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SEO Dictionary: 

Affiliate Marketing

Affiliate marketing is a performance-based customer acquisitions channel, where the affiliate is paid when visitors complete an action.
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SEO and Marketing Terms: Affiliate Marketing

Affiliate marketing programs allow merchants to expand their market reach by paying independent agents on a cost per action (CPA) basis. It’s a distributed sales force without the salary; payments are based on performance and depend on whether the desired action was completed. Because payments are directly aligned with actual performance, it can be a cost-effective way to boost brand exposure and revenue. You’re basically outsourcing demand generation and bypassing the upfront media costs.

Here’s how affiliate marketing works

Affiliate marketing is fairly simple, but it does have several steps:

  • Create the program. From your perspective as the merchant/seller/brand, you would create your product or outline your service. You then lay out the terms of your commission structure (for example, commission rates, allowed traffic types, how long you’ll credit a referral, what the desired action is, and so on). 
  • Affiliates sign up for your program. Once they sign up, they receive a tracking link that is unique to them. The affiliate will promote that unique link, whether through their blog, email list, YouTube, social media, ads, and so on.
  • Someone buys the product or service. A potential customer clicks on the unique link the affiliate is sharing. The lead turns into a customer by purchasing the product through the unique link.
  • Commissions are paid. Once the customer has purchased, you pay the affiliate the agreed-upon commission.

Why do brands use affiliate marketing?

In short, affiliate marketing has lower acquisition risks than other paid forms of marketing. Unlike Pay-Per-Click, there’s no guaranteed ad spend. You don’t pay out unless you get results first. You don’t pay for impressions, clicks, or time on site. You pay for outcomes. That’s the joy of a pure performance model. 

Another reason is that the affiliates scale your reach on their own. They create comparison pages, tutorials, and case studies. They build and maintain their own traffic channels, build reviews, and develop paid ad funnels. You benefit from their distribution channels.

Are there risks?

Lower acquisition risks don’t mean no risk at all. From a brand standpoint, it’s important to remember that affiliate marketing isn’t free money. Some of the risks include fraud or fake leads, erosion of your margins if you set commissions too high, and distortion of your brand message, among others. You should treat affiliate marketing as a measurable, controllable acquisition channel that should be used along with paid search, paid social, SEO, and additional partnerships.

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