The process of paying a commission in return for promoting products or services, known as affiliate marketing, is a growing industry in the UK.
According to Statista opens in new window, £627 million was invested in affiliate marketing in the UK during 2020, up from £569 million in 2019.
Data from Glassdoor shows the average salary of an affiliate marketer in the UK is over £38,000 opens in new window.
Affiliate marketing is a popular way for individuals to make money.
It also has advantages for start-ups and small business owners looking to attract new customers opens in new window and grow sales at a low cost.
It reduces the need for significant investment in marketing campaigns opens in new window by encouraging others to promote you in return for a fee.
Research by the Internet Advertising Bureau UK opens in new window found that 19% of the businesses involved in affiliate marketing in the UK are small companies with under 50 employees.
What is affiliate marketing?
Affiliate marketing is an online advertising model which involves a business paying third parties opens in new window a commission or fee in return for promoting their products or services and achieving particular actions such as new sales or driving traffic to a website.
There are various models for commission in affiliate marketing.
- pay-per-sale: This is the most common commission structure; affiliates receive a fee when a product or service is purchased as a result of their promotion
- pay-per-action: Using this broad model, you pay affiliates when a potential customer carries out a specific action; examples include signing up for a newsletter opens in new window, responding to a survey, or filing in a contact form
- pay-per-lead: A fee is paid to affiliates to generate leads that could become paying customers
- pay-per-click: Affiliates receive a fee when an online link is clicked
- Pay-per-install: This system involves companies promoting mobile apps or software; a commission is paid to affiliates when the app or software is downloaded or installed.
Businesses can create their own affiliate marketing programme, but many sign up for an existing affiliate network.
Affiliate networks are intermediaries between businesses and people looking to earn a commission for promoting products or services.
In return for a fee, you list the products or services you want to sell, and the networks encourage registered affiliate marketers to promote them.
They also provide tracking and reporting data and handle commission pay-outs.
Benefits of affiliate marketing for business growth
Affiliate marketing is often a good option for business owners running start-ups and small businesses with limited resources and finances.
1. Low costs
Affiliate marketing can be more cost-effective than other advertising opens in new window and marketing activity forms as it is performance-based; you only pay affiliates when they secure a sale or another action that you require them to deliver.
This means you don’t have to spend large amounts of money setting up an advertising or marketing campaign before seeing any results.
2. Build social proof
Affiliate marketing can enhance your brand’s online reputation by associating it with influencers who already have a loyal and trusted following.
Read our guide on how to work with influencers on Tik Tok opens in new window.
3. Attract a broader range of customers
Affiliate marketing can help you reach customers you might otherwise not have been able to attract.
Many affiliates are bloggers opens in new window or social media influencers with a following relevant to businesses’ specific niches.
By aligning your brand with them, you can reach their fans because your products or services will likely resonate, and they trust the affiliate’s recommendations.
Get Twitter marketing tips for small businesses opens in new window in our helpful guide.
4. Higher return on investment
Determining your return on investment can be tricky with many marketing and advertising activities, but it can be easier with affiliate marketing due to it being a performance-based model.
This is particularly true if you pay a commission when an affiliate generates an actual sale because you only spend money when they generate a new customer.
How to get started with affiliate marketing
Here are the steps small businesses may take when setting up their affiliate marketing activities for the first time.
1. Decide your goals
Before starting affiliate marketing, you need to decide the types of customers you want to attract and the affiliate marketers you want to work with.
It would help if you also determined how much revenue you want to generate from your affiliate marketing efforts.
Set targets and key performance indicators with clear and measurable goals.
2. Determine your commission structure
Decide the commission model you will use to reward your affiliates and achieve your goals.
Analysing how your competitors succeed opens in new window with affiliate marketing may help you decide which commission structure is best for your business.
Commission structures include:
3. Select an affiliate network
There are many affiliate networks to choose from, but you need to sign up for one relevant to your business.
Before settling on a network, it can be a good idea to research what they offer.
You need to understand the types of affiliates you are looking to recruit and which networks they use.
Many networks specialise in specific niches or locations, so you may want to choose one that’s directly related to the sector in which you operate.
Carrying out competitor analysis to work out which networks they are successfully using can help you identify which ones you should sign up for.
Affiliate networks charge fees for using them, so you need to know your budget.
You’ll likely have to pay set up and monthly charges, while some networks take a cut of each sale.
Do your research by comparing the fees of different networks.
Ask affiliate networks for testimonials and speak to other business owners you know for recommendations.
4. Follow advertising rules
There are rules regarding affiliate marketing that you need to be aware of.
Individuals promoting products or services in return for a fee must make that clear in online posts by using tags such as #ad.
You, as the brand, could also get into trouble if an affiliate breaks the rules.
There are more details on the Advertising Standards Authority website opens in new window.
The above are guidelines rather than legal advice, and you may wish to seek legal advice opens in new window to determine whether affiliate marketing is suitable for you and your business.
Want to market your start-up business? Check our free online courses in partnership with the Open University on effective marketing techniques.
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.