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DIGITAL MARKETING: Affiliate marketing

From a shaky start that was almost derailed by the dotcom crash, affiliate marketing is now showing astonishing growth, accounting for £1.3 billion in sales last year alone. This equates to an estimated 17 per cent of all online sales. It was once derided as little more than the poor cousin of traditional marketing techniques, but businesses are now waking up to the power of affiliate marketing to consolidate their existing sales channels, enhance their brand image and push into new territories.

The idea is simple. Your business arranges partnerships with other companies who in effect become extensions of your own sales force. For every sale or lead that is generated, the affiliate member receives commission. Amazon is credited with developing affiliate marketing into a viable marketing channel. Today, thousands of businesses gain direct sales or valuable leads in a wide range of sectors. Not surprisingly, the B2C market has seen the most dramatic growth in affiliate marketing, but where consumer-facing businesses lead, B2B companies soon follow.

Robert Glasgow, MD of Webgains, explains the mechanics of affiliate marketing, "The great thing about affiliate marketing is that none of the advertising is wasted because a business [merchant] only pays a commission on actual sales. Commission is determined by the merchant according to the gross margin of each of his products, so he gets to decide how much he can afford to pay. So long as the net margin per product X and the volume of sales generated is greater than the charges, then the channel would make sense commercially. The other thing to note is that the business gets exposure of its brand name on all of the affiliate sites for free, because it only pays a commission on sales."