What is affiliate marketing?
Affiliate marketing is a type of performance-based marketing where a business rewards individuals for generating sales by giving them a commission on the sales they generate. A commission is the percentage of profit paid out by the company in exchange for a sale. Commissions can be clearly stated in advance so affiliates know exactly how much they will make from each sale. As a partner of a business, the affiliate promotes its products or services for a commission. The affiliate might put a link or product recommendation on their own website, add it to their social media channels, or send an email to their subscribers. This way, if someone clicks on the link or recommendation and makes a purchase, the affiliate receives a commission. These commission-based relationships can be long-lasting and mutually beneficial. Affiliate programs are often free to join and are a great way to attract new customers or grow your existing customer base.
Definition of Cost-per-Sale (CPS)
Cost-per-sale (CPS) is a commission model in which an affiliate is paid a fixed amount per sale. This model is great for businesses that want to have control over their costs. While the CPS model is more expensive per sale than other types of affiliate programs, it can be a good choice for businesses that have a high average order value (AOV). AOV is the total amount of sales made per customer. A high AOV indicates that the average customer is spending more than they usually do on your site. An example of cost-per-sale affiliate marketing is the Amazon Associates program. With Amazon Associates, you are paid a fixed percentage of the sale price for every product or service listed on their site. Amazon Associates program is cost-per-sale because affiliates are paid a fixed amount per sale, regardless of how many clicks it took to get to that sale.
Definition of Cost-per-Click (CPC)
Cost-per-click (CPC) is a commission model in which an affiliate is paid for each click on an ad. Usually, this ad is a link to the affiliate’s website or social media page where they are promoting the business’s product or service. Advertisers like this model because it drives targeted traffic to their site. Affiliates like the CPC model because they can make a lot of money from a single click. However, they might have to spend a lot of money on ads to get that click. The Google AdWords and Facebook Ads networks are examples of cost-per-click affiliate marketing. With Google AdWords, you are paid a set amount per click on your ad. This amount is determined by Google and, in most cases, you can’t change it. With Facebook Ads, you are only charged when someone clicks on your ad. You can select a cost-per-click amount that works best for your business.
Definition of Cost-per-Action (CPA)
Cost-per-action (CPA) is a commission model in which the affiliate is paid a fixed amount per a specific action. This action can be something like a click, signup, download, or any other measurable action. This model is best for businesses that want to achieve a particular goal with their affiliate program. For example, a golf equipment company might want to encourage affiliates to sign people up for their golf club subscription service. In this case, the golf equipment company might offer a generous affiliate rate for a new signup. The amount paid per signup is the CPA amount. An example of cost-per-action affiliate marketing is the Amazon Associates program. With Amazon Associates, you are paid a set amount per action taken by a customer. Actions can include purchases, clicks to product pages, clicks to images, and more. You’re not paid when someone first visits your site, you’re only paid when the customer completes a specific action.
Choosing the Right Type of Affiliate for Your Business
When choosing the right type of affiliate for your business, it’s important to consider your current resources and goals. If you are just getting started with affiliate marketing, it’s a good idea to start with cost-per-click or cost-per-action. This will help you decide what type of affiliate works best for your business. If you already have a well-established affiliate program, you might want to try out different types of affiliates to see which works best for you. This can be helpful if you’re struggling with a low conversion rate or want to increase your sales with affiliate marketing. Once you decide which type of affiliate works best for your business, it’s important to incentivize them. Rewarding your affiliates for a job well done is a great way to show your appreciation and keep them motivated.
Common Mistakes to Avoid in Affiliate Marketing
- Don’t Be Too Selective: Being too selective with your affiliates can cost you money and potential sales. It’s important to accept affiliates from all different types of businesses so you can appeal to a wide range of potential customers.
- Don’t Be Cheap: You don’t have to pay the highest rate in the industry, but you shouldn’t be cheap either. Affiliate marketing is a relationship, and relationships are built on trust. If you offer poor rates, your affiliates won’t trust you and they won’t work with you.
- Don’t Over-Promote: It’s important to promote your affiliate program, but you don’t want to over-promote and annoy potential customers.