Affiliate marketing beginner guide. Pic by Caleb Roenigk

Affiliate marketing (complete beginner's guide)

Learning how to be an effective affiliate marketer on one of the top affiliate programs is a great skill to have for entrepreneurs and anyone looking to start up their own business.

Affiliate marketers need all the skills required to drive sales and revenue that traditional or online business must have. The only difference is that starting up your own business takes a lot of work, whereas starting an affiliate campaign is really easy.

The skills you learn from working in affiliate marketing will help you to succeed in your own business when it comes time to promote your own products or services. It won't teach you how to manage a supply chain, but it will teach you how to increase your sales and drive a positive cash flow (obviously something that is critical for any startup).

Definition

Let's get a quick definition and explanation of affiliate marketing so we're all reading off the same page:

Affiliate marketing is a business process that incentivizes the promotion of products and services by offering commission on sales.

In other words, companies outsource their marketing efforts to people like you and me. In return we get a commission for sending customers to purchase their products. Every time someone we send makes a purchase, we get a cut of that sale. The seller gets more sales and we get paid.

With that out of the way, let's get started...

1. Pick a niche

One of the great benefits of affiliate marketing is that you can pick and choose the type of product or service you want to sell.

If you're thinking of starting your own business, it makes sense to choose similar products or services to sell since the work you do in identifying target audiences, social networks, media, and so on, will be transferable to your own startup.

The first thing any new affiliate marketer must do is pick a niche. A niche is basically a definable segment of an industry. For example, as an individual, you might not want to tackle the entire electronics market because your message will be diluted across all the different segments - tvs, pcs, cameras, phones, and so on.

Remember that selling online requires you to create focused content that is relevant to a target audience. The more focused your content, the more likely you are to build authority in that niche and appear higher up in search results as a result.

Basically, it comes down to picking a niche you are interested in, know something about, and can build up a useful body of content over time.

Affiliate industry rankings

Commission junction, arguably the largest and most successful affiliate network in the world, recently released their benchmark report for Q1 & Q2 in 2014, with some really interesting insight into the affiliate marketing industry.

In particular, their report gives a good overview of the relative sizes of each industry (by virtue of the most clicks generated in each niche), the best CR (Conversion Rate), as well as the highest EPC (Earnings Per Click) data.

Instead of regurgitating the entire report here, we're going to give you a break-down of the affiliate marketing industry by ranking each niche by 3 main key indicators - clicks, CR, and EPC.

Affiliate niches ranked by clicks

When calculating how profitable a given niche might be, it is important to have an idea of the size of the industry. How many people are potential buyers in that industry?

A table showing the top ranked industries by the number of clicks they generate is therefore of great value... and here it is:

RankIndustryClicks (x 1 000)
1Department stores2 584
2Financial services696
3Travel570
4Computers & Electronics537
5Clothing502
6Accessories487
7Business441
8Home & Garden406
9Media & Entertainment299
10Automotive255
11Gifts197
12Health & Beauty153
13Sports & Fitness117

It's not too hard to see that department stores and malls are about 4 times the size of the nearest niche (financial services) in terms of the number of clicks generated.

But what does this mean? Clicks alone don't give us the whole picture, so it is important to also look at two other factors, namely CR & EPC, before we can determine the overall potential value within an industry.

Affiliate niches ranked by CR

Life would be simple if there was always a direct correlation between the number of clicks and the EPC. Unfortunately, different niches have different target markets with different buying patterns, products, and all sort of other variables.

This makes it important to know what the conversion rate is because this tells us how likely we are to generate sales from the leads arising from our sites.

RankIndustryConversion Rate
1Financial services5%
2Business4%
3Gifts4%
4Health & Beauty4%
5Department stores3%
6Travel3%
7Clothing3%
8Accessories3%
9Home & Garden3%
10Media & Entertainment3%
11Automotive3%
12Sports & Fitness3%
13Computers & Electronics2%

Wow, so far Financial services has placed second in overall clicks generated, and tops the table in terms of the conversion rate (i.e. 5% of all clicks thru to advertisers sites resulted in a conversion).

Department stores, which had a significant advantage in terms of the overall clicks generated, fell down to 5th spot in terms of conversions (still pretty good tho).

The final part of the equation is working out how much value there is in an average conversion...

