What is affiliate marketing?
Affiliate marketing is a process where publishers earn a commission by promoting a product or service made by another retailer or advertiser using an affiliate link. The affiliate partner is rewarded a payout for providing a specific result to the retailer or advertiser.
Typically, the result is a sale. But some affiliate marketing programs can reward you for leads, free-trial users, clicks to a website, or getting downloads for an app.
Most affiliate programs are usually free to join, so you don’t have to worry about high startup costs. Done right, an effective affiliate marketing strategy can go from side hustle to profitable online business idea by netting you a healthy income.
How affiliate marketing works
Affiliate marketing involves referring a product or service by sharing it on a blog, social media platform, podcast, or website. The affiliate earns a commission each time someone makes a purchase through the unique affiliate link associated with their recommendation.
To review:
- You show an ad or a link for Store Z on your website, blog, or social network.
- A customer clicks your unique affiliate link.
- The customer makes a purchase in Store Z.
- The affiliate network records the transaction.
- The purchase is confirmed by Store Z.
- You get paid a monetary commission.
Commission rates for affiliate sales vary depending on the company and the offer. On the low end, you’ll earn about 5% of the sale, but with some arrangements, you can earn as much as 50%, usually when promoting a class or event. There are also affiliate marketing programs that provide a flat rate per sale instead of a percentage.
Types of affiliate marketing
Affiliates always carry a bit of mystery—you never know if the person has ever really used the product or if they are just promoting it for the money. Both cases still exist today.
It wasn’t until 2009 when renowned affiliate marketer Pat Flynn broke down the different types of affiliate marketers into three groups. Understanding these types of affiliate marketing can show you the different ways people make money online in this space, regardless of your moral compass.
Unattached affiliate marketing
The first type of affiliate marketing is referred to as “unattached,” or when you have no authority in the niche of the product you’re advertising. There is no connection between you and the customer. Often you are running pay-per-click advertising campaigns with your affiliate link and hoping people will click it, buy the product, and earn a commission.
Unattached affiliate marketing is attractive because you don’t need to do any legwork. Affiliate marketing businesses rely on reputation and trust with a target audience online. Some affiliate marketers don’t have the time or desire to build those relationships, so this type of marketing is their best option.
“Unattached affiliate marketing isn’t a genuine business model, it’s for people who just want to generate income,” explains Elise Dopson, founder of Sprocker Lovers. “Our focus for Sprocker Lovers is building community and providing free education around a particular niche first, which in our case is the sprocker spaniel dog breed, and selling second.”
Related affiliate marketing
Related affiliate marketing is the practice of promoting products and services you don’t use but that are related to your niche. An affiliate marketer in this case has an audience, whether it’s through blogging, YouTube, TikTok, or another channel. A related affiliate marketer also has influence, which makes them a trusted source for recommending products, even if they’ve never used them before.
While related affiliate marketing can generate more affiliate income, it comes with the risk of promoting something you’ve never tried before. It could be the worst product or service ever, and you wouldn’t even know. It only takes one bad recommendation to lose the trust of your audience. If you don’t have trust and transparency, it’ll be hard to build a sustainable affiliate marketing business.
Involved affiliate marketing
Involved affiliate marketing refers to only recommending products and services the affiliate marketer has used and truly believes in. “Involved affiliate marketing is the way forward,” says Elise. “It’s rooted in trust and authenticity, which is best for your audience and business.”
In this type of marketing, an affiliate marketer uses his or her influence to promote products and services that followers may actually need, instead of paying to get clicks on a banner ad. It takes more time to build this type of credibility with an audience, but it’s necessary for building a sustainable business.
Elise explains that the involved approach makes advertising much easier for affiliate marketing partners. “You don’t have to hide behind expensive PPC ads and hope for clicks and sales. An organic Instagram Story or blog post about your experience with a product will go a long way.” Elise prefers this method because it’s honest and is “the only genuine way to become a trusted source on any topic.”
Involved affiliate marketing is the only genuine way to become a trusted source on any topic.
Pros and cons of affiliate marketing
Yes, affiliate marketing is worth it, given its growth in popularity. Statista estimates the affiliate marketing industry will be worth $8.2 billion by 2023, up from $5.4 billion in 2017. It’s also a low- to no-cost business venture you can profit from immensely. But before diving in, consider the pros and cons of entering the affiliate marketing world.
Pros
While industry growth is a good indication of success, entrepreneurs also take this referral marketing route for a few other reasons.
Easy to execute
Your side of the equation simply involves handling the digital marketing side of building and selling a product. You don’t have to worry about the harder tasks, like developing, supporting, or fulfilling the offer.
