What is Affiliate Marketing? 20 Definitions that will Help You Understand
Also referred to as performance marketing, affiliate marketing is a form of performance-based advertising in which a business pays its affiliates based on the actions of a visitor or customer brought to the business through the affiliate’s own marketing efforts. Brands and agencies offer affiliate opportunities to publishers while affiliates sign up to market for advertisers. Below are 20 definitions of relevant terms in the affiliate space.
Often referred to as the Merchant, the advertiser is either the company that produces the products or services affiliates promote or the company that brand hired to advertiser for them. Advertisers pay affiliates or networks for delivering traffic that generates a sale or lead for their brand.
An individual (or company) who promotes products or services for a merchant in exchange for commission based off the sales and leads acquired. Affiliates are also known as publishers.
The person who manages an affiliate program for a merchant. They are responsible for recruiting publishers, policing affiliate activity and increasing overall sales for the advertiser. An affiliate manager acts as liaison between the affiliate and the merchant; they may work in-house for the advertiser or be an independent service provider (see below: OPM) contracted run their affiliate program.
A third-party company that provides affiliate program management services for multiple brands. Affiliate networks have their own pool of affiliates for which they provide the tracking technology to report clicks, sales and leads. They allow advertisers opportunities for more exposure assuming their network includes reputable publishers with quality traffic.
Clicking through refers to the act of someone clicking on an affiliate link and being taken to the merchant’s website. Click-through-rate is a percentage rate that measures the number of times an affiliate link has been clicked on divided the number of times the link has been viewed. That number is then multiplied by 100 to find the percentage rate.
Conversions are actions successfully completed by a visitor or customer based on the pre-defined point of sale established between advertiser and affiliate. The action could be a click, a credit card submission during a sale, or signing up for an email list. Conversion rates show the number of times your affiliate link has generated a predefined conversion compared to the number of times the link has been viewed displayed as a percentage. Similar to the CTR, conversion rates are calculated by diving the amount of sales a link has generated by the number of impressions the link received and multiplying the result by 100.
A cookie is a small file that is added to a browser by a site or redirector domain, allowing the site to recognize the user when he or she returns. Specific to affiliate marketing, cookies are used as a tracking alternate to pixels. They assign an ID to a user that has clicked on an affiliate link to get to a merchant website for a predefined period. If that user completes a conversion, the affiliate is credited for the sale based off the cookie recognition, regardless of whether or not they completed the sale using the affiliate link on a repeat visit.
Cost Per Action (CPA)
Cost Per Action, or Cost Per Acquisition, refers to the amount of money paid to obtain a desired outcome such as a completed sale or signup.
Cost Per Click (CPC)
Cost Per Click refers to the amount of money paid to generate a click by a user on an affiliate link. This is calculate by the number of clicks generated divided by the total campaign cost.
Cost Per Thousand (CPM)
Cost Per Thousand refers to the amount of money it costs to display an advertisement per 1000 impressions.
A type of graphical ad or text link provided to the affiliate for use in promoting the affiliate program.
Earnings Per Click (EPC)
Earnings Per Click is the average amount earned every time someone clicks on an affiliate link. To find EPC, divide the amount generated in commissions from an affiliate link and by the total number of clicks that link received. If a campaign generates $2000 through an affiliate link and that that link received 7,000 clicks, the EPC would be $.29.
Insertion orders outline campaign details in addition to the terms and conditions agreement that advertisers and affiliates sign prior to commencing their working relationship. IOs enforce affiliate compliance, specify payout amounts per conversion, define traffic sources allowed and dictate campaign duration.
Outsourced Program Manager (OPM)
Outsourced Program Managers are third-party account representatives who work independently of an advertiser to find affiliates and ensure campaign success. OPMs are also considered affiliate managers and provide the services an advertiser needs to be profitable through affiliate marketing without having to take on the expense in-house.
Advertisers provide tracking links to each of their affiliates or networks that includes a unique code specifically assigned to that account. Using this link, advertisers and networks can track the number of conversions acquired by a specific affiliate, allowing them to gage performance.
Unique clicks track the number of original (or unique) visitors have clicked on an affiliate link versus seeing the total number of clicks (raw clicks) that have occurred. If someone clicks on an affiliate link 3 times, only one click would be counted. Unique clicks have a cookie persistence of 24 hours so if the same user came back more than a day later and re-clicked the affiliate link, another unique click would track, making it a total of 2 unique clicks and 4 raw clicks for that user.
White labeling refers to a merchant allowing an affiliate to sell products under their own brand with no mention of the actual merchant. The advertisements are designed uniquely for the affiliate pushing the offer and often make no mention of the outside merchant. This can improve the conversion rate by convincing consumers that the product or service is solely available from the publisher. Most advertisers merchants limit white labeling opportunities to their top-performing and most trusted affiliates.
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