The Three Factors That Determine Affiliate Marketing Success

By Michael Johnston

As affiliate marketing has become a multi-billion dollar industry over the past several years, it’s also become increasingly sophisticated. Across the seemingly endless niches are a variety of strategies for generating revenue. With more merchants, offers, and analytics, there’s a lot to the affiliate marketing business.

But while the details have grown increasingly complex, the big picture remains incredibly simple. Success in affiliate marketing ultimately depends on how well you execute three tasks.

Affiliate Marketing For Dummies

If you’re an affiliate marketer, you have a chance to make money every time someone opens up a Web browser. To the affiliate marketer, below is a diagram of how the flow of every Internet engagement unfolds.

You make money on the path that includes three green boxes; on all others–the vast majority of scenarios–you get nothing. So at its simplest, affiliate marketing success comes to those who maximize the number of positive outcomes down the flow chart above.

Three Key Factors

Put another way, think of affiliate marketing as this formula:

Revenue = Visitors x Click Rate x Conversion Rate x Commission

Improving any one of the variables on the right side of this equation will increase the dollar amount on the left side. So affiliate marketing really boils down to optimizing three factors:

Factor #1: Visitors / Traffic

In order to make money from affiliate marketing, you need to convert a visitor to your site to a paying customer for your merchant partner(s). Obviously, the more visitors you have (i.e., the greater the traffic to your site), the more chances you have to make an affiliate referral.

Building up a large base of traffic is in itself a huge challenge. There’s an overwhelming amount of content on the Web dedicated to attracting visitors to your website, and we won’t go into any detail on the topic here. (Check out SEOmoz or Search Engine Land if you really want to read more).

If your website doesn’t have much traffic to speak of, there’s probably not a big opportunity for you now in affiliate marketing. Focus on producing high quality content, building some links, and getting a recurring stream of visitors to your site. But ff you have a website that is already attracting a significant number of visitors from referring sites, organic search, and direct visits, affiliate marketing could be a logical way to monetize.

Factor #2: Click Rate

This is where we put the “marketing” in affiliate marketing. It’s up to you as the affiliate marketer to make sure that your audience sees the affiliate links and offers you have on your site. You can’t simply throw them into the right sidebar and hope that your audience seeks them out and clicks on them. There’s a great deal that you can do to increase the likelihood that your visitors click on the links and get in front of the affiliate offer.

This topic is extremely broad; there are countless strategies for increasing visibility (and ultimately click rate) on your affiliate links, ranging from incorporating links into your content to sending emails to your newsletter list. Check out some of the affiliate marketing gurus on our Best Monetization Blogs overview for an extensive supply of tips and tricks for boosting the number of clicks your affiliate links receive.

Factor #3: Conversion Rate

Conversion rate refers to the percentage of referrals sent who ultimately complete the desired action (e.g., purchase something from Amazon).

This is one area that is often overlooked as an “out of my hands” part of the affiliate marketing funnel. Once you’ve sent a visitor to the merchant site, all you can do is cross your fingers and hope they ultimately complete whatever action is necessary for you to get your commission. That’s partially true I suppose. But you have more input here than you may realize.

Part of the affiliate marketing game involves picking out merchant partners and products to promote. If you’re promoting a crap product, you can probably send some traffic through the affiliate link by doing a good job of marketing it to your audience. But once they get to the merchant site and are disappointed in what they see, they’re probably going to abandon.

If you’re promoting a quality product that you think delivers great value to your audience, they’re much more likely to complete the purchase once they’ve clicked.

Commission $ vs. Conversion %

There’s often a trade-off between the quality of a product and the commission being offered. And it’s tempting to gravitate toward the partners and products that pay you the most per conversion. But if those products are unlikely to convert, they might not be the best fit.

Consider two products:

• Product A: $100 commission to affiliates
• Product B: $25 commission to affiliates

Product A looks like the winner, right? Not necessarily; your expected revenue from promoting this product depends on the likelihood of conversion. Suppose the conversion rates look like this:

• Product A: 1%
• Product B: 5%

For each affiliate click you send to Product A, you can expect $1.00 in revenue. For each sent to Product B, you can expect $1.25 in affiliate revenue.

