Affiliate marketing, what is it?

Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts. The industry has four core players: the merchant (also known as ‘retailer’ or ‘brand’), the network (that contains offers for the affiliate to choose from and also takes care of the payments), the publisher (also known as ‘the affiliate’), and the customer. The market has grown in complexity, resulting in the emergence of a secondary tier of players, including affiliate management agencies, super-affiliates and specialized third party vendors.

Affiliate marketing overlaps with other Internet marketing methods to some degree, because affiliates often use regular advertising methods. Those methods include organic search engine optimization (SEO), paid search engine marketing (otherwise known as programmatic media buying, PPC, paid ads, and pay per click), e-mail marketing, content marketing and in some sense display advertising. On the other hand, affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner.

Affiliate marketing is commonly confused with referral marketing, as both forms of marketing use third parties to drive sales to the retailer. However, both are distinct forms of marketing and the main difference between them is that affiliate marketing relies purely on financial motivations to drive sales while referral marketing relies on trust and personal relationships to drive sales

How are affiliates rewarded for their conversions?

Eighty percent of affiliate programs today use revenue sharing or pay per sale (PPS) as a compensation method, nineteen percent use cost per action (CPA), and the remaining programs use other methods such as cost per click (CPC) or cost per mille (CPM, cost per estimated 1000 views).

Most affiliate programs give credit on last click. What does this mean? For example, the Last Interaction model in Analytics assigns 100% credit to the final touchpoints (i.e., clicks) that immediately precede sales or conversions.

Why last click attribution is bad for affiliate marketing

Let’s say you’re a consumer and you’re researching a travel package. When it comes to travel, this is typically a good size investment for a family, hence there is a lot of research. A consumer could visit up to 10 sites which equals multiple clicks on-site, display ads, email blasts then finally the consumer clicked on a travel blog and made the purchase. Now, all these advertising methods influenced the eventual purchase but the blog would get the credit for the conversion. As an affiliate that was utilizing the display ad, email blast they are left in the dust because most affiliate programs use last click attribution. This doesn’t seem fair as each affiliate should get partial credit for their efforts. Also, if someone clicked on an ad 2 months ago then converted, did that ad really contribute to the conversion?

How new attribution software providers will fix a broken last click model in Affiliate Marketing

As the rise of SaaS attribution providers are on the rise, they are looking to fix how people perform and optimize marketing and they are looking to apply their software to other industries such as affiliate marketing. With the same attribution models providers use for their direct clients, they can now use in affiliate marketing. Imagine being an affiliate that hosted a blog you lost out on your credit because the last click attribution model always favored a re-targeting ad? If your affiliate network was using a Linear Multi-Touch attribution model, you would get the same credit as the re-targeting ad. Disputes of credit will be down and more affiliates will be making revenue in turn adding more effort to their advertising methods.

How LeadsRX is helping

In closing, LeadsRX is on the fore-front of helping affiliate programs with implementing full funnel attribution models and shifting how programs are crediting affiliates. This not only helps the affiliate program with giving credit where it’s due, it’s also showing their affiliates that transparency is good. The fictitious blog we spoke about earlier will most likely step up their efforts as their affiliate program is now giving them the credit they deserve!