How to Optimize an Affiliate Marketing Program for Profitability
Bo Bennett once said, “Affiliate marketing has made businesses millions and ordinary people millionaires.”
Of course, affiliate marketing has this mysterious aura about it. Many of the top search results for the term are focused on what it is and whether you can make money from it.
The truth is that it’s not all that mysterious. It’s nothing more than another marketing channel for you to experiment with, analyze, optimize and grow.
What Is Affiliate Marketing?
Affiliate marketing is “a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts”.
Think of affiliates as an extension of your in-house marketing team. Instead of a salary, you pay them for each new lead or sale acquired as a result of their marketing efforts.
Some people confuse affiliate marketing with referral marketing. Referral marketing is “a method of promoting products or services to new customers through referrals, usually word of mouth”. So, instead of working with marketers, you’re working with existing customers.
Here’s how ReferralCandy explains the difference between the two…
Now, I’d argue that perhaps “altruistic” is not the correct word for modern referral marketing as many programs are incentivized with gift cards, additional features, swag, etc. But you do see a clear distinction between the two.
How Does It Work, Exactly?
Let’s say you’re the VP of Marketing at a travel company. You might then decide to start an affiliate marketing program to help you reach new audiences. You start with two affiliates: Kim and Jim.
Kim and Jim are now spending their days driving targeted traffic to your beach vacation landing page.
There are different ways to structure your affiliate payouts. For example, one affiliate program might pay Kim a commission whenever a visitor she referred leaves their name and number. Another affiliate program might not pay Kim a commission until that visitor makes a purchase.
What Is an Affiliate Network?
If you’ve read about affiliate marketing before, chances are you’ve heard of affiliate networks. An affiliate network is where affiliates can go to find reputable offers to promote and where advertisers can go to find lots of affiliates.
MonetizePros explains the benefits of affiliate networks well…
To over-simplify, the network exists to:
- Match up merchants and affiliates;
- Handle the administrative aspects of an affiliate-merchant relationship;
- Protect affiliates.
The “matchmaking” service–offering access to a pool of merchants–is the role of a network that likely comes to mind first. But the administrative workload handled by networks can’t be overlooked; they handle all the tracking, reporting, and payment processing that arises.
Affiliate networks take a lot of the administrative and logistics work out of managing an affiliate program. They also give you access to a bigger pool of affiliates. However, affiliate networks will expect a commission from you as well, which cuts into your profit margin.
What Does an Affiliate Marketer Look Like Today?
So, who are these affiliates? Well, according to the 2015 Affiliate Marketing Benchmark Report…
- 97% of affiliates live in the U.S.
- Most of them are from California (8.56%), New York (8.16%), Florida (7.40%), Texas (6.16%), Pennsylvania (5.71%) and Illinois (5.71%).
- 47% identify as male and 40.65% identify as female.
- 35-44 is the most common age bracket for an affiliate to fall in (28.93%), followed by 25-34 (26.43%).
- 71% of affiliates have a 4-year degree (BA, BS). Another 22.50% have a Master’s Degree.
- Most affiliates are married (53.79%) with kids (60.22%) and work from home (55.48%).
- An impressive 23.63% became affiliates in 2014. 2012 was runner-up with just 10.96%, indicating rapid growth in the industry in recent years.
How to Optimize Your Affiliate Marketing Program
When optimizing an affiliate marketing program, you should be focused on two things…
- The quality of the traffic your affiliates are sending you.
- The conversion rate of your landing page or offer.
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