Affiliate niches ranked by EPC

The EPC, or earnings per click value, is one of the key components of the affiliate based revenue stream. For the purposes of this report, the EPC figure is given as dollars per 100 clicks.

In essence, you can view the EPC as the average amount of revenue you would make per 100 click thrus from your Web properties (assuming you are sending relatively targeted traffic) to the affiliate advertiser.

RankIndustryEPC (100 clicks)
1Financial services$71
2Business$55
3Sports & Fitness$30
4Travel$28
5Automotive$28
6Home & Garden$27
7Computers & Electronics$26
8Gifts$25
9Department stores$23
10Accessories$20
11Clothing$20
12Media & Entertainment$17
13Health & Beauty$6

Clearly Financial services must be the most lucrative affiliate industry because it not only comes in second in overall clicks, but it ranks highest in both conversion rates and earnings per conversion.

A simple equation to determine income might be:

Revenue = Clicks x CR x EPC/100

We divide the EPC by 100 because this value is given per 100 clicks. For financial services, network wide over a single quarter, we get:

Revenue = 696 000 x 4% x $71/100 = $19 766

So is that the end of the story? Should we all run out and become financial services affiliates? Probably not.

There is one more thing we need to take into account - how expensive is it to attract the right traffic in the first place. It's no good looking at how much we can earn if it will cost us more to get those earnings.

In fact, what you will most likely find is that competition in this sector is extremely high precisely because it is such a profitable niche.

Takeaways

I guess it is important understand that despite how the overall industry performs, what determines whether or not your particular properties will generate decent income and be profitable, is how much value you can add to the buying process.

There's no point in looking at the great CR and EPC in Financial services and deciding to become a financial services affiliate when you know nothing about finance.

However, you can learn a great deal about how to leverage your own skills to pick the best possible direction for affiliate marketing campaigns by understanding how your niche works.

In particular, using this data in conjunction with your own research into what the most successful publishers in your niche are doing will equip you to become more and more competitive throughout 2014 and into 2015.

Make sure you check out the full report if you want a bit more in-depth coverage and analysis of these figures.

2. Plan your campaign

With your niche selected, you now need to work out how best to get the right message across to the right people with the least amount of effort and cost.

Choose a Web platform

Fortunately, the Internet has gotten to the point where it is very easy to create new webpages. It's no longer difficult to create cutting-edge, high quality websites - even if you don't have any Web design experience.

Get started in minutes with our complete beginners guide to making a website.

Effectively what you are looking for is a web platform that allows you to create SEO optimized landing pages that are specifically designed with best practices built in. Naturally you will also need your Web pages to be socially integrated so that any content you create can be spread socially through networks like Facebook, twitter, StumbleUpon, or LinkedIn.

What really counts (once you have chosen a Web platform) is your own creativity in creating content (discussed in step 3 below) and spreading the message. But first...

Choose affiliate partners

Part of planning your affiliate campaign is also deciding which businesses you want to partner with. There are tonnes of different affiliate schemes available. Not all of them are reliable, so approach with caution.

The world's most popular affiliate scheme is run by Amazon, and you can sign up with them at their associates page. Amazon is reliable and converts well.

If you're after some variety or speciality niche products and services to sell, I recommend trying the following networks (that I can personally vouch for):

Remember that each affiliate program is unique. Run by different people with different requirements, goals and terms of service. In particular, many only want to partner with established publishers so be aware that not every company you'd like to partner with will accept your request (until you can demonstrate solid, quality Web traffic levels).

3. Create content

In order to really start driving traffic through to your Web pages you need to create content that is focused, relevant and engaging. If you're not familiar with sales funnels:

Sales funnel chart for blogger.s Pic by AdEspresso

I recommend you spend some time learning how to use content to create effective ones.

Simply copying and pasting sales information from one site to another is actually worse than useless. Google will notice that you aren't providing any original content and will immediately penalize your site. No one will visit it and you will have wasted time and effort.

Instead, find an angle that interests readers. People want to be entertained and informed without feeling like they're being pitched every second of every day. If you can find a way to get people to trust you, you can get them to make purchases through you.

Building trust is something you will need to do in your own business, so it makes sense to practice the technique first.

4. Promote, analyze & refine

Once you have worked out the details of how to create your content and publish it online, your job splits into three disciplines:

  • creating more and more content
  • finding new and creative ways to spread the word
  • analyzing traffic and conversion rates of that content

Currently one of the best ways to spread content is via social networks. If your content has something of value (let's say you created a page comparing the values of all the best televisions) and this gets picked up and spread around one or more of the social networks (for argument's sake, let's say Digg), then it it quite likely that your page will experience a massive surge in traffic.

