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The Ultimate Guide for eCommerce Affiliate Marketing

It’s hard to go a day without hearing about affiliate programs. Whether you’re watching the Youtube channel of your favorite content creator, perusing Instagram, or finding a new recipe on a food blog, you’re bound to see or hear people promoting their affiliate links. It’s not surprising these are so common since worldwide affiliate marketing spend is increasing at an unprecedented rate. Specifically, US affiliate marketing spend reached $6.8 billion in 2020, and 16% of eCommerce sales in the US and Canada are generated via affiliate marketing. 

But why has affiliate marketing become so popular? The answer is simple: increased revenue. Below, we define affiliate marketing, highlight what leading eCommerce marketing agencies consider when launching an affiliate marketing program, and offer several examples of companies already reaping the benefits of affiliate marketing.

What is affiliate marketing?

Affiliate marketing is a form of performance-based marketing where a publisher is compensated for promoting an advertiser’s products. Advertisers enter this agreement because they want to leverage publishers’ audience engagement, expertise, and traffic. In today’s world, we can think of publishers as influencers and advertisers as eCommerce brands. eCommerce brands contract with influencers who receive set commissions based on the number of leads they bring in, sales they generate, or customer site visits they produce. 

Depending on the advertiser’s goals, publishers have to hit specific KPIs to receive a payout. For example, metrics in affiliate agreements can include direct conversions, new social media follows, content downloads, newsletter signups, or customer clicks due to the publisher’s notoriety. 

What are the benefits of affiliate marketing?

It’s no surprise that 16% of all eCommerce sales in the US and Canada originate from affiliate marketing when you think about its benefits. The first is its extremely low startup costs. Besides implementing a tool or process for centralizing affiliate metrics, there are no upfront fees. Remember, publishers don’t get paid until they hit their numbers, so advertisers essentially get free promotion until influencers meet the standards outlined in your agreement.

Next is high ROI. It’s tough to get your brand discovered, even if you have a great product. But influencers can dramatically amplify your marketing efforts. The audience you’re trying to reach already feels connected to the influencers they follow and tend to trust influencers’ judgment. With that level of third-party validation and social proof, you’re bound to get more traffic from pre-qualified leads, both increasing the likelihood of a sale and improving your SEO.

Besides the increased revenue you’re likely to get, you’ll also have an easier time monitoring your progress. For example, you can track the direct impact of an influencer’s activity on clicks, impressions, leads, and sales fairly easily. If you need to pivot to a different influencer, you’ll be able to make an informed, confident decision quickly. This can be daunting, so working with an eCommerce digital marketing agency is helpful when analyzing your core analytics and metrics. For example, a digital marketing agency has experience interpreting data-driven insights for eCommerce stores. They can develop key strategies to help you reach your target audience and achieve your revenue goals.

Things To Consider When Developing Your Affiliate Program 

The benefits of affiliate marketing are substantial, but it takes adequate planning to ensure consistent revenue growth. There are a few things you need to do before launching your affiliate program:

  • Define your objectives - It’s always a good idea to define objectives before you begin a new initiative, and it’s no different for an affiliate program. Take a moment to think about what you want out of your affiliate marketing strategy. Is it an increased conversion rate? Increased revenue? Maybe it’s increasing your average order value or overall site traffic. Perhaps it’s a combination of all of the above. Write out these goals and then determine corresponding KPIs to go along with them.

    For example, track the percentage of affiliate-prompted site visitors who bought your products for an increased conversion rate. Similarly, track how many clicks affiliate links received and how much you earned per click for increased site traffic. Whatever your objectives are, make sure you have hard numbers to back them up.
  • Research your competitors - An easy way to get inspiration for your affiliate program is to look at your competitors’ strategies. Keep a running spreadsheet of your competitors and their influencer base, affiliate incentives, commission payouts, and any other details you can find. Additionally, try using influencers in verticals that your competitors may not be addressing to fill in whitespace and maximize your return on investment.
  • Understand your average LTV - Customer lifetime value is one of the most valuable metrics for an eCommerce company. LTV reflects the amount of money a customer will pay you throughout their relationship with your brand. Some customers are one-and-done, meaning they buy one product and never come back. However, some customers have exceptionally high lifetime value, meaning they love your products and keep returning to buy more. To increase your revenue-generating opportunities, design your affiliate program to yield as many of these high LTV customers as possible. To calculate the LTV of a segment of your customer base in a specific period: LTV = (average sale value) x (# repeat transactions) x (average retention)
  • Understand your retention rate - Retention rate may not seem relevant at first glance, but it plays a vital role in how much you can afford to spend in your affiliate program. If you’re acquiring customers that leave and don’t come back, you constantly have to play catch up. On the other hand, if customers stick around once you’ve reeled them in, you can increase your affiliate marketing budget. To calculate your monthly customer retention rate: Monthly customer retention rate = ((# customers at the end of the month - # new customers acquired throughout that month) / # of customers at the start of the month) x 100

As you can see, affiliate marketing programs have a lot of moving parts and for smaller organizations (and even big ones), it’s easy for all these steps to feel overwhelming. However, hiring an experienced eCommerce marketing agency to set up and manage your affiliate program can significantly boost sales.