Don’t get blinded by simply commissions. Finding relevant, quality products to promote is one of the most important parts of the affiliate business.

Bottom Line

Focusing on any one of these areas increases your chances of affiliate marketing success. But optimizing one area when another is sub-optimal won’t deliver the results you want. In other words, the real success and revenue comes when all three are executed successfully.

For example, building up a big base of traffic won’t deliver much of a reward if you’re working with the wrong affiliate offers. Similarly, doing a great job marketing the ideal offers to an extremely small traffic base won’t translate into much revenue. Each of these three points must be implemented and improved together, or else you won’t see results.

There’s obviously a lot of work that goes into each of the three points above; building up substantial traffic takes months (or even years) of effort, and finding the right affiliates involves never-ending research.

What Is Affiliate Marketing?

What Is Affiliate Marketing?

by Andy Hagans

Affiliate marketing has become a massive online industry over the past several years, emerging as both an effective way for marketers to sell their products and services and for publishers to monetize their audiences. Despite the popularity of affiliate marketing, many publishers still aren’t aware of exactly what affiliate marketing is or how it works. In some cases, these publishers are gatekeepers to an audience that could be very effectively monetized through affiliate marketing, meaning that they’re passing up an attractive revenue stream.

What It Is (And What It Isn’t)

At its heart, affiliate marketing is an online version of a sales structure that has been happening offline for decades. In its simplest form, it involves three primary components:

• A merchant, or someone with a product or service to sell
• An affiliate, or individual with the willingness and ability to sell that product to a particular audience
• A product or service

For each product the affiliate sells, they receive a portion of the proceeds from the merchant. It’s effectively an outsourced sales team. At its core, affiliate marketing is just that simple.

Offline Example

When I was a child, my school would have fundraisers that involved us going door-to-door to sell magazine subscriptions (magazines were glossy, soft-cover publications that would be mailed to a subscriber’s house on a weekly or monthly basis). I didn’t realize it at the time, but I was right in the middle of an affiliate marketing scheme. The magazine companies had products they wanted to sell. Schools had the ability to sell these products. And for every subscription sold, the magazine companies gave a slice of the proceeds to the school. (In this example, there’s actually a secondary later of affiliate marketing; the schools effectively outsource the actual selling to the students, in exchange for prizes that come with meeting certain sales figures.)

Online, affiliate marketing works generally the same way–except that the door-to-door sales approach is replaced by strategies more suited to a digital marketplace. In most instances, the affiliate marketing process works as follows:

1. Visitor to a publisher’s website clicks an “affiliate link” that takes them to a third party landing page
2. Visitor makes a purchase
3. Affiliate (publisher) gets a commission based on the value of the products and services purchased at the partner’s site

In other words, affiliate marketing is a kind of cost-per-action (CPA) advertising. The publisher makes nothing for highlighting a partner’s product on their site, and they make nothing for getting a visitor to click through to that site. The commission is only earned when a sale is completed.

Affiliate marketing is facilitated by “affiliate links” that allow merchants to track where their customers originate. In other words, it’s possible (and actually very simple) to know which revenue came from a specific affiliate and to compensate that affiliate accordingly.

Affiliate Marketing Economics

For publishers, the affiliate marketing revenue equation looks something like this (we’ve boldedthe factors that are most within your control in optimization efforts):

Visitors x Click Rate (on Affiliate Links) = Referred Visitors

Referred Visitors x Conversion Rate x Average Purchase Price = Referral Revenue

Referral Revenue x Commission % = Affiliate Marketing Revenue

The success of an affiliate marketing strategy depends on how many referrals you’re able to send to merchant sites and how well these referrals convert (hence the bolding of these factors above). The more relevant and appealing the offers you highlight on your site, the higher both your click and conversion rates will likely be. If you’re running a travel blog, you probably don’t want to be featuring affiliate offers for baby products; replacing them with affiliate links to cruise packages would probably result in a higher referral rate.

