Affiliate Network vs. Affiliate Software
Web businesses and online merchants have many marketing opportunities available today that is has become overwhelming and rather difficult to choose which ones to pursue.
All these marketing opportunities and channels have their unique strengths and weaknesses. What usually comes to mind when dealing with online marketing is the cost of such campaigns and the return on the investment. Obviously, every merchant wants to increase sales and profit when investing into marketing. The problem is that most of traditional online marketing strategies are based on pay-per-view or pay-per-click approach. This is understandable from the marketing platform’s perspective, but for merchants and retailers it can become frustrating over time. There are of course best practices in the marketing industry, but none of them guarantee a return on the investment or any positive results whatsoever. This is why we would like to introduce one marketing concept that is proven, yet relative underestimated by today’s businesses: the affiliate marketing.
What is Affiliate Marketing?
Affiliate marketing has been around for more than two decades now. This is a performance-based marketing model. What does it mean? Unlike traditional online marketing like Google AdWords, Facebook ads, etc. which are all billed on the base of impressions or clicks, affiliate marketing is based on the actual results like conversions, sales, leads, etc. This means that in the core of affiliate marketing are meaningful results for business owners and merchants.
Affiliate marketing is based on the best type of marketing there was and will ever be – the word of mouth. Yes, this kind of marketing has always been something all retailers were considering the holy grail of marketing. Building strong reputation among customers and producing high quality products was the driving force behind the positive and widespread word of mouth. Of course, paying for a TV commercial has always been cheaper than building everlasting relationships with customers and producing amazing products. But, this is why TV commercials would never convert users to customers as effectively as the word of mouth.
Thus, affiliate marketing can be seen as an online version of the word of mouth. The principle behind affiliate marketing is that there are two groups working together towards a mutual goal. On one side we have merchants, business owners and retailers. On the other side there are individuals, aspiring marketers and customers who are simply called – affiliates. Merchants make their products available and affiliates spread the word about those products. The goal for the affiliate is to generate sales of those products through their marketing efforts. When a sale is made, an affiliate earns a commission. Commission is usually a pre-defined percentage of the product retail price. This means that merchants are willing to split the commission with affiliates for each sale they have driven.
This is a great setup as it brings benefits to both parties involved. Merchants in this case only pay for the results – actual sales. Affiliates on the other hand market products the best way they know how in order to generate income.
Affiliate sales are usually tracked by using special affiliate links. These links tell website owners and merchants from which specific affiliate the sales are coming from. Affiliates can use many marketing strategies ranging from simply sending an email to a friend of theirs who they know might be interested in buying the product or sharing a post about a product on their Facebook profile, to large scale promotions like writing blog posts about certain products, adding banners and links on affiliate sites, etc. All this in the end is based on the word of mouth and spreading the information about the relevant products.
There are lots of things merchants can gain from this type of marketing. First of all – they get tons of “free marketing” in terms of not having to pay for marketing which does not bring accountable results. Even though affiliate marketing sometimes would not bring actual sales, it surely will bring new traffic to the website as well as increase brand awareness, the number of incoming links and possibly even influence better search engine rankings over time.
Affiliates find this type of marketing fun. They can earn commissions from spreading the word about their favorite products. This is something they would probably do anyway, so why not earn a bonus along the way?
Today, merchants who are looking to get started with affiliate marketing have two choices on their hands. They can join one of affiliate networks or use affiliate software to organize an affiliate program on their own. Let us check out these in more details.
1. Affiliate Networks
Affiliate network is a place where merchants and affiliates meet. When merchants join an affiliate network, they get access to their admin panel and merchant interface. This is an online interface which allows merchants to set up their affiliate program and manage all aspects of it. This is the place where merchants will define commissions, add products, upload marketing materials and configure all the other options. We can think of an affiliate network as a sort of marketplace where merchants expose their affiliate programs and products they offer. Merchants are usually charged a fee to gain access to the network and there are usually also some other costs such as transaction fees for each merchant commission payment as well as minimum monthly fees. Now, this can indeed ramp up the costs of affiliate marketing for merchants using affiliate networks to expose their affiliate programs.
On the other hand, affiliates can join affiliate networks free of charge. Affiliate networks are only appealing to merchants if there are thousands of high quality affiliates on the network. When affiliates join a certain network, they get access to their affiliate control panel. This is the place where they can see everything related to their performance, commissions earned as well as to search for suitable products to market. Affiliates need to meet certain requirements in order to be eligible to join a network. Requirements usually include having a website, lots of followers on social media, etc. When affiliates are accepted they can start browsing available affiliate programs and products merchants have made available. These are all opportunities.
