Affiliate Marketing – A Complete Guide for E-commerce Businesses

For an e-commerce business that wants to promote its products with a limited budget, low effort and less time, affiliate marketing is one of the most effective ways to do so. 

In fact, India’s affiliate industry has tremendous potential for growth and is on track to touch the targeted USD 835 million by 2025 from around USD 300 million in 2021.

Early-stage e-commerce businesses as well as established ones can significantly benefit from this approach to boost their awareness, sales and growth.

If you want to review your company’s affiliate strategy or build a powerful one from scratch, here’s a step-by-step guide that explores affiliate marketing through the perspective of an online business and explains why it should be a part of your digital marketing strategy.

What is affiliate marketing?

An affiliate program is a performance-based marketing strategy where businesses pay the affiliate a fee for each visitor or buyer directed by them to the website. 

It is a monetisation model for individuals (affiliates) where they promote products/service through various channels and in exchange for a commission. 

Affiliates usually leverage their own websites/blogs/social media accounts as platforms to advertise the products to their respective users. Upon clicking the link the user is redirected to the store where they are likely to transact and make a purchase.

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What are the Pros and Cons of Affiliate Marketing

1. Being a low-cost marketing option, affiliate programs offer high Return On Investment (ROI) since in most cases the business pays an affiliate upon a conversion or sale and without sustaining any advertising cost.

2. Affiliate programs have chances of fraud since fake clicks can be generated through a software and claimed to be by authentic users- this is especially applicable where businesses offer commission for traffic or impressions.

3. Some affiliates may retort to unethical practices such as redirecting the user to domains that are deliberately misspelt so as to appear same as the original website and use this site to sell products and earn profits. 

4. Affiliate marketing is low cost and hence low risk. Payments or fees are initiated by businesses only once a conversion happens, making it an ideal tool for firms operating with limited budgets.

5. Businesses can access a wider audience and market by working with multiple affiliates who are willing to advertise products and services on their platform.

What are some common channels for affiliate marketing

Here are some of the popular approaches that are ideal for affiliate marketing.

1. Blogs

If an affiliate is well versed in SEO optimization their blogs can rank in search engine results and subsequently drive higher traffic to these pages. A seller’s ad present on those blogs is likely to attract attention from a substantial number of readers, increasing the chances of sales.

2. Influencer affiliates

Considering the popularity and impact that influencers have today, affiliate marketing by influencers can ensure very high product visibility. An advertisement or link on their channel fetches significant attention and generates better results for businesses.

3. Microsites

Microsite, which is an auxiliary website, focuses on a single product with detailed information and aims at a target audience that will find the information helpful without the other distractions of a regular website. A microsite can also host affiliate links driving people to transact and buy the product.

4. Emails

Affiliate marketers who have a database of users can add affiliate links to the email newsletters that they sent to the list of subscribers. For instance, an email featuring skin care can include a cosmetic or makeup product link.

5. Coupon sites

Coupon sites are a great platform for affiliate links because a lot of people are frequently scouting for offers on these pages and a suitable affiliate link can potentially bring a significant number of shoppers from those websites.

6. Review sites

Sites that compare products or post frequent reviews attract tons of traffic everyday. They are the best places for affiliate marketing with banners and contextual links embedded on those websites.

Steps to create an affiliate program

Here’s a look at the steps involved in building a successful affiliate marketing program for your e-commerce store.

1. Define your goals

It is important to analyse what you plan to achieve through the affiliate marketing efforts and derive your objectives accordingly.

Let us look at some actionable goals:

• The revenue you plan to target through this marketing
• The average order value you expect from each affiliate
• The overall traffic that you expect on the website

These metrics will also assist in measuring the success of affiliate marketing and making changes wherever necessary.

2. Select a solution 

Building an in-house affiliate program can be a difficult and tedious task. While you may have a dedicated marketing team in your firm, it may not be possible to create a successful affiliate program without the help of an agency.

To manage a sizable affiliate network it is advisable to use a platform which will simplify the communication, streamline the process and track all the data at one place.

An affiliate platform should also help you manage:

• The payouts and commissions 
• Campaign optimisations to suit different channels 
• Detailed reports and analytics on affiliate performance

Handling all of this internally is a tough exercise requiring additional resources, time and effort. However remember to choose a platform that offers adequate tools, good support and fraud detection capabilities.

Here are some popular affiliate marketing software

3. Decide the products

Not all the products available on your website will be suitable for affiliate marketing. Some might need a detailed explanation and not give the best results through banners and links.

Product selection will also depend on the affiliates you choose and the audience they cater to. 

Here’s a broad categorisation to help you decide which products to go ahead with:

• Low volume but niche products that might have fewer takers
• High volume products that have a mass appeal
• Expensive products that are popular and in demand
• Non-expensive products that are yet to catch up on popularity and sales

4. Determine the commission

Commissions can greatly vary from 5 per cent to 30 per cent according to the industry you are in and is dependent on multiple factors including product value, logistical costs and so on.

However, you can decide the type of commission you would want to extend to the affiliates that include:

• Percentage rate commission – Offers affiliates a set percentage on each sale or a percentage of the total order amount. 
• Flat fee commission – Offers a pre-decided, specific fee on every order or item sold
• Product specific commission – Offers a certain commission exclusive to a particular product
• Affiliate-specific commission – Customises the rate depending on the success/performance of the affiliate
• Tiered commission – Allows affiliates to earn more depending on the number of successful referrals
• Recurring referral – Allows a commission each time a subscription/membership is renewed
• Lifetime commission – Allows monthly commission till the subscription is active

5. Define your policy and structure

This step requires you to lay down the terms and conditions that communicate the requirements and expectations from the affiliates as well as the payment policies.

You will have to establish factors such as:

• The marketing channels allowed for promoting your links
• The payment cycle and the process
• The type of keywords, phrases allowed 
• The commission structure
• An overall guide to what is permitted and what is restricted

7. Choose the right affiliates

When you work with an affiliate agency, they offer a network and database to readily collaborate with. Nevertheless, you can also research independently to look for the right attributes.

Here are some key factors to keep mind

• Analyse their digital presence, the channels through which they are active and the quality of their content
• Look at the categories they promote, the ad placements and so on.
• Understand if their pages are well optimised for search engines so as to ensure higher traffic
• Check similarities in their positioning and your brand to conclude if it will align with their content

Tips to improve your affiliate marketing performance

FAQs

Is affiliate marketing effective for small businesses?

With low upfront costs, it is one of the best ways to promote a business if you are new to the e-commerce space and operating on a limited budget.

How is affiliate different from referral?

An affiliate promotes a link/ad while a referral is the action taken after clicking the link. It is created when a user completes an action (clicks on a link) and is directed to the business’s website.

What if an affiliate fails to perform in terms of sales?e a good network of affiliates for Affiliate marketing is a risk free approach and the business does not incur any losses incase an affiliate is underperforming. Nevertheless, it is essential to have a good network of affiliates for better sales.