A marketing tactic used by 81% of brands and 84% of online publishers is worth a closer look. That tactic? Affiliate marketing — the promotion of other people’s products in return for a commission.
Affiliate programs have gained popularity over the past several years for a variety of reasons. For one, it’s a strategy that’s well-suited for the connected digital world — so much so that the average order value for affiliate sales is 21% higher than other marketing channels, and annual customer revenue can increase by as much as 58%.
Affiliate programs can be a good way for marketers and retailers of every size to reach a wider audience while winning new customers and boosting revenue. It can be tough, however, for newbies to figure out where to start.
Here’s a look at how affiliate programs work, how you can get started with affiliate marketing, and some examples of successful programs.
What is a Retail Affiliate Program?
Let’s back up for a minute and look more closely at what a retail affiliate program actually is. From the perspective of the affiliate, marketing adviser Pat Flynn defines affiliate marketing as “the process of earning a commission by promoting another person’s (or company’s) product.”
For retailers, affiliate programs tap into a network of partners and promote products to their audiences, providing a link for consumers to buy directly from the retailer. In return, retailers pay these affiliates a set commission for each sale that comes from their following.
How Affiliate Programs Work
Affiliates promote and link to your products from their own website, blog, social media, or email. When customers click that link and ultimately make a purchase from your store, you pay out the commission (say, 5%) based on the total amount of that order.
Orders from affiliates are tracked by creating a special link that allows you to see where visitors to your online store came from. Here’s an example of a what one looks like:
In this example, the tag “123456” represents an individual affiliate’s ID number. You’ll assign a different number to each affiliate you partner with — creating a unique link allowing you to identify and keep track of the consumers they send your way, whether or not they become customers, and how much they spend. This makes it easy to figure out which affiliates are sending the highest and most-valuable traffic so you can double down and pay them accordingly.
Pay Per Sale, Per Lead, or Per Click?
The majority of retail affiliate programs pay affiliates for each order that comes from their unique affiliate link, known as pay per sale. However, some retailers also opt to pay affiliates per lead, per click, or some combination of all three. The way you pay affiliates, along with the percentage commission you offer, can fluctuate and evolve.
Deciding which method is best for your store depends on the primary goal of your affiliate marketing. If you’re looking to increase brand awareness and recognition, pay per click could be the best option. If you’re strictly in it to boost revenue, the typical pay per sale is a better option.
Getting Started with Affiliate Marketing for Your Store
The two main ways retailers implement an affiliate marketing program are building their own program and going directly to affiliates, and joining a third-party affiliate network to gain access to affiliates and streamline the back-end of the process.
Top Affiliate Networks for Retail
There are myriad benefits and drawbacks to building your own program or using an affiliate network, but the key point to remember is that joining an affiliate network means you’ll have to pay an additional commission to the third party (on top of what you pay affiliates). If you’re a small retailer, this can eat into your profits in a hurry.
That said, joining an affiliate network makes it seamless to market your program and bring on affiliate partners. If that sounds right for you, a few of the top retail affiliate networks to consider include ShareASale, Rakuten Marketing (formerly Linkshare), and FlexOffers.
Building Your Own Retail Affiliate Program
Building your own retail affiliate program is both easy to do and easy to automate. If you’re already using Shopify, you can access tons of plugins and modules that make it easy to track affiliate sales and pay out commissions. If you’re not a Shopify merchant, there is other software you can choose from like Erass, vNative, and Referral Candy.
The first step in building a program for your store is to identify the audience you want to reach: Who are your ideal customers? What do they look like? Where do they spend time online? Who do they listen to? This information is vital because it informs which influencers, bloggers, or other personalities will be effective affiliates for your business.
The next step is to decide how you’ll set your commission structure. As mentioned above, you can choose to pay per sale, per lead, per click, or any mix of the three. If you’re in doubt, paying per sale is always a safe bet.
Once that’s decided, consider what percentage you feel comfortable offering in exchange for each sale. Affiliate commissions are usually a small percentage (typically less than 10%) and can vary from one type of product to another. It’s also common to offer higher commissions to affiliates who send more orders your way.
Target, for example, offers between 5 and 8% commission on home and outdoor living products and only a flat 1% on health and beauty.
When you have a list of potential affiliates and you know what you’re willing to pay for a commission, the next step is to reach out and recruit those affiliates for your store. Once you’ve brought them on, you can automate affiliate order tracking and payment using the Shopify plugins or one of the software options mentioned above.
Why You Should Be Picky About Your Store’s Affiliate Partners
It’s easy to fall into the thinking that any affiliate sale is a win. While that’s true to some extent, the best affiliate marketers take it a step further and exercise extreme prejudice when selecting partners. After all, a one-off sale isn’t as valuable as a repeat customer — but if they come from an affiliate, you’ll pay the same for both.
That’s why it’s good practice to be picky about the affiliates you work with and pay. Use a tool like HubSpot CRM or Salesforce that allows you to track the entire lifecycle of new customers brought in through affiliate marketing. This makes it easy to make informed decisions about where to spend and double down on your affiliate marketing efforts in order to get the best returns in the long term.
Retailers Doing Affiliate Marketing Right
Harry & David Lets Data Inform Spend
Harry & David specializes in premium food gifts and gift baskets. The company lets data speak for itself and lead its investment in affiliates, whether working with individual partners, affiliate networks, or large coupon websites. It considers more than just affiliate performance, tracking affiliates’ search and traffic trends outside their contribution to Harry & David.
Digital marketing manager Christian Schwindle told Digital Commerce 360 that the company’s analytical approach to affiliate investment led to the best returns — skyrocketing revenue from one particular affiliate “from five digits to seven digits.”
Amazon Combines Affiliate Marketing with Prime Membership
It’s not a secret that Amazon owns a large share and a wide variety of the ecommerce market. That makes it a no-brainer for affiliates to hook up with their affiliate network, Amazon Associates.
But affiliate programs accomplish different things depending on your business model. Amazon enjoys a lot of trust from digital shoppers, so its affiliate program is less about social proof or reach and more about generating demand for individual products. By combining its affiliate and membership programs, Amazon boasts a 74% conversion rate for Prime members.
MVMT Protects the Bottom Line with Time-Limited Commissions
MVMT, a popular direct-to-consumer watch brand, uses its affiliate program to boost revenue. As mentioned earlier, affiliate marketing can serve a lot of roles for your business, and MVMT was clear on how it would use the tactic.
The company built a large band of affiliates by offering above-market commissions of 10% — but to ensure it only paid for immediate sales (instead of brand awareness or just leads), it put a time limit on commissions. Affiliates are paid only when customers buy from their link within 15 days.
Affiliate Marketing for Retail
When done right, retail affiliate programs can be a huge boon for your business. They can facilitate higher sales, grow brand recognition, and even promote trust in your business — that’s why so many of today’s businesses lean on affiliate marketing in one way or another.
By building an affiliate program that’s best for your business, and letting data lead your decisions and investments, you can boost revenue in a sustainable way.