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Growing and Managing Your Affiliate Program

To get the most out of your affiliate program, enlist publishers/influencers who already have a substantial following and loyal customer base. But how do you find them? 

One of the benefits of joining an established major affiliate network (vs. an in-house affiliate program) like Rakuten or Commission Junction is that they already have an established base of affiliate publishers. In addition, some platforms even specialize in a particular vertical that can get you even more qualified affiliate candidates. Thus, this makes finding new influencers who align with your brand and products easier.

Within your affiliate platform, you are able to outline your program’s rules of engagement and commission rates, and the network will auto-pay your publishers. Additionally, you can search for affiliates within the network and send them private invitations to join your program. 

Of course, you can always source new affiliates directly and advertise your program via social media channels and on your website. Best practices include creating a dedicated landing page that outlines the benefits of your program, including a direct link to join your designated affiliate network. When researching potential affiliate partners, browse relevant social media channels like Instagram, Facebook, Snapchat, TikTok, and Pinterest and find micro-influencers who have an engaged social media audience and who will be an evangelist for your brand.

It’s also important to note, look for candidates who are currently participating in affiliate programs, as this serves as proof of their ability to promote your program and shows their potential reach. This article on the top 10 eCommerce Social Media Marketing Strategies to Drive revenue offers tips and strategies on building influencer and affiliate marketing programs.

Major eCommerce Brands Who Use Affiliate Programs

Many major retailers have already jumped on the affiliate bandwagon. Here is just a snapshot of a few big-name brands effectively leveraging affiliate programs:

  • Target - Target’s affiliate program is open to all publishers who cater to US customers, and top affiliates can earn up to 8% commission. And because Target sells so many types of products一furniture, electronics, apparel, health, and beauty一they can get a variety of influencers to market to an exact niche. Target also hosts a variety of contests and constantly updates its promotions in a weekly affiliate newsletter.
  • Home Depot - With so many up-and-coming DIY influencers, Home Depot is emphasizing its affiliate program. Affiliates can earn between 2 and 8% commission depending on the products they promote and how many shoppers they draw in. In addition, Home Depot consistently nurtures its affiliate programs with weekly newsletters and a daily feed of promo materials.

Use Affiliate Programs to Boost Sales During the Holiday Season 

Black Friday, Cyber Monday (BFCM), and other holiday sales can be massive revenue generators for businesses of all sizes. Affiliate programs can magnify the effects of those sales when organized strategically.

The first step is to create irresistible promotions. What will incentivize customers to buy even more than they usually do? Is it a series of rotating discounts up to the holiday? Maybe it’s discounting a top-selling product that is rarely ever on sale. Perhaps it’s freebies that you give away at a certain total purchase amount. Whichever route you choose, create compelling promotional offers and use your affiliate partners to amplify sales.

Next, tell your affiliates about these sales or discounts way before they go live. This allows ample time for your affiliate partners to tease their audience and create hype around your brand. In that same vein, give your affiliates the marketing materials they need to really showcase your promotional event. 

Once they are part of your program, affiliates are often self-sufficient but make it easier on them by supplying pre-made graphics, promotional banners, and a list of top-selling items. You can take this idea a step further by offering affiliates special holiday incentives as well. For example, offer free products or an extra commission structure during certain sale events.

Lastly, recruit your best-performing affiliates for these critical revenue-generating seasons. Holidays only come once a year, so you want to make sure you get the best bang for your buck. In conjunction with seasonal sale events and when planning out your Q4 strategies, look at some other leading eCommerce trends to boost sales

Common Affiliate Program Challenges

There are a few challenges to bear in mind when implementing and iterating on your affiliate program. The most obvious challenge is getting the right affiliates in your program. Once you’ve attracted a few influencers, it’s paramount that you measure their potential. How much traffic are they bringing to your website? Are they speaking to types of prospects or customers you’d never had before? Are they upholding your brand standards? Are they making sales? If not, it may be time to recruit other candidates.

To oversee your affiliate program, you’ll need comprehensive reporting and analysis capabilities. This will help you manage and tighten up your program while ensuring that you don’t hinder other marketing efforts. It’s hard to do it alone, so consider seeking out the help of an eCommerce marketing agency to help you find this delicate balance and ramp up your program for success. 

Implement Your Affiliate Program Today

Affiliate programs reach untapped audiences primed and ready to buy products or services from influencers they admire. As a result, affiliates limit the need for costly outside sales teams, enhance brand discovery, and drastically increase the impact of your everyday and holiday marketing campaigns. And now is the time to take advantage of this growing marketing tactic. Over 80% of brands already use affiliate marketing programs, and annual affiliate spend is up to $12 billion.

While affiliate programs can yield higher conversion rates and potentially bring in customers with higher lifetime value, establishing a successful affiliate marketing program doesn’t happen overnight. Instead, it takes time and hard work to build the right affiliate base, determine appropriate commission payouts, and iterate on your strategy to grow and manage your program. That’s where the help of seasoned, creative, and innovative experts comes into play.

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