If you spend a lot of time on social media, especially Instagram, you have more than likely seen, or even shopped through, an affiliate link. When an influencer talks about a product and says "swipe up for link," they are referring to an affiliate link. When you click on that and purchase a product, the influencer gets a kickback. It's usually a mutually beneficial relationship, because the company gets more traffic and customers, and the influencer gets a part of those sales. It's a great way for bloggers and Instagram influencers to actually make money.
But what do small businesses need to know about affiliate programs? Industry experts lent their advice to Business News Daily.
What is an affiliate link?
An affiliate link is a URL that a publisher (affiliate) uses to send traffic to a retailer's website. An affiliate is a web publisher that drives traffic to an online retailer in exchange for a commission on each sale, according to Amit Khera, former marketing executive at Ralph Lauren and co-founder of performance marketing agency OAK Digital.
These trackable links allow brands to see which publisher partners are driving consumer traffic and sales back to the brand's own e-commerce site, said Danny Kourianos, senior vice president of marketing at affiliate network Rakuten Marketing.
"Affiliate marketing is an incredibly effective marketing channel that enables businesses, including small businesses, to leverage affiliates to reach and engage in-market shoppers [with] a brand [they] may not otherwise connect with," Kourianos said.
Khera noted that affiliate revenue can make up 10 to 20 percent of online revenue. [Read related article: Getting Started with the Amazon Associates Affiliate Program]
How do they work?
When a business sets up an affiliate program, it invite companies to join its program. The business then supplies the affiliates with content to promote (products, promotions, etc.), Khera told Business News Daily.
He added that different types of affiliates have different methods to promote their products. These are the three major types of affiliate:
- Coupon/deal: These affiliates have strong SEO or email lists (example: RetailMeNot).
- Loyalty: These affiliates offer their users an incentive to buy through their links, such as rewards points or cash back (example: Ebates).
- Content/blogger: These affiliates are often the most desirable because they drive discovery at the top of the funnel (example: MoneySavingExpert.com).
"Many times, businesses work with an outsourced program manager (OPM) to manage the program on their behalf," Khera said. "OPMs have strong contacts with top affiliates and are also able to negotiate for more exposure and lower fees. They utilize best practices to give you the strongest possible program."
Through affiliate networks, small businesses can partner with publishers they may not have had access to on their own, noted Kourianos. "These new partnerships help to reach and target a wider audience of potential customers. Affiliate links monitor the performance of each publisher's individual links, giving the business deeper strategic insight into their overall affiliate program and success."
What type of business should use affiliate links?
Khera said that all B2C e-commerce businesses should utilize affiliate links. This includes businesses that sell tangible goods, services or even virtual products.
"A business can also utilize affiliate to pay for sign-ups or leads (i.e., a medical device company that follows up with a sales phone call to close the deal)," Khera advised.
Kourianos said that affiliate marketing should be used by any brand or small business that is looking for a way to drive more traffic to their business site, increase their reach and sales, and do all of that in a cost-effective way.
"It can also be used by blogs, websites, mobile apps, shopping platforms and browser add-ons looking to increase consumer purchases in exchange for commission," he added.
Advantages and disadvantages of affiliate links
Any venture to bring traffic and sales to your business's website takes some trial and error. While affiliate links may seem like a no-brainer, there are some factors to keep in mind. Khera and Kourianos laid out some advantages and disadvantages for businesses looking to get into affiliate programs.
Advantages
- You can drive incremental sales at no or low risk.
- You get free exposure on different types of publishers. This is especially valuable when bloggers or content sites promote your product.
- Affiliate programs not only increase customer reach, traffic and revenue, but they also help build brand awareness and loyalty.
- It's a cost-effective means of doing business, since it's pay for performance.
Disadvantages
- You need to develop some sort of model to ensure you're not overpaying for certain types of sales. Affiliates should be compensated differently based on the type of user they bring to your site.
- These programs require strong management and oversight to be successful and brand-forward.
- Affiliate links may end up competing with other ads that belong to the business from other channels.
- You may not be able to fully control all your exposure.
"[Your] affiliate links may be presented alongside questionable content or disreputable tactics," Kourianos elaborated. "Especially with a small business that may not have the bandwidth to monitor every affiliate publisher, it is important to lean on an affiliate network that helps vet each publisher partner to ensure the brand is protected."
Additionally, "for advertisers, the main purpose of an affiliate link is to drive site traffic and consumer sales," he said. "The success of an affiliate program is contingent on the success and conversion of their affiliate links and partnerships. Ultimately, it's a great strategy that allows businesses to increase brand exposure and increase sales."