Affiliates would usually search for products they have already used and liked. For example, travel blogger might search for a merchant selling a set of bags he recently purchased and found really convenient and useful on his last trip. This affiliate would join the affiliate program to obtain special affiliate links he can use for promotion. To market the product, our travel blogger might write about his last trip and mention how good the bags performed and leave links to the site where visitors can purchase them. If visitors click on the links and make a purchase, our travel blogger would earn a commission. This was just an example to show you how all of this works.
- Instant exposure to thousands of potential affiliates
- All affiliates on the network have been carefully selected
- High quality affiliates
- Merchants can get expert support from trained affiliate marketers running the network
- Add-on services networks offer which can help merchants fully outsource their affiliate programs
- Reliable interface, hosted on network’s server
- Possibility to integrate affiliate marketing with other types of marketing
- Joining a network can be costly for some merchants and small businesses
- Besides the network fees, there are fees for each commission affiliate earn as well as additional monthly minimum fees, service costs etc.
- Merchants are exposing their program only to the affiliates who are a part of the network. In order for 3rd party visitors to join the program, they first need to join the network as affiliates.
- Most of networks do not list their pricing on their websites so it is hard to plan a budget
2. Affiliate Software
Affiliate software is an interface and sort of infrastructure for managing an affiliate program. Running an affiliate program presents a set of technology challenges involved in managing affiliates, tracking sales and paying commissions. This is all simplified by affiliate software solutions available out there. Merchants can purchase this software or subscribe to it and then use it to run their own affiliate program for their business. Affiliate software is either installed on the web server merchant provides or it is self-hosted in the cloud. These are two of the main differences when it comes to software solutions, as affiliate companies can either sell licenses or lease the software (or offer both of the options). The software features both merchant admin panel, as well as affiliate admin panel with all the features merchants and affiliates would need in order to be involved in affiliate marketing activities. This means that setting up commissions, adding products, joining affiliate programs, getting special trackable links for promotion – it is all there!
- There are no transaction fees or any other fees related to each sale or commission paid
- It is possible to predict affiliate marketing costs due to the fact that all prices are fixed
- Software customization and versatility
- It is possible to buy and own the software for a one-time purchase
- Affiliate program can be marketed through various means and platforms in order to attract possible affiliates
- Generally lower costs of running an affiliate program in relation to using an affiliate network
- It is possible to choose a specific software solution that fits merchant’s exact needs
- Software might require complicated installation on the merchant’s server
- Software solutions can be complicated to use and are more appropriate for tech savvy users
- Merchant needs to market his affiliate program on his own in order to attract potential affiliates
- Some software solutions out there have certain limitations in terms of number of affiliates, clicks on the links, etc.
- Merchants need to recruit their own affiliate manager if they want to outsource their affiliate program and have someone more experienced managing it
Main Differences Between Affiliate Networks and Affiliate Software:
- The main difference between affiliate networks and affiliate software is the fact that affiliate networks offer instant exposure to thousands of potential affiliates while when using the software, merchant is fully responsible for marketing his affiliate program and attracting potential affiliates. This means that affiliate networks can get the affiliate program rolling faster, unlike with affiliate software where merchants need to get creative in their marketing efforts in order to convert potential affiliates and have them join their affiliate program.
- Another big difference when it comes to network vs. software is the cost. Generally speaking, affiliate software is in any form a more budget friendly solution. This is because software solutions can be purchased for a fixed price. Even if you are leasing software on monthly basis, the costs are fully predictable. There are no hidden costs. This is not the case with networks. Merchants are charged for joining the network and there are usually lots of other small fees related to transactions, monthly minimums and other costs which can really ramp up the cost of running an affiliate program. This means that when you join the network, you really need to give it your best and be successful in affiliate marketing or else the investment might be lost. This is an important aspect to consider as getting an affiliate program to grow and having it start bringing viable results can take a while, due to the very nature of the system. Those who choose software need to be aware that building their affiliate program and having it kick off will take even longer in comparison to those who are using an affiliate network to boost their program. It all comes down to managing pros and cons and finding a profitable solution. Networks are more costly but offer instant exposure as well as some advanced consultant features. Software path is more budget friendly but requires more in terms of management resources, it takes longer for affiliate program to grow and investment into marketing of the affiliate program needs to be counted in (which can get costly).
Both affiliate software and affiliate networks have their strengths and weaknesses. One thing is certain though, if you are a business owner and you are selling your products online – affiliate marketing is a strategy you should consider. This kind of marketing is used by both small and enterprise sized business and has been proven to bring positive results in terms of increased profit, sales and traffic. The fact that this type of marketing slightly favors merchants in terms of not having to pay for marketing which does not bring predefined actions such as sales, newsletter signups or leads, is yet another reason you should consider this for your business. With carefully chosen affiliate marketing platform (software or network), there are lots of benefits to take advantage of which can help you grow your business and take it to another level.