Appeal of Affiliate Marketing (to Advertisers)

Advertisers love affiliate marketing because it involves minimal risk. If a sufficient margin is built in as compensation for the affiliate, it becomes impossible to lose money. That’s because affiliates are generally only paid when a sale is completed (i.e., a lead is converted). Advertisers (or “merchants”) pay nothing for leads that don’t convert.

Compare this to a CPM-based advertising campaign, where an advertiser pays a fixed amount to get a fixed number of ad impressions. (E.g., they may pay $10,000 to have 1 million ads shown on a publisher site, or a $10 CPM.) That campaign may be unsuccessful however if the ad impressions don’t convert into clicks and/or eventual sales.

Under most affiliate marketing arrangements, advertisers only pay for converted leads. There is basically no way they can lose money or get a negative ROI with this marketing method. Each new sale generated may have a thin margin after the affiliate payment is made, but it’s possible to structure in such a way that eliminates the possibility of a loss.

Some merchants will pay for actions that do not involve the transfer of money (i.e., something besides a sale of a product or service). For example, many merchants pay affiliates for referred visitors that ultimately sign up for a newsletter or other free product.

Appeal of Affiliate Marketing (to Publishers)

Affiliate marketing is very appealing to some publishers as well, because it can allow them to make considerably more money than they would under an alternative monetization strategy. Though the specifics of payout arrangements can vary a bit, in general affiliate payments will be significantly larger than the revenue generated from a click under a CPC pricing arrangement (or the effective CPC under a CPM arrangement). For high margin products such as e-books, for which there are no material costs, affiliate margins can be as 50% of the total purchase price. So it’s not unheard of for affiliates to generate $100 or much more from each referral.

To explain this a bit further, let’s consider a real life example. Below is a screenshot from AffiliateTip.com, a popular blog run by affiliate marketing guru Shawn Collins. In his right sidebar, he has a number of affiliate links for products such as HootSuite, Dropbox, and Bluehost:

Alternatively, there could be a traditional 160×600 display ad unit here. From a network, that ad unit might earn the published an effective CPM of $3 or $4. If the optimal affiliate marketing links are used instead, the payout can be much higher.

Let’s assume that the aggregate click rate on this affiliate link section is 1%, that 20% of referred visitors convert, and that the average commission is $10. For every 1,000 visitors:

• 10 click through to an affiliate link
• 2 end up purchasing something from a merchant
• $20 in revenue for the publisher is generated

The end result in this hypothetical is $20 in revenue–significantly more than the $3 or $4 that could be earned from traditional display advertising.

Of course, the revenue per visitor is highly dependent on the click and conversion rates. But the hypothetical above should illustrate that if you’re able to find quality, relevant affiliate offers, affiliate marketing can be a very attractive monetization opportunity.

Affiliate Marketing In Action

Affiliate marketers can use a number of strategies to sell to their audience, with different approaches making the most sense for different niches and product lineups. These strategies include:

• Coupons
• Product Reviews
• Product Rankings
• Product Aggregation / Price Comparison

Below are some real life examples of affiliate marketing strategies in action:

• Review: 31 Days to Build a Better Blog. Note the affiliate links to the landing page where this e-book can be purchased. For every referred purchased, this publisher makes 40% of the total purchase price.
• TV Review Site. This site compiles prices for products at various Web retailers, including an affiliate link to all of them. If a visitor to this site ultimately clicks through and makes a purchase, a commission is earned.
• Only Cookware. This is one of several sites run by Amazon “super affiliates” Paula and Wanda. Their reviews feature affiliate links for visitors to purchase the products on Amazon, which nets them a commission in the neighborhood of 8.5%.

