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How to choose an affiliate marketing model for your brand

3rd Aug 2015
Contributor MyCustomer
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Affiliate marketing is a relatively low-cost way for brands to showcase their products and services – and just as happily, the business model is a simple one.

It is basically a commission-based referral system, under which a partner markets your offerings for a slice of the pie. But the term covers a broad range of business models, with some working better for certain industries than others.

Nonetheless, brands should not rely on just one type of model to boost sales. Instead it makes more sense to work with a diverse base in order to maximise your reach. We explore seven key types here:

1. Pay-per-click affiliates

What do they do?

PPC affiliates place brands’ display or banner adverts on web sites or against search engine results with related content. They are paid an agreed fee each time a consumer clicks on the ad and is directed to the merchant’s website.

Pros

This kind of activity creates instant visibility and, as long as campaigns are set up effectively, you should see significant increases in traffic coming to your site. Such campaigns can be introduced quickly as it is possible to make adverts live as soon they begin.

It is also worth bearing in mind that PPC partners will look after everything for you if you don’t have the internal skills to do it yourself. Some also design microsites and landing pages that provide value-add before funnelling traffic to your website in order to minimise leakage. But as many PPC brand campaigns target low-hanging fruit, it may actually prove more cost-effective to run such a campaign in-house.

Cons

This model is open to abuse through click fraud, although search engines such as Google have introduced automated systems to try and guard against such activity by rivals or bot networks. As a result, many affiliates have dropped PPC in favour of cost-per-lead transactions.

Even so, PPC campaigns may quickly become expensive as competition for search terms can be fierce, making it vital to initiate continual change in order to obtain an optimal return on investment.

It also makes sense to employ a single PPC affiliate rather than multiple providers to ensure that they do not start bidding against each other, therefore driving click costs up.

Best suited to which industries?

Used across the board for lead generation and ecommerce.

2. Content affiliates

What do they do?

Content affiliates provide information to audiences interested in specific topics and carry advertising as a by-product in order to generate revenues.

Pros

Provided you identify content affiliates with a similar focus, your adverts will automatically be displayed before your target audience, which is particularly useful if you are going after a niche demographic.

In addition, some sites provide pertinent information that may help consumers in their purchasing decisions. Because users are more likely to be open to opinions expressed on the website, if you obtain a seal-of-approval from contributors, it will help improve the perception of your brand.

This all means that content sites can generate good quality traffic.

Cons

The quality of content sites varies considerably so be careful to avoid poorly designed ones or those that are not updated regularly.

Also bear in mind that they are 'passive affiliates' because their primary function is not advertising but content provision. This means that your adverts will not be pushed proactively, but will be displayed in relatively low profile positions such as a side-bar.

As a result, if you have signed up a number of affiliates in this area, it can become time-consuming to monitor content consistently and check whether they are all still promoting you or talking positively about your brand.

Moreover, sales volumes per website tend to be low in this space, with many sites driving only a few purchases per year. Although they may contribute to a final buying decision, many will not lead to a direct conversion.

Concern has also been expressed lately that software vendors such as Apple and Facebook are coming out with ad-blocking software extensions to their products, which could kill the banner advertising business model off entirely.

Best suited to which industries?

Relevant to most verticals for lead generation and ecommerce purposes, but works particularly well for fashion.

3. Social media/blogging and vlogging sites

What are they?

Social media and blogging websites are related to content sites and between them make up about 50% of the affiliate marketing space. They are created by consumers themselves and provide a forum for product reviews, promotion and placement as well as general feedback.

Pros

The major benefit of social media is that it is accessible to everyone and there are, in theory, no limits to the number of people who could be reached should an offer go viral.

Affiliates with a strong following have a lot of influence over their audience and can drive not only sales but also a positive brand perception, particularly if they are sufficiently won over to become brand ambassadors. Although in the past, it was difficult for affiliates in this space to interact with advertisers, new tools such as WordPress plug-ins and dynamic advertising approaches are making it easier for them to make money from their content by engaging in promotional activity.

Cons

The downside of social media is that you do not have complete control over your brand. As a result, a badly phrased Tweet or Facebook post from an affiliate can be damaging as it will linked to your brand, and therefore reflect badly on you, particularly if there is an outcry.

Moreover, while blogs will provide you with honest feedback on your products, you also need to be prepared for negative input – and not expect the blogger in question to edit their post just because you do not like it.

Another consideration is ensuring that your offer is as compelling as possible, backed up with a strong call-to-action, or it will simply be lost in the noise.

Best suited to which industries?

Works for most verticals, but is particularly popular among beauty and fashion retailers.

4. Email affiliates

What are they?

Email affiliates create huge databases of contacts, acquired through a variety of sources, whom they target with advertising messages.

Pros

These partners allow advertisers to create highly targeted campaigns across most demographics and devices.

They are also effective in issuing calls-to-action among large numbers of users that you are unlikely to have access to yourself.

Moreover, if consumers do chose to open individual emails or newsletters when they are sent out, you will immediately see strong peaks in activity as a result.

Cons

Going down this route is not cheap. You will be required to pay an upfront fee as well as a commission on any sales too.

