Affiliate marketing is an essential part of marketing any e-commerce website and in fact most non e-commerce sites can utilise this technology to implement performance marketing campaigns.
Affiliates link to your site using a special link that allows the affiliate tracking system to record all sales generated from each particular affiliate. You then pay the affiliates a commission based on the revenue they generate.
Affiliate programs are not limited to e-commerce sites as you can reward affiliates for generating traffic and non transactional actions like registrations and qualified lead generation.
The origins of affiliate marketing can possibly be found in the USA in 1996. “As legend has it, Jeff Bezos, CEO and founder of Amazon.com, chatted with a woman at a cocktail party about how she wanted to sell books about divorce on her website. After that exchange, Bezos pondered the idea and thought about having the woman link her site to Amazon.com and receive a commission on the book sales. This was the impetus for creating the so-called “first on the Web” Amazon.com Associates Program which was launched in July 1996.”
Industry Stats
3.5% of all online revenue will be generated by affiliates source: IMRG (Interactive in Media Retail Group) 2004. However some online retailer’s report 20% of revenue comes from affiliate programs.
99% of US retailers that use affiliate marketing rate it as “effective” or “very effective”
Advantages
- Pure performance based marketing
- Flexible and tailored reward schemes
- Generates links from other sites improving search engine rankings (Page Rank)
Disadvantages
- Affiliates require support and encouragement to generate real returns
- 80% of affiliates will generate close to no revenue
- Non transactional (traffic) based rewards subject to abuse and fraud
- Payments to affiliates have to be administered or outsourced
- Takes time to establish a network of good affiliates
When to Use
- Every e-commerce site should have an affiliate program
- Excellent for negotiating performance based advertising contracts with publishers and marketers