Many publishers would be surprised at the depth of the affiliate marketing industry; it’s a lot more than e-books and amazon affiliates. Commission Junction, one of the largest affiliate networks, has an impressive list of advertiser verticals:

Bottom Line

Affiliate marketing is a fairly simple concept that can be implemented in a countless number of ways online. Though it’s not as familiar or easy to set up as display advertising strategies that dominate many publisher monetization strategies, there is the potential for a big payoff if a bit of work is done upfront.

6 Social Media Best Practices & Resources

Having a social media presence is no is no longer optional for small businesses, it's a prerequisite for success. Your customers rely on social media to recommend your business and address customer service needs, and you'll need it to build a strong brand. Let's go over some best practices and recommended resources.

First, we'd like to point you to a list of 103 compelling social media statistics that Business 2 Community, an outlet focused on marketing strategy, put out in November. If you don't have a chance to look at the whole list, here are a few that are particularly relevant to small businesses:

• 97% of all consumer search for local businesses online
• 72% of adult Internet users in the US are active on at least on social network
• 68% of consumers check out companies on social networking sites before buying

Read More:

We're quickly moving away from the attention economy, where businesses try to find out what customers are thinking by flooding them with advertisements, and into the intention economy. In the intention economy, where customers tell businesses what they want and let them compete, social media is the most important tool for listening to what they'''re saying.

If you're not familiar with the different social networks, here is a fun bacon chart that will help you understand them.

Best Practices

Pick Your Voice

To ensure a consistent brand voice, it's best to pick one person or a small team to handle all social media responsibilities. Then decide what kind of voice is best for your business. If you're a personal trainer, maybe you want to position yourself as a motivator and create a profile full of inspirational materials.

Create a Schedule

And stick to it! Inactive accounts show a lack of commitment and are far too common. Make sure you're posting at least 2-3 times a week. If you really want to get organized, consider using this free social media publishing schedule template from HubSpot.

Interact With Followers

They followed you because they like your product or service. Show them that you care too by taking time to thoughtfully interact with them. In addition to simply responding to questions and comments, be proactive and find out what they're interested in!

Don't Be Overly Self-serving

Remember the attention and intention economies we talked about earlier? You'll gain a larger and more loyal audience by helping your followers better themselves rather than perpetually promoting your brand to them. For every post about your company, share three non-promotional posts.

Shareable Content is Key

One of the goals of social media, regardless of the platform you're on, is having the content you share be shared by others. Lists ("Top Ten Best...", "8 Ways to...", etc.) and other forms of easily digestible information are much more likely to be shared.

Use Images

According to a HubSpot post last year, updates that include an image on Facebook get 53% more likes. The same goes for Twitter, and Pinterest is by nature a visual platform.

Best Social Networks for Small Businesses

Not only is the chart funny, it demonstrates an important point: not all social networks should be used in the same way. Content must be tailored to fit the channel it's being distributed over. Your business should definitely be on Facebook and Twitter. There's a good chance you should also be on Pinterest. Depending on your business, some of the other networks might also be relevant.

Facebook

With over 1.15 billion monthly users, Facebook is the world's biggest social network. Most small businesses should create a free business page on Facebook (step by step process in previous newsletter).

Twitter

On Twitter, members share posts that are limited to 140 characters. They can either be directed at other users or meant for your followers to read. Anyone who's interested in what you're saying can "follow" you. Everything you post will show up on their wall. As a business, the more followers you have, the better. You can also gauge the quality of your followers by looking at their profiles and seeing how relevant they are. The #hashtag (this is how it's used) is one of the things that made Twitter famous. Hashtags are added before words or phrases to categorize a post. Once posted, the word or phrase becomes a hyperlink that will tell you who else in the Twitterverse is talking about the same thing.

This cheat sheet from Elliot Design might be helpful for small business owners who are new to Twitter and want to get off to a fast start.

Pinterest

A network for users to share similar interests, Pinterest allows you to "pin" images, videos and other objects to your wall, or pinboard. Here is some basic information about how Pinterest works and some brands that are crushing it on Pinterest!

Don't know when or what to post about? Pinerly put together a nice infographic that explains just that.

