An old advertising saying is that you should advertise more when the economy is bad. Yeah, right … Let me get this straight. More people are spending less money, so I should spend more money to attract the fewer people buying? I don’t think so.
Thanks goodness for the web, where you actually can increase your advertising and sales without spending a cent. How’s that, you ask? By setting up an affiliate program, that’s how. Believe it or not, an affiliate program is a program whereby Internet marketers spend their money to advertise your product or service and you only pay if and when they make a sale. Sounds good? Then read on.
I know, I know, it sounded fishy to me too, until I got into this crazy business. Be glad you are reading this now, months or years before your competitors do, because most every business selling goods or services on the Internet will need to have an affiliate program running in the near future to stay competitive.
The way an affiliate program works is that you take your product or service and offer it to an affiliate advertising network. The ad network takes your product and creates what is called (logically enough) an offer. An offer includes all of the things needed to sell your product on the Internet, like the price the item will be sold for to the customer, what commission the advertising network will be paid for facilitating the sale of your product, and what the landing pages will look like. Landing pages are the web pages that customers will be directed to when considering a purchase of your product. Often, the ad network creates landing pages for you or at least will help you with them.
You may already be familiar with some affiliate programs and not even know it. Amazon.com, for instance, was one of the first companies to let website owners link to the Amazon site and affiliates to earn a commission if a customer bought a book after being referred to Amazon.com from a site.
An affiliate acts as the middleman between online consumers and products. By connecting consumers with the products they’re looking for, an affiliate gets paid a commission each time a sale is made. Sales are tracked with an affiliate link that the affiliate ad network sets up, tracks, and manages for you. When a specified action or sale is made by the consumer, this is called a conversion.
The affiliate is paid for each conversion, which is tracked by a variety of means known as cookies and/or firing pixels. A firing pixel is a piece of computer code inserted into your landing page. For example, when a consumer puts his or her credit card information on your landing page to make a purchase and the charge is approved, the firing pixel sends a signal to the ad network that a sale has been made, and the affiliate is credited for the sale. The great thing about this for the seller is that they don’t have to worry about any technical issues. The ad network does all of that, so you can continue to focus on creating the best product and customer service experience to keep your customers coming back. The affiliate only gets paid once, while you keep the customer for life (or as long as the customer chooses to do business with you).
Affiliate advertising networks have relationships with hundreds – even thousands – of individual affiliates. Your offer will be set up to pay the affiliate a set amount, or percentage of each sale, known as the payout. One common way to pay affiliates is a Pay-Per-Sale offer. The affiliate receives a commission that you set, normally in the range of 10%-60% of the retail price of the item being sold, each time a sale is made. Another way that affiliates are paid is termed Pay-Per-Lead. In this method, the affiliate is paid each time a potential client registers his name, address, phone, etc., on your landing page as a result of the affiliate’s effort. A pay-per-lead program works well for companies selling things like auto insurance or home mortgages that require a longer selling cycle.
To get people to your landing page to buy your product, affiliates drive traffic, that is, they get people to click on a link that allows the consumer to see your product’s sales page. Affiliates use a variety of means to drive traffic -– some honest, others not so honest.
One of the most prevalent methods affiliates use to drive traffic is through Pay-Per-Click Advertising. In this method, the affiliate is, in effect, buying traffic. One popular way of buying traffic is for the affiliate to buy an ad on the Google AdWords platform. AdWords ads are the sponsored ads and links you see on across the top and on the right-hand side of Google’s search results pages.
The affiliate writes an ad that advertises your product using about 150 characters. He then finds a list of keywords that people are typing into the Google search engine when they are seeking to buy a product. For example, if you’re selling baby blankets, the affiliate could use Google’s free keyword suggestion tool, called the Google Keyword Tool External. It’s located at: https://adwords.google.com/select/KeywordToolExternal. A partial list from a recent search for “baby blankets” using this tool produced the following list: baby bedding, personalized baby blanket, crib bedding, toddler bedding, baby gifts, etc.
Now the way Google makes its money is that Google allows affiliates to place a bid for how much they are willing to pay each time someone types in a keyword from the above list and clicks on the affiliate’s ad.
Let’s look at an example. When the person looking to buy a baby blanket clicks on the ad, he is taken to your landing page. If they buy a baby blanket, the affiliate gets paid his commission. In this example, let’s say the customer pays a retail price of $50 for the blanket and you have agreed to pay the affiliate $10 per sale. The affiliate would receive $10 and the affiliate ad network would receive roughly $2 for setting up and managing your offer. If the bid price or cost-per-click for the keyword “baby blanket” on Google AdWords was $1, and eight people clicked on the ad before someone bought a blanket, the affiliate would have spent $8 in clicks to make a $10 commission, resulting in a $2 profit. Everyone wins — you get a sale, the affiliate gets a commission, Google gets ad revenue, the affiliate network gets a commission, and (always most important of all ultimately) the customer gets what he was looking for!
Next week, we’ll look at how the relationship between the ad network and individual affiliates is set up and some pros and cons of an affiliate program.