How Does Performance Marketing Work?
1. Retailers or “Merchants”
2. Affiliates or “Publishers”
3. Affiliate Networks and Third-Party Tracking Platforms:
4. Affiliate Managers or OPMs (Outsourced Program Management Companies):
5. Pay Per Sale / CPA (Cost Per Acquisition)
6. Pay Per Lead
7. Pay Per Click
8. Pay Per ‘X’
Performance Marketing consists of four groups: Retailers or “Merchants”, Affiliates or “Publishers”, Affiliate Networks and Third-Party Tracking Platforms, and Affiliate Managers or “OPMs” (Affiliate Management Companies).
Each group is imperative for Performance Marketing to work, and they work in unison, each with their own essential role that drives the ultimate desired result. Here is a breakdown of each group:
1. Retailers or “Merchants”
Also known as Advertisers, these are the businesses that are looking to promote their products and services through Affiliate Partners or “Publishers”.
Retailers and ecommerce companies in various verticals such as fashion and apparel, food and beverage, health and beauty products, and sporting goods can be very successful in the Performance Marketing.
This is mainly because in today’s world, consumers look to influencers and other shoppers for product recommendations, reviews, and discounts before buying, especially when they are in the research phase of their purchase.
The affiliate programs that do the best in Performance Marketing are usually those who have an already established brand online or a presence in several marketing channels with an already engaged audience, and their website has a minimum proven conversation rate that can help them.
These programs have affiliate partners that produce a positive ROI in exchange for marketing efforts, traffic generation, and exposure.
2. Affiliates or “Publishers”
This group is considered the “marketing partners” of the Performance Marketing space.
Affiliates or Publishers come in many forms: coupon websites, loyalty and cashback websites, product review sites, blogs, online magazine, and so on.
When it comes to the best affiliate programs that pay quickly, coupon and loyalty sites are a great way to drive sales with little effort and through lower commission payouts, especially within the North American marketplace.
However, with Affiliate Marketing moving more towards an all-encompassing Performance Marketing model which includes social influencers, content sites, product review sites, mobile apps, personalization applications, artificial intelligence, complimentary merchant partnerships, and remarketing ad managers, there needs to be a strategy and understanding of what each of these marketing partners need from a merchant to be successful.
Influencers, as an example, are publishers that mainly promote through their blogs, social groups, and social channels.
Their focus is to give their followers trusted guidance with authentic personal experiences and reviews, and they love being first to announce new product releases, exclusive offers and sales and usually have product giveaways for their fan base.
This partnership has a lot of value since it goes beyond the sale with additional brand and product exposure while building continued loyalty for both the influencer and the brand.
3. Affiliate Networks and Third-Party Tracking Platforms:
Affiliate networks or “third-party tracking platforms” are essential to the merchant/affiliate partnership.
They offer a one-stop shop for information and tools such as banners, text links, product feeds, promotions and payouts (like a bank).
These affiliate networks and tracking platforms are also where merchants and affiliate managers create strategic commission structures, issue bonuses, send out newsletters, and handle returns.
For both the merchant and affiliate, these networks and platforms are a way to keep track of leads, clicks, and conversions.
Some examples of leading affiliate networks and tracking platforms within the Performance Marketing industry are Partnerize, Commission Junction, AWIN, Impact, HasOffers, Avantlink, PepperJam and Rakuten Marketing.
Different affiliate networks and tracking platforms have different strengths and weaknesses, cost structures, merchant vertical expertise, and so on, so be sure to do your research, or ask an expert, such as an experienced affiliate manager or OPM.
4. Affiliate Managers or OPMs (Outsourced Program Management Companies):
Affiliate managers, or affiliate management agencies (OPMs), are considered the main driver between the merchant and affiliate.
While affiliate managers can be in-house, brands might also choose to work with agencies to either manage the entire program or support the in-house team, due to their expertise and an existing network of affiliate partners.
Working with an experienced affiliate management company means the brand can scale their affiliate or performance marketing program more efficiently and with a faster higher ROI.
More hands on deck, existing proven processes in place, robust partner databases and technical and strategic expertise all add to the benefit of working with an agency, such as Global Excellence Award winners, All Inclusive Marketing.
Tasks that agencies can support often include partner recruitment, growth strategies, long tail program optimization, content creation, campaign management and more.
Some merchants decide to give their program to an experienced agency to manage 100%, while others engage with agencies to work in conjunction with their in-house team.
These types of agency partnerships are beneficial because often in-house teams have limited resources, expertise, existing affiliate relationships, and limited market reach, so working with an agency can help fill these gaps and drive much faster results.
Affiliate managers within agencies make sure everything the affiliates need are within reach for both the merchant and partner within the network and everyone is supported with brand strategy and approach.
There are different variables to consider when choosing whether to work with an affiliate program management company or OPM, such as in-house team size, budget, goals, timeframes, vertical expertise, and brand alignment/fit.
Now that we’ve covered the groups involved in Performance Marketing, let’s cover the four most common payment models used within the space.
5. Pay Per Sale / CPA (Cost Per Acquisition)
Exactly as it sounds, this is an arrangement where a retailer or merchant pays an affiliate or publisher for sales they generate once the transaction is complete.
In ecommerce, this is the most common payment model for merchants to set up.
6. Pay Per Lead
A “lead” is typically a completed form registration or signup involving information given by the user or consumer about themselves and is usually a non-cash conversion.
This could include the customer’s name, email address, phone number, household income, personality traits, job information, and so on.
Leads can be as simple as name and email, or as complex as a three-page in-depth information exchange to qualify for a mortgage or loan.
Usually the more complex the lead form, the higher the payout.
7. Pay Per Click
In this payment model, a retailer will pay an affiliate for any clicks they refer to a desired landing page.
This model is less used in the performance marketing world and is generally used only when Nexus applies.
8. Pay Per ‘X’
In this payment model, the ‘X’ can represent whatever the merchant defines as the desired action outside of a lead, click, or sale.
Downloads, upsells within apps, and rewards program sign-ups are examples of these.
content originally ran in BigCommerce by Sarah Bundy