Low risk
Since there’s no cost to join affiliate programs, you can start making money with an established affiliate product or service without any upfront investment. Affiliate marketing also can generate relatively passive income through commission—the ideal money-making scenario. Though initially you’ll have to invest time creating traffic sources, your affiliate link can continue to deliver a steady paycheck.
Easy to scale
Successful affiliate marketing offers the potential to significantly scale your earnings without hiring extra help. You can introduce new products to your current audience and build campaigns for additional products while your existing work continues to generate affiliate revenue in the background.
Before you get too excited, know that great affiliate marketing is built on trust. While seemingly there is an endless number of products or services to promote, it’s best to only highlight those you personally use or would recommend. Even when a product interests you or fits within an existing hobby, becoming a great affiliate marketer for that product takes a lot of work.
Read more: The Beginner’s Guide to Setting Up an Affiliate Program for Your Shopify Store
Cons
Affiliate marketing also has a few disadvantages compared to other types of marketing campaigns. Before jumping in, let’s look at a few challenges you’ll face on your journey to affiliate marketing success.
Requires patience
Affiliate marketing is not a get-rich-quick scheme. It requires time and patience to grow an audience and gain influence.
You’ll want to test different channels to see which connect best with your audience. Research the most relevant and credible products to promote. Spend time blogging, publishing free content on social media, hosting virtual events, and doing other lead-generating activities on your marketing channels.
Commission-based
There’s no boss handing you a weekly paycheck as an affiliate marketer. Affiliate programs work on a commission basis, whether you’re paid by lead, click, or sale.
Companies use a temporary browser cookie to track people’s actions from your content. When a desired action is taken by someone, you receive the payout.
No control over program
Affiliates must obey the rules set by a company for their program. You need to follow their guidelines for what you say and how you present their product or service. Competitors must follow the same recommendations, so you have to get creative to differentiate yourself from the crowd.
How do affiliate marketers make money?
Affiliate marketing income spans a large spectrum. There are some affiliate marketers that will make a few hundred bucks per month and others that make six figures a year. The larger your following, the more money you can make as an affiliate marketer.
Compensation software company Payscale reports that the average annual salary of an affiliate marketer is over $53,000, based on over 7,000 salary profiles, with many affiliate marketers earning significantly more.
But how do affiliates actually get paid? When you choose an affiliate program to promote, you’ll notice there are different payment models. Companies also call it a price model, payout model, conversion type, or another variation.
Regardless of the name, the payment model tells you what goals you will get paid for. If you’re promoting a software product, the action could be a free trial signup. For an affiliate marketer who promotes physical products, the goal will likely be a purchase.
Many programs run with last-click attribution, which means the affiliate who receives the last click before purchase gets 100% credit. However this is changing, as programs improve attribution models and reporting. For example, you could share equal credit for a sale if there were multiple affiliates in a buyer’s conversion funnel.
Five common ways affiliates get paid include:
- Pay per sale, where you earn a commission for each sale you make. It’s a common payout model for ecommerce offers.
- Pay per action, which earns you a commission for a specific action. Many affiliate programs use this payout model because it’s broad and can be applied to different offers: a newsletter signup, a click, contact request, form submission, etc.
- Pay per install, where you are paid for every install generated from your website traffic. The goal of your content would be to promote mobile apps and software so that people download or install them.
- Pay per lead, which pays you every time someone signs up for something. It’s a popular payout method because companies use it for sweepstakes, lead generation, and other types of offers. Cost per lead offers are common for beginners because it’s easier to generate leads than to sell products to an audience.
- Pay per click, a rare payout system where you earn commission on every click on your affiliate link. Pay per click programs are used by big merchants with a goal to build brand awareness. Customers don’t need to sign up or buy anything, just to visit the merchant’s website.
How much you make depends on your affiliate niche. For example, research conducted by Shopify in 2021* found that the highest average commission rate ($70.99) was for business-related programs. While books and media and clothing categories earned just over $6 per commission. The maximum average commission we found was around $289.06 per sale.
How to start affiliate marketing in 4 steps
- Pick your platform and method
- Decide your niche and audience
- Find your products
- Choose your first affiliate program
Just like running your own small business, becoming a successful affiliate takes dedication and discipline. Use the following step-by-step guide to start your affiliate marketing business. But before you consider finding a brand name, buying a domain name and creating a logo.
Pick your platform and method
The first step is figuring out the platform you want to build your audience around. Every affiliate marketer has a different approach and platform. There are many affiliate marketing ideas you can choose from based on different methods:
- Niche topic and review sites. These are sites that review products for a specific audience or compare a line of products against their competitors. This method requires you to create content related to the review space and post regularly to draw in an audience.
