Affiliate marketing definition

In many ways affiliate marketing is similar to referral marketing. Both approaches use rewards as an incentive to get third-parties (existing customers or other businesses) to refer new customers. However, affiliate marketing relies solely on financial incentives, whereas human connections play an important role in referral marketing.

For each new customer or lead brought in, the business running the campaign pays the affiliate a referral fee.

Affiliate marketing is a form of marketing that sources new customers via other businesses, publishers, and third-parties (affiliates). These affiliates refer their customers or readers to other brands in return for a small commission.

Benefits of affiliate marketing

Affiliate marketing is a popular choice for many businesses because it’s performance-based. You get to choose which actions or events count as conversions, and you only pay out when these conversions are completed.

For example, you could choose to reward affiliates with $2.00 for every email signup they secure, and 2% of successfully referred customers’ first orders. This way you can fine tune incentives to achieve the best results for your business.

Just like referral marketing, affiliate marketing is highly cost-effective in comparison to other marketing techniques. The payouts for successful affiliate referrals are usually much cheaper than the costs of running a full-scale advertising campaign, for example. Because of these benefits, affiliate marketing is expected to become increasingly popular.

By 2022, spending on affiliate marketing will reach $8.2 billion in the US alone. - Statista

How do you run an affiliate marketing program?

It’s relatively simple to set up an affiliate marketing program. There are just a few components you need to get one up and running:

  • A product
  • Affiliates to promote it
  • A mechanism to track new customers that have been referred by your affiliates
  • A mechanism to reward your affiliates

Usually the referral mechanism is simply a referral code that can be used to verify which affiliate has referred a customer. The referral code also determines the reward that the affiliate gets for their referral. Because this mechanism is similar to a standard customer referral program, a promotions platform with a full range of referral program options can also be used to run an affiliate marketing program.

Receive Monthly Promotion Insights

Get expert insights & news on the latest promotion trends in our monthly newsletter.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Promotion tips
Industry insights
Case Studies