In layman’s terms, affiliate marketing is: "web publishers/ affiliates generating registrations/ leads/ sales for merchants/advertisers, in return for a bounty / commission each time they do so".
Advertisers don’t buy this advertising, they simply pay them when people click through and perform the action specified by the Advertiser - sign up, transact, fill in a lead etc. Affiliate marketing networks like http://www.dgm-india.com/are the link between the merchants and affiliates, they provide the advertisers with technology and track end-to-end performance across various defined performance metrics / parameters like registrations, transactions, referrals, leads etc. while acting as a gateway to large numbers of individual affiliates / publishers. It also allows third party tracking and certification which is crucial when the quantum of referrals are huge.
Benefits of Affiliate Marketing to Advertisers / Merchants
- Expand reach : More traffic > More registrations
- Brand exposure: Free benefit, since you do not pay for advertising.
- Drive revenue: Well-run affiliate programmes can generate terrific returns
- Inform marketing activities: Learn from affiliates about what is working in terms of pricing, offers, products, propositions, landing pages … and what is not. For example, you can watch the best performing affiliates to see how they write their Google ads for the best response. These skilled practitioners can help you improve other areas of your business.
- Reduce costs/financial risks: Affiliates offer merchants a virtual sales force without the need to worry about staff salaries, overheads, sick pay etc. The CPA (cost per action) performance model is very cost effective in this respect.
- Measurability and accountability: Affiliate networks have lots of tools to help you track your campaigns. Combine this information with your web analytics and sales data to see the big picture and measure ROI.
- Easy draw for merchants with good products but no monies to commit upfront.
- Get an instant alternative monetising opportunity beyond Ad Sales & ad networks
- Affiliate Marketing can act as a platform to drive in monies with unused inventory.
- Cookies set up for 30,60 days ensure sales incentive for publishers
- Complete control of merchants they wish to promote, unlike the situation of an Ad network.
Consumers use Internet to seek information about products - their features, pricing etc. Primary need of Internet Customers is 'comparison shopping' where buyers can see in “one-view” offers from multiple merchants for the same SKU/ product and then with a click proceed to buy the same.
This becomes easily possible for Web Publishers to achieve through the help of Affiliate Networks, since the networks pick up 'live feeds' of all products and services from Merchants. The Affiliates in turn pick up those feeds, aggregate & display them on their respective websites the way the consumers would want to see them. Few examples of top global affiliate sites:
- Kelkoo (Yahoo shopping)
e-commerce in India currently driven by Individual deals & bargains. Customers are exposed to a single proposition of a “Deal” at one point of time and hence they can respond to only specific stimuli. I fee that this can be one of the major reasons for the low commerce activities in India. The only exception is the 'Travel' category where we anyways see all online travel portal giving comparisons between various airlines, hotels etc.
Affiliate Marketing: Important channel for customer acquisition
Affiliate Marketing is globally becoming an indispensable channel for advertisers looking to acquire customers online. Globally, affiliate marketing already contributes to almost 25% of the online spends. Sample these:
- Affiliates worldwide will earn $6.5 billion in bounty and commissions in 2006 [Source: Marketing Sherpa]
- Market for UK affiliate marketing to grow to £2.16 billion: [Source: E-consultancy – October 11th, 2006]
- UK market for this marketing segment will record a growth of 60% this year to about £2.16 billion, compared to the £1.35 billion in 2005 [Source: Traffic Junction – October 11th, 2006]
Affiliate Marketing in India
Start has been made by http://www.dgm-india.com/ by being the first credible Affiliate network in India. I expect over a period of next 18-24 months Affiliate Marketing becoming a very important channel for online customer acquisition and contributing to almost 10% of online advertising.