Resources

With social media comes social media experts, and there are a lot of them out there. If all of this is new to you, don't get overwhelmed. If you don't want to spend time on social media every day, here are some great resources to schedule your posts in advance!

Buffer

Buffer is another great tool. It also allows you to write several posts at once to be distributed throughout the day at the best times to reach your target audience. In addition to analytics Facebook and Twitter provide (numbers of likes, shares, favorites and retweets), Buffer provides in-depth analysis, such as the exact number of people who click on links you share.

HootSuite

Both Buffer and HootSuite offer a free option

HootSuite is the most popular tool for scheduling posts on social media. It tracks your brand mentions and analyzes social media traffic for you. It's not only for small businesses that don't have time to spend on social media. Some of the biggest brands in the world use HootSuite, including PepsiCo, Sony, CBS and Virgin.

We hope you've found this information useful! If there are any other topics you'd like to see us cover, please don't hesitate toreach out. Once you implement them, we'd love to hear how the social media best practices have affected your business.

- The Acuity TeamSocial Media Best Practices Infographic

12 Months of Facebook contest (infographic)

5 “Trust Badges” That Can Increase Your Conversion Rate

5 “Trust Badges” That Can Increase Your Conversion Rate

by Andy Hagans

For any website that sells a product or service–whether it be a physical good or an email newsletter–there are two primary ways to increase transaction volume. One is to increase traffic, getting more potential customers into your sales funnel. The other is to increase the conversion rate on your checkout page, getting more revenue and more customers from your existing traffic base.

There are a number of ways to boost conversion rates, including adding testimonials to the site, tweaking price points and coupon codes, and even changing the color of the checkout button. Another opportunity to increase conversions involves putting a “trust badge” on a checkout page, with the goal of convincing potential customers that the process is safe and secure. As online fraud rises, it’s important for customers to feel secure. Statistics highlighting the rise of online fraud as a problem to e-commerce sites include:

• The Internet Crime Complaint Center estimates 24,000 fraud complaints each monthin 2012.
• Shopping cart abandonment rates vary by site, but are generally between 55% and 75%.
• Of consumers who dropped out of a purchase, 17% mentioned “concerns about payment security” as a reason.
• In some surveys, as many as 61% of participants said they had decided not to purchase a product because it was missing a trust seal.

Behind the Trust Badge

In order for them to have any significance, the badges that have become common at online checkouts must have some security features behind them. Many “trust badges” are associated with SSL, or secure sockets layer. The details of how these certificates work gets a bit complex, but it essentially creates a secure connection for information (e.g., credit card numbers) to be transmitted.

There are two general types of SSLs: standard and extended validation (EV) SSL certificates. The differences are pretty minor; EV certificates require a bit more administrative effort to check out some additional information about the domains, so they will cost a bit more.

Some badges–including some well-known brands–are not really indicative of any technical security features, but rather an indication of trust from a third party. The Better Business Bureau seal is a good example here; the BBB doesn’t enhance the technical security features of a site, but does indicate that the business has been examined and deemed to be trustworthy by a third party. Other “trust seals” include TRUSTe.

Which Badges Work?

ActualInsights.com has some interesting results from a study they ran a few years back in which they asked consumers questions about the recognition and trust of a number of different badges:

Below is a heatmap showing which trust badges were recognized (which is very similar to another illustration showing which badges were trusted):

Though this study didn’t have a huge sample size, it jives with the experiences of the Web-savvy crowd who is used to seeing certain badges on the most popular e-commerce sites.

Another survey from the Baymard Institute found that Norton led the way followed by McAfee.

Unfortunately for sites that have benefited from the McAfee name, Intel, which bought McAfee for $7.7 billion in 2010, has announced that it will rebrand the products as Intel Security. That move comes after the company’s founder lived out a bizarre experience that involved fleeing from Belize police and escaping to Canada (reportedly without much of his fortune).

