Do you affiliate?

Affiliate Marketing is big business and growing at a rapid pace (60% year on year - see graph). In 2006 sales of goods and services through affiliate channels was calculated at £2bn. Convinced yet?

So what is affiliate marketing? Put simply it is a commission only transaction between a Merchant (typically the owner or seller of goods or services) and an Affiliate (the owner of a website, blog or e-mail list).

This then is a commission only sale model. Perfect right? Well actually it is rather good but there is much to know. In order to expedite your learning curve I have tried to list some of the most important factors to succeed in this arena, this has been written from the perspective Merchants perspective:

1. Tracking - Merchants must be able to track every in-bound link from their affiliates. This is a unique identifiable link that follows the user from the affiliates webiste (blog, email) to the landing page and then all the way through the website to the all important sales acknowledgment (confirmation) page.
   
   This then allows the merchant to pay the affiliate for the sale.
   
   
2. Incentive, incentive, incentive - You really need to contemplate how much you are willing to offer the affiliate for a sale (or booking, or enquiry...). This is commonly reffered to as the CPA amount (Cost Per Acquisition) In doing so you must consider that your cost-of-sale will be vastly reduced. You are not paying for advertising after all. Secondly you need to do your research to find out what others are offering.
   
   If you get this right you will have the opportunity to unleash a small army of affiliates who will invest in gaining and driving traffic to you. Get it wrong and you will quickly (and wrongly) conclude that affiliate marketing is not for you.
   
   
3. Pay fast - many affiliates are small businesses or one-man-bands who will be investing in advertising such as Google Adwords. In doing so they are paying either on account or every fortnight. You need to pay them promptly or they will leave.
   
   
4. Identifying & Vetting Affiliates - you maybe aware of an old business adage known as the 80-20 rule whereby 80% of your business comes from 20% of your clients - well in affiliate marketing this figure is even more acute say 95-5. This means that finding the right affiliates is all important.
   
   
5. Return to Sender - every business gets products returned for one reason or another. If you are paying affiliates for sales generated you need to consider how you handle returns. There are two options here:
   
   
• You pay your affiliates each month for sales generated in the preceeding month less returns. Most affiliate networks work this way.
  
  
• You factor your average return percentage into your CPA offer. I think this is a far better business model for all unless you are willing to share the details of each person who returns an item.
  
  If you are running and online only business you will also need to know about the distance selling rules.
  

Whilst big brands might have a dedicated affiliate program manager most companies use an Affiliate Network who act as a broker. However this can be very expensive with sign on fees often running in the thousands, monthly account management fees PLUS networks fees (sometimes call an override fee) which is typically 30% of what ever you agree to pay the affiliates. Something else to factor.

Shameless plug - If you found this useful please note that i-KOS offers a comprehensive Affiliate Program Management scheme for merchants whereby we run every aspect of your campaign - Please call (01322 277255) or mail me to discuss myles.davidson@i-kos.com