AFFILIATE MARKETING

The essence of affiliate marketing lies in encouraging participants (so-called affiliates) that are independent from the advertiser (sponsor) to perform commission-based sales activities by means of affiliate networks (L., 2005). Basic benefit of the application of affiliate mechanisms for sponsor is a method of compensation dependent on the effect of the conducted campaign and the model of payment for the campaign (Kalyanam, 2002)

 The sales partner can only earn financial profit if his activities encourage customers to carry out a predefined transaction, determined in the contract with the sponsor. Generally, action is the channel defined as selling products through e-commerce. The sponsor does not need to login in advance.

The customer paid after an action determined by the campaign budgets as the affiliate fee. Affiliates can be: Internet media (portals and whirlpools), comparison engines, experts personal websites and individuals - customers with all kinds of web assets (social media profile, personal website, blog, etc.).

                An affiliate receives financial benefit (most often a commission) as compensation for attracting Internet users to the offer of a sponsor promoting its product on the affiliate’s website (Chai, 2006)

 

          AFFILIATE NETWORKS

        Most sponsor-affiliated relationships are managed over several large networks. Networks provide technology to manage affiliate events, coordinate monitoring activities (when an affiliate sends a potential customer to the advertiser's website) and support transactions. They also manage the calculation of commissions and, in most cases, payment of payments to affiliates and issuance of payments to subsidiaries. Networks also make it easy to manage. In the implementation process (when an affiliate tries to participate in an advertiser's affiliate marketing program) and the process of accessing ads to affiliates (eg banners, text links, product data file, etc.) so that the sponsor can promote their products sufficiently. These networks are considered as units that improve the market and make it more forward-looking by facilitating the use of affiliate marketing principles. Among the largest affiliate networks we mentioned are: LinkShare, Performics, Zanox, Trade Doubler, DGM, Commission Junction.

The following graph presents the mechanism of affiliate model, the numeric symbols describe the following actions:               

1. Convincing potential customers to visit the affiliate’s website.

2. Redirection of the customer onto the sponsor’s website where he/she performs a predefined action (i.e. purchase, filling-in a form, e-mail address registration etc.).

 3. Affiliate’s compensation (commission) for the value of the order/the number of assumed actions performed by the customer.

The key to successful affiliate marketing lies in establishing a win-win relationship between the three parties (sponsor, affiliate and customer). The sponsor benefits from a fully appointed sales force and has a predictable and ex-post spent marketing cost. Partners create an income stream without investing in infrastructure and expertise. By increasing the effectiveness of online activities, the affiliate focuses sexually on optimization of the Internet service (eg blog's Facebook profile, website) content, structure, navigation, functionality, etc. terms. Customers receive reliable information about products from sources other than the sponsor itself.The significance of affiliate marketing can be also seen in the change of roles performed by entities participating in concluding transactions on e-market. Intermediaries such as portals or vortals would lose their dominant position on e-market in favor of customers’, experts’, opinion leaders’ web presence (Mazurek, 2008)By means of affiliate networks, such players may become business partners – not only participants offering advertising space but traders gaining commission-based compensation and fulfilling sales force actions, having high credibility and offering added value on their web sites for specific target groups.Awareness has been raised in companies that started using sales partnerships instead of traditional marketing. The most striking difference is based on performance. More prominence makes a difference in the market area. Marketing costs are replaced by commission for sales which is much more effective, taking into consideration focus on the performance and effectiveness of marketing activities (Chang-Hoan, 2001)

Growing popularity of affiliate activities derives from the fact that traditional models of ad sales or promoting actions on e-market. i.e. flat fee model (FF), cost per mille model (CPM) or cost per click model (CPC) do not fulfill effectively their roles inter alia because:

 

• to a relatively low extent, FF, CPM and CPC models link the promotional expenditures of a sponsor with the results (performance) of promotional e-campaigns,

• to a great extent, FF and CPM models shift the risk of success of the performed promotional actions onto the sponsor. The owner of advertising space (e.g. portal) gains reward on the basis of broadly defined popularity of the website, clicks or time visit. There is no dependence of this compensation on actual effects desired by the sponsor in the form of e.g. visiting the sponsor’s website, performing the given action or online purchase,

• owners of promotional space maintain status quo, offering to sponsors a small range of models of advertising space purchase (the CPM model dominates which minimally links the effectiveness of an advertisement with the effect desired by a sponsor),

• vertisement with the effect desired by a sponsor), • the sponsors are aware of progressing discouragement towards traditional e-promoting activities (display e-advertising, e-mail marketing, etc.) by internet users and search for new models of cooperation, especially with clients (Mazurek, 2009),

• gradual progress of decrease of effectiveness of internet promotion activities based on CPM model.

Resources:

Chang-Hoan, C., Jung-Gyo, L., Tharp, M. (2001), "Different forced-exposure levels to banner advertisements", Journal of Advertising Research, Vol. 41 No.4, pp.45-56.

Mazurek, G., Corporate blogs - innovative communication tool or another internet hype? Empirical research study in: Proceedings of the International Multiconference on Computer Science and Information Technology, Vol. 3, 2008, pp. 403-406.