Affiliate marketing is, by its very nature, a great digital marketing channel because it embodies many different disciplines, from email marketing through to cash back and voucher codes. However, because affiliate marketing operates on a commission basis, this has led to the creation of numerous and multiple acronyms. Once you get past the jargon, affiliate marketing is actually very simple.
So what is affiliate marketing? In its simplest form, affiliate marketing is an internet-based marketing practice in which an advertiser (brand or merchant) rewards channel partners termed as affiliates (website owners or publishers) a commission for their marketing contribution towards a visitor conversion. To help you understand the ‘lingo’ of this model, I’ve compiled a beginners list of the most widely used acronyms in affiliate marketing and what they mean.
Advertiser: This is the name given to the company selling the goods or services, for example a retailer or a bank.
Affiliate: An affiliate is the owner of the website who is paid a commission for an approved action, for example a click, lead or sale, that originates from their site.
Affiliate network: A network facilitates the sale of products or services on behalf of an advertiser. They oversee the campaign (or programme) that will usually incorporate multiple affiliates. They provide insight into where sales are being generated and how content can be tailored in order to drive more sales. The provide support to both the advertiser and affiliates.
Average Basket Value (ABV): Average basket value is the total value or products/services sold in a certain time period, divided by the number of orders. Advertisers often use this as a performance benchmark.
Conversion Rate: At the beginning of a programme an advertiser will set out the desired call to action. Typically this is a sale or request for information. The conversion rate is the number of people who click on the ad/banner/offer and then undertake the required action. It is calculated by dividing the number of completed actions by the number of clicks. For example, if a company sold 60 products that had been driven by 800 click throughs, they would have a conversion rate of 7.5%.
Commission: This is the amount paid to the affiliate for generating a sale, request for information or click through to an advertisers website.
Cost Per Action (CPA): This is how much it costs for a consumer to complete the required action (sale, request for information or click through).
Cost Per Click (CPC): This is how much it costs the advertiser each time someone clicks on your ad/banner/offer.
Cost Per Lead (CPL): This is how much it costs the advertiser for each qualified lead.
Click Through Rate (CTR): This is the ratio of the number of people who have seen the advertisers ad and clicked on it. It is calculated by dividing the number of clicks by the number of impressions and multiplying by 100. CTR is a good indicator of how the content is resonating and its relevance to the advertisers target audience, so the higher the percentage the better!
Hopefully this overview of the most used terms in affiliate marketing is useful. Like any industry, the affiliate sector is guilty of developing its own language, but once you understand it affiliate marketing is an exceptionally powerful – and successful – area of digital marketing.
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