Beyond the studies mentioned above, there is a significant amount of evidence to show that trust badges have a positive impact on a site’s conversion rate and revenue. (It’s nice if there’s some actual security behind the badge as well, though that might not matter all that much.) These badges make consumers feel better about giving their credit card information to an unfamiliar website, which generally results in a higher rate among new customers. (The impact on returning visitors is generally minimal, since they are more likely to trust the site already.) These badges can also impact the average order value, indicating that customers feel better about placing larger orders with sites they trust.

Below are overviews of five badges that can be used as part of a test to boost e-commerce conversion rates, along with any case studies indicating success. (As noted below, many of the case studies are prepared by the companies themselves–which somewhat diminishes their usefulness.)Badge #1: Symantec (formerly VeriSign)

What It Is: Symantec acquired VeriSign in 2010, consolidating two Internet security heavyweights. In addition to numerous other security products, the company offers standard and EV SSLs.

Case Studies: There are a number of case studies highlighting the benefits of adding VeriSign or Symantec SSLs:

• Blue Fountain Media saw a 42% increase in sales.
• VeriSign prepared a case study showing a 30% increase in conversions for Central Reservation Service, an online hotel booking site.
• USCutter reported an 11% increase in sales by adding a Norton Secured powered by VeriSign logo (though it didn’t provide the specifics on any increase in conversion rate).
• VeriSign also reported a significant increase in conversion rate for CarInsurance.com after implementing an EV SSL.

Price: Standard SSL certificates cost $399 per year while an EV SSL will run you $995 (it gets more expensive if you’re registered outside of the U.S., Canada, Brazil, South Korea, India, or China). In other words, if you want one of the most recognized brands you’re going to pay a bit of a premium.Badge #2: Comodo

What It Is: In addition to anti-virus software, Comodo offers SSL certificates.

Case Studies: Comodo includes a case study on its site highlighting the successes of one of their customers. Zamberg.com saw an 11% increase in conversion rate and a 23% increase in the value per transaction after implementing the EV SSL.

Price: Comodo offers a standard SSL for $99.95 annually or an EV SSL certificate for $449 per year. Discounts are available when multiple years are purchased upfront.Badge #3: GoDaddy

What It Is: GoDaddy offers SSL certificates that come with a “Verified & Secured” badge.

Price: GoDaddy is one of the cheapest SSL providers out there: $69.99 per year for a standard SSL (domain validated, with a $100,000 warranty), $149.99 annually for their premium offering (domain and company validated, $1,000,000 warranty).Badge #4: TRUSTe

What It Is: TRUSTe offers a number of online security products, including a privacy package that includes a certification badge.

Price: Because TRUSTe offers more customized products and services, you’ll need to contact them with specifics of your site to get pricing information.Badge #5: Homemade Special

What It Is: Something you whip up on your own (or download) to give a sense of validation and legitimacy to your site.

It’s worth considering (and testing) the impact a “homemade” trust badge will have on conversion rates. For example, Visual Website Optimizer has a case study showing that a “100% Money Back Guarantee” badge resulted in a 32% increase in conversion rate. This example obviously doesn’t speak to the security of the transaction, but instead highlights one of the primary benefits of the service.

In another example, a badge awarded by a third party (but with no indication of enhanced security) similarly had a meaningful, positive impact on the conversion rate.

Other SSL / Trust Badge Providers

The list above is only partial; there are a number of other providers out there:

• Better Business Bureau
• GeoTrust
• Thawte

Additional SSL Case Studies

There are also a number of additional case studies that make the case for testing an SSL badge as a way to improve conversion rate and average order size:

• McAfee on Joann.com
• McAfee Case Studies
• Internet Trust Marks: Building Confidence and Profit Online
• Trust Badges and Conversion Rates

Bottom Line

If you have an e-commerce site–or any page where you can potentially take money from visitors–adding the security (and, more importantly, perceived security) of a trust badge is probably worth investigating. Odds are that a small image can have a meaningful impact on conversion rates, and help you generate more revenue from your existing traffic.