- Digital content. Digital content creators include bloggers, YouTubers, or social media influencers. They create niche content that resonates with a target audience. The goal is to organically introduce niche products their audience will enjoy. This increases the chances they’ll buy and you’ll earn an affiliate commission.
- Courses, events, workshops. If you’re an educator, you can integrate affiliate partnership offers into your events.
No matter which route you take, authenticity and audience building are the two most crucial elements for affiliate marketing.
If you cannot authentically connect with your audience, chances are you won’t have success in converting them into affiliate sales.
To pick a platform and method, ask yourself:
- What platforms do you use the most?
- Which platforms do you understand best?
Common platforms affiliate marketers use are:
- Blogging
- TikTok
- Pay per click (PPC)
Starting with a marketing platform you’re comfortable with helps you create high-quality content. This can result in a stronger, more engaged audience you can turn into sales.
Decide your niche and audience
When it comes to choosing a niche, aim for something you’re passionate and knowledgeable about. This helps you come across as authentic and as a trusted source of information for potential customers. It also helps you evaluate which products and brands you want to promote.
Say, for example, you started a blog about dogs. You own a sprocker spaniel and you’re passionate about helping other owners care for their sprockers.
You create a blog like Sprocker Lovers, and you regularly post and encourage people to subscribe to an email list and share your content. Sprocker spaniels are your niche, and you’re going to invest in content marketing and optimization to grow your audience of owners.
“The niche you choose for your affiliate site guides how much time or effort you’ll need to put into building it to a point where you begin to see SEO results,” says Elise.
“SERPs for software, marketing, and health care, for example, are all dominated by huge blogging sites with even bigger marketing budgets. The secret is finding untapped areas where competition isn’t as fierce—and getting in there before other people recognize it.”
As you post more, you can use affiliate marketing tools like social listening, website analytics, and social media insights to discover who your audience is and what they like.
It’s important you know your audience so well, that you understand why they follow you in the first place.
Remember, you’re not paid to post. Affiliate marketing is a performance-based online business. If you know what your audience likes, you can then refer the best products to them and earn more affiliate income.
Find your products
To earn revenue as an affiliate marketer, your audience needs to connect with what you’re saying. The items or services you promote need to be products they genuinely want. Getting this wrong can hinder your success and diminish your credibility—as well as your audience.
If you’re curious where to look for products or brands to work with, don’t worry. There are tons of affiliate marketplaces, including:
Another option is to visit the websites of the products and services you use and like to see if they have an affiliate program. Large companies often have programs they promote on their site, such as Amazon Associates or the Shopify Affiliate Program.
You also can take a more direct approach. Reach out to the owner of a great product you come across and see if they offer an affiliate marketing program. If they don’t, they might be happy to set up an arrangement with you, such as offering you a special coupon code to share with your followers.
The best deals often are found when you’re the first to inquire and have a relevant distribution channel, such as approaching the seller of a new fitness product if you’re a health and wellness blogger.
Affiliate marketing programs will have terms of service you need to follow, so read the fine print. For example, your affiliate link usually will have a cookie with a specified timeframe, and some programs don’t allow you to purchase pay-per-click ads using the product or company’s name.
Choose your first affiliate program
As you brainstorm products or browse through affiliate platforms, the most important criteria to keep in mind is that the product should be aligned with your audience, or the audience you hope to build. Ask yourself, Is it something your target audience would find valuable? Does it fit with your area of expertise?
A food blogger probably wouldn’t promote beauty products, for example. A wide range of other products, such as cookware, meal kits, gourmet ingredients, or even aprons would make more sense.
Also make sure the product or service you’re promoting is a fit for the platform you’re promoting it on. For example, home décor and clothing are well suited to image-heavy platforms like Instagram. However, if you’re promoting more in-depth purchases, like software, your conversion rates may be higher on longer-form platforms, like a blog or YouTube.
Tips for affiliate marketing success
As we mentioned earlier, affiliate marketing revenue eventually can become a form of passive income, but you still have to do some heavy lifting upfront. The success of your program will depend on the quality of your review.
To create a good review, it’s best to get personal. Share your experience in your blog, social media post, Instagram Story, or YouTube video. If you’re writing a personal review, give a candid opinion based on your experience with and knowledge of the product. The more open you are, the more authentic you will be. People will be more comfortable following your advice if they feel they can trust you.
Trust is a key factor in your affiliate marketing efforts, because people need to trust you enough to act on your recommendations. The level of trust you’ll need to make affiliate sales depends on your industry and the products you’re recommending—for example, it takes more trust to be an effective affiliate for a $1,000 course than it does for a $20 t-shirt.
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Thanks for reaching out to Modelsoft.
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We are planning to write a blog on this topic very soon.