The more traffic you can drive to your page, the more likely it is that a certain fraction of those visitors will click through and make a purchase (a conversion). By analyzing how well Web pages convert, you can start to work out how to improve them:

more traffic + a higher conversion rate = more revenue

Be careful not to become spammy or self promotional. Many social networks are acutely alert to people wanting to advertise directly. Make sure you offer content of real value. It could be a funny video clip, a podcast, a blog post, a landing page... anything - so long as it is interesting.

better content => greater trust and authority => higher conversion

Affiliate marketing is a numbers game in which you have to continually strive to keep impressions high, the CTR (Click Thru Rate) high, and the EPM (Earnings per 1000 impressions) and EPC (Earnings Per 100 Clicks) high.

The higher you can keep these numbers, the more money you will generate from your content.

How to rock affiliate marketing figures and calculations

Most content publishers tend not to reveal their earnings from affiliate relationships and advertising. I'm going to show what my blog has done over the last week or so to give you an idea of the numbers I generate.

Remember that every blog is unique and what you earn from content depends on:

  • Content quality
  • Traffic volumes
  • Level of reader engagement
  • Skill & experience
  • Niche

My figures are as follows:

  • Impressions: 4424
  • CTR: 4.14%
  • EPM: $29.39
  • EPC: $71.04

Interpreting statistics

What these numbers indicate is that out of every thousand impressions (whenever a reader looks at a page that displays an affiliate ad or link), on average 41 (and a half) people will click on a link.

Those 41 (and a half) people end up generating revenue for me, in the form of affiliate commissions, in the amount of $29.39 (EPM). They do this because a small percentage of them go ahead and purchase something at a rate of $71.04 per hundred clicks (EPC).

So, for every hundred clicks I generate, on average, I will be paid $71.04. It takes approximately 2400 impressions to generate these clicks and the resulting revenue.

In other words, I make about 3c per impression (each time someone views a page).

If I want to earn more money I need to increase the number of impressions my content generates. But, there's a catch. I have to do it in such a way as to maintain my other stats, otherwise, all I am doing is increasing my server costs without increasing revenue.

The role of SEO, social and marketing in affiliate publishing

However you monetize content, it is possible to work out what the EPM is. With this figure in hand, you can work out what type of marketing, advertising, SEO and social campaigns are suitable.

Advertising

By way of example, consider StumbleUpon. Advertising on StumbleUpon costs around 5c per page view. Currently, I would lose 2c on average per page view, so this is not a good option.

But, my EPM is for general blog content. I might be confident that I can increase my EPM by creating special pages that would appeal to a targetable niche. If I can increase my earnings to 7c per page view, then StumbleUpon becomes viable.

The same considerations go into all advertising campaigns. Because advertising, unlike other forms of marketing, has no residual benefits (i.e. as soon as you stop paying, traffic ceases), the calculation is simple:

Is my ad spend greater or less than my return?

Factors that can influence the ROI (Return on Investment) for advertising are:

  • Ad focus & traffic quality
  • Page design
  • Content quality
  • Content clarity
  • Trust
  • Authority
  • Skill and creativity
  • Niche

In other words, look at your content and make sure that it both skilfully integrates affiliate links in a way that is targeted, relevant, and engaging for the target audience. Whether or not you are successful can come down to pushing the EPM up by a few dollars and cents, so lots of skill, thought and creativity needs to go into creating great content.

Social & SEO

There are two main differences between SEO & social marketing, and advertising. Namely:

  • Benefits accrue and accumulate with time
  • Cost is measured predominantly in labor and time, instead of cash

Whatever work you put into building up authority and trust within a social niche, continues to increase as you attract more and more followers. A well built social network can maintain a relatively high level of engagement.

The same goes for SEO. Create high quality content on a regular basis. Make it socially integrated, and generate a higher PageRank and back-links. The benefits are compounded and long lasting.

The downside is that both methods can take a lot of time. You have to be prepared to put in the hours for very little return (at least initially). As opposed to advertising, which generates traffic and return instantly.

Best of luck with your affiliate marketing efforts. If you'd like to share any successes or lessons you have, post a comment or drop me an email.

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