in your niche.
  • Positively impact your brand.

Awareness and authority enable affiliates to reach and influence your target audience. Avoid partnerships that tarnish your brand, trigger a backlash with one of your market segments, or generate bad PR (like these five failed brand partnerships).

Developing clear, tailored affiliate contracts 

Affiliate contracts establish the guidelines that govern how affiliates participate in your affiliate program. These contracts must be:

1) Tailored to each affiliate: Affiliates will participate in your program in various ways and at varying degrees of involvement. Some affiliates will do more than others — creating commerce content requires more effort than simply posting discount codes. On the other hand, some affiliate partners will provide more value than others, like having a larger, more engaged audience. Customize incentives to keep your top-performing affiliates motivated and happy.

2) Clear: Ensure your contracts leave no confusion. Communicate how affiliates will participate in your program, the conversion events that trigger payment, and the payout. Complex affiliate partnerships require extra clarity. For example, enterprises often take months to convert leads. If their affiliates get paid for conversions, their affiliate contracts must communicate information like:

  • What qualifies as a lead
  • The length of the payment window (i.e., how long after referring the lead does the affiliate still get credit for conversion)
  • When the affiliate gets paid after conversion

Effectively onboard and engage affiliates

When affiliates succeed, your business grows. To foster mutual success, your affiliate program must include:

  • Onboard affiliates: Create an onboarding process that provides affiliates with all the information and tools they need to generate leads for you effectively. Automate onboarding to empower affiliates without wasting too much time. 
  • Engage affiliates: As effective as your onboarding process is, equip affiliates with ammunition and motivation to fuel their success. Proactively communicate with affiliate partners with impact.com’s Partnership Cloud. Furthermore, arm affiliates with incentives, information, and helpful tactics. 

Robust affiliate program management

Level up your marketing strategy with an efficient and well-managed affiliate program. Opt for an affiliate marketing program and reap its benefits. Effectively record and track every click, improve performance with insights from reports, onboard new affiliates, and set up efficient payout systems.

Ultimate guide to affiliate marketing

Want to dive deeper into how to start a successful affiliate marketing program?Download Ultimate guide to affiliate marketing: What is affiliate marketing and how to get started

Get my free guide

Learn more about affiliate marketing or get in touch with a growth technologist at grow@impact.com to find out how impact.com’s platform can help grow your business.

Want to know more about affiliate marketing? Check out these impact.com resources:

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