Market is dynamic in nature which suggests that it is changing every day. The concepts related to the market are also evolving with the changes seen in the market. Affiliate marketing is one of the contemporary ways of promoting products and services and an effective advertising model. Affiliate marketing is also regarded as a performance-based concept.
In simple words, it is the advertising model where a product or service is promoted or advertised by associating with a third-party (affiliate). The company in return provides commission fee and other incentives to the affiliate. The recent boom in Internet users has increased the state of affiliate marketing.
Affiliate marketing is one of the emerging strategies to attract sales and generate online revenues. Before, the company, producing the goods and services, used to be involved in all sorts of marketing functions. Affiliate marketing is delegation of some of the marketing functions i.e. promotion of the product. Instagram influencers, Vloggers etc. are seen promoting brands in their contents and providing affiliate links in their page or channels. This is one of the examples of this marketing.
Statistics on Affiliate Marketing
- A study by Forrester Consulting suggested that total affiliate spending in 2017 was $ 5.3 Billion and it is predicted to rise to $6.8 Billion by the end of 2020. This shows the growing market of affiliate marketing.
- A study suggests that 81% of the brands use this marketing as their regular strategy to generate online revenue. It also suggests that 84% of the publishers vouch for affiliate marketing.
- Google Trends has published statistics that search for the term ‘affiliate marketing’ has increased by 30% in just a span of a year i.e. from September 2016 to September 2017.
- It has been recorded that 20% of publishers’ annual revenue is generated through Affiliate Marketing and 16 % of the online sales are from affiliate marketing (2017).
- Instagrammer Jason Stone from his Instagram Account Millionaire Mentor, generated $7 million in retail in a single year i.e. June 2016 to June 2017.
- Amazon provides a 1-10% commission to its affiliates for promotion. Amazon has hiked this rate from the highest of 8.5% to 10%.
How does Affiliate Marketing work?
Affiliate Marketing has the particular responsibility of promoting the market so that it can earn revenue, it requires involvement and coordination of different groups. There are 4 parties involved in affiliate marketing.
- The Sellers or Advertisers or Product Creators
- The Affiliates or Publishers
- The Consumers
- The Network
The Sellers or Advertisers or Product Creators:
Sellers, Advertisers or Product creators can be anyone from a solo business person promoting its product or service to a large enterprise with multiple ranges of business or a vendor merchant with a product in the market. There are individuals or businesses with a product or service they wish to sell.
For Instance, Amazon, the online retail giant, as well as Mr. XYZ, a youtuber with good content , can be the seller.
The Affiliates or Publishers
Affiliates or publishers are the third party who promote the content or the product of the seller/advertisers in their platform. Affiliates market the sellers’ product in more convincing ways to the potential customers. Publishers persuade their followers, viewers to try the product and convince them to purchase it. For every revenue generated from the side of publishers, s/he receives a commission. The affiliates hold audiences of a certain nature and a product specific dealing with the need of such niche audience can be catered by affiliate marketing.
For Instance, Instagram Account named Millionaire Mentor is one the publishers with generate income of $7 million in 2017. Million Mentor has got 5.4 Million followers on Instagram (January 2020). ClickBank, Rakuten, C J Affiliate, FlexOffers etc. are some of the leading Affiliate Marketing Companies.
Affiliate marketers get paid in various ways. Some of the most common ways are :
- Share on sale
- Pay per lead
- Pay per click
The followers, subscribers, blog followers and the one who purchases from the affiliate links are the customers. Affiliates share the products in their social media accounts, websites, blogs etc. and interested customers consider buying it.
When customers make a purchase, affiliates and sellers both share the profit. For customers, affiliates stand as intermediaries for marketing of the product. Some affiliates discloses to their followers, subscribers that the promotion to be paid promotion and some affiliates do not. In 2017, 16 % of the online sales are from affiliate marketing which shows the involvement of customers in affiliate marketing.
Some do not consider networks as the part of affiliate Marketing but there are certain groups which associate Network groups as an important part of affiliate marketing. Network simply means an affiliate doing more than just promoting the product for sales. Affiliates sometimes manage the database of the products, sales, payment and product delivery on behalf of Advertisers. All this association of functions by affiliates creates an affiliate network. ClickBanks, CJ Affiliates, FlexOffers etc. are some of the affiliate networks.