But email open rates can sometimes be low, especially if your campaign is not targeted enough or your subject lines are uninteresting - and getting it right requires a lot of testing and learning.

Many partners offer good statistical campaign analysis in order to help you optimise your activities. But be sure to evaluate the source and level of detail provided by affiliates’ contact data in order to minimise the danger of over-promoting your campaign to existing customers.

In order to see large sales volumes, meanwhile, you will need to issue a strong call-to-action - not least because most affiliates generally run a maximum of two campaigns on behalf of a merchant or offer but no more if emails fail to convert.

Best suited to which industries?

Pertinent across most industries for lead generation and ecommerce purposes.

5. Loyalty and reward sites

What are they?

These 'incentive affiliates' offer consumers a reward in the form of a small percentage gain in cash-back or loyalty point terms for making a purchase via their website.

Pros

These websites, which generally have high brand recognition of their own, reward customers for shopping with you –and most consumers will not even need to be persuaded with additional offers in order to complete a sale. The idea is that, if it’s between your product and that of a rival whose offering is not featured, customers are more likely to go with yours.

Another bonus is that lead acquisition costs tend to be lower with this model than for non-incentive affiliates because they share the commission you have paid them with consumers in order to drive the transaction.

A further benefit of cash-back sites is that they have millions of regular users and newsletter subscribers. They can be targeted accurately to ensure that your best offers are sent to people who have previously shown an interest in your brand – or your rivals’.

Newsletter offers can be particularly useful in generating short-term sales peaks if you’re a bit behind on your monthly or quarterly targets.

If used correctly, these sites are a good means of driving incremental sales in both the on- and offline space as they generate above average conversions and high average order values.

Cons

There is an ongoing debate about these websites centring on the notion of “customers-would-have-bought-it-anyway” so why bother paying the affiliates a commission? To address this concern, brands should always analyse their data carefully to ensure that the sites are offering incremental value and not just creating pay-outs for a purchase that would have occurred anyway.

This consideration is particularly important for smaller advertisers with tight budgets as most cash-back sites will ask for higher commissions as well as a tenancy payment in order to feature their messages prominently.

Best suited to which industries?

Work best with ecommerce sites in the retail, financial services including insurance, and gambling space.

6. Price comparison sites

What are they?

Price comparison sites, which are strong brands in their own right, do what they say on the tin: list your products and those of your competitors in a table and compare the prices.

Pros

These sites have large databases of big name customers and boast high traffic volumes. This means that they can be a big driver of incremental sales.

They normally list a brand’s entire product range, giving even lesser known items exposure.

If one of your unique selling points is low pricing, you can end up stealing sales from better-known brands by offering similar products at a cheaper price.

Cons

You must ensure that your prices are competitive or customers and prospects will simply go to cheaper rivals.

Moreover, sponsored listings or ‘top of table’ positions can be pricey, which means that additional costs may need to be factored into your marketing budget.

Time and money may also need to be assigned for potential technical integration work, particularly if your product feed is not able to work with a majority of these sites.

There has been a recent trend for price comparison sites to push brands to move from a flat rate pay-per-click to a cost-per-click model if conversion rates are low. But such a move will ratchet up how much you pay them for the same level of traffic.

While a lot of sites are great at promoting individual products, they often only provide sparse information about the brand itself.

Best suited to which industries?

Particularly popular for both lead generation and ecommerce activity among financial services firms, including insurance, telcos, utilities and travel companies.

7. Vouchercode sites

What are they?

Voucher code sites offer users a discount code that they can redeem against their online purchases.

Pros

These kinds of sites attract huge volumes of traffic from shoppers looking for a bargain and who – crucially – want to make a purchase. Not only do they help boost brand awareness and recall, they are also effective at generating incremental sales.

Because vouchercode sites have an engaged audience that is happy to receive emails about special deals, it is a great place to feature your top offers, particularly if you have a sale or other promotion coming up.

As there are so many of these sites these days, competition to display your code and gain your commission is often high. This means that partners may increase the amount of marketing activity undertaken on your behalf.

Most sites have a specific page dedicated to each brand, which provides you with an opportunity to list all of your best discounts.

Cons

Top exposure slots for offers can be very expensive and are likely to lead to either a tenancy fee or a commission hike. Most sites demand that individual offers are exclusive to them, and it can be difficult for small brands to secure a place in a newsletter full stop, no matter what the offer.

Affiliates can sometimes be slow at posting codes, which means that they may end up being out-of-date by the time they are posted. As a result, be sure to mark code expiry dates clearly so as not to upset customers.

The same debate on the notion of “customers-would-have-bought-it-anyway” that applies to loyalty and reward sites also applies here.

Best suited to which industries?

Work well with any retail and ecommerce site.

Contributions from:

  • Richard Greenwell, publisher development manager at international affiliate network, affilinet.
  • Carley Talbot, head of consumer products at performance marketing agency, Clickwork7.
  • Jacqueline Cox, senior affiliate marketing manager at global marketing and technology agency, DigitasLBi.
  • The performance marketing team at digital agency, Zeal.

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