Affiliate is generally used when describing a company or marketing. Here we’ll define and find out more about both of these terms.
Definition of an affiliate company
An affiliate is a company that is related to another company in some way. Generally, the affiliate company is less than 50% owned by the parent company. Two companies can be considered as affiliated if one company has control over the other or if a third company controls both.
Companies can be affiliated with each other through shareholdings, by holding a minority interest (less than 50%) or one company may be a subsidiary of another.
>> Interested in knowing more about companies in the UK? Read our PLC definition.
The differences between an affiliate and a subsidiary
To understand the differences between an affiliate and a subsidiary, the role of a parent company needs to be defined. This is a term used to describe a company that owns sufficient stock in another company to allow it to have control over it. As this would mean the parent company holding more than a 50% share to achieve this control, the term only refers to subsidiaries and not to affiliates.
Therefore, a subsidiary company is one where the parent company owns more than 50% of the stock. With majority power over the subsidiary, the parent company can influence key decisions in the business, such as naming a board of directors. In cases where the parent company owns 100% of another company’s stock, the subordinate company is considered to be a wholly owned subsidiary. For clarity, a subsidiary is always an affiliate, but an affiliate isn’t always a subsidiary.
There are many similarities between an affiliate company and a subsidiary with one exception. With affiliates, one company owns less than half of the company’s stock. The company that has less than the 50% share is deemed to have minority control over the affiliate company. If two companies are both subsidiaries of another company, they are considered to be affiliates of each other.
Affiliate marketing definition
The term affiliate is also used in relation to online marketing. It’s essentially where one company opts to affiliate with another to sell products or services. The merchant has a website, on which affiliates can sell products. The merchant retains control over the site and pays a commission to affiliates. This is known as affiliate marketing.
Affiliate marketing is an increasingly popular internet marketing tool that enables affiliates to earn commission for the customers they bring to a website. This tends to be on a cost-per-click basis rather than cost-per-lead or sale.
Three parties contribute to successful affiliate marketing. These are:
The merchant: Also known as the seller. This is the individual or company that creates the product or service.
The affiliate: Sometimes also called the publisher, affiliates can also be an individual or company. An affiliate advertises the merchants’ products and attempts to attract and persuade potential customers to buy them. They achieve this in many ways, from a simple review blog to an entire website that focuses on a particular topic and promotes affiliate products that are related.
The customer: The customer makes affiliate marketing work. If they don’t buy any products, the merchant doesn’t make any sales, and the affiliate doesn’t earn any commission. Sometimes the customer is aware that they’re part of an affiliate marketing system as more and more affiliate marketers take a transparent approach. However, even if the customer doesn’t know, they will still pay the same price for the product, and system tracking enables the affiliate to receive their commission still.
The benefits of affiliate marketing for merchants
Affiliate marketing can be hugely beneficial for both the merchant and the affiliate if done right. Here are the top three advantages of using this form of marketing for the merchant:
1. Increase brand awareness
If an online business is getting off the ground, affiliates can help to increase brand awareness through the use of banners and ads that they position on their sites. The potential customers that visit the affiliate site each month will view advertisements for brands they may not know about and click-through to a website which results in more sales.
2. Improve your brand reach
Affiliates can reach different audiences that an online business currently isn’t targeting. This effectively improves a company’s brand reach by marketing products to interested people with no up-front fee required.
By far the most convincing advantage of affiliate marketing is that there are no advertising costs. Affiliates are paid merely for driving the right actions. Therefore, promotion is their responsibility, and they shoulder the costs of advertising.
How to become an affiliate marketer
Of course, to be a merchant you need to have a product to sell. It’s much simpler to become an online affiliate marketer, but it can take a while to build enough traffic to earn a reasonable income. If you’re a budding affiliate marketer, here are four steps that you should follow:
1. Find your niche
Start by deciding the types of product you want to promote. It may be easier to choose products that you have a genuine interest in or that you use regularly. When you start writing reviews or blogs about the products, it will become apparent to the customer if you do not have a relationship with what you’re promoting and they’ll dismiss your recommendations.
Within your reviews and blogs, you can use an affiliate link to the products you’re promoting. This will ensure that you receive commission if people click through to the merchants’ website or purchases a product.
To earn commission in this way, you need to have a lot of traffic visiting your site. You can achieve this by creating an attractive website with interesting and relevant content, but this takes time. You can speed up this process by utilising social media to get more traffic.
2. Increase traffic with social media marketing
Social media marketing can be compelling and is a great way to increase traffic. To showcase your expertise when promoting a product, you could consider video marketing by producing a webinar, hosting a Facebook Live event or featuring on IG TV which is a relatively new feature on Instagram.
The benefits of video marketing include:
- Being able to present the product’s features properly
- Allows you to talk in depth about its benefits and drawbacks
- Take your audience on a journey regarding your history with the product
- It’s a more engaging way for your audience to find out about the product.
>> Read More: Marketing Definition.
3. Be transparent
Your audience always appreciates your openness and honesty, and you’ll appear much more authentic as a result. By including an affiliate link and sharing it at the end of the webinar doesn’t feel forced or lead your audience to believe that you’re just after the hard sell.
Being transparent about your relationship with a merchant can go in your favour if you can persuade them to provide a special deal for your audience.
4. Use paid advertising to grow your business
While social media marketing is mostly free, you may also want to think about using paid advertising on social media as well. This way you can improve your reach to your targeted audience and drive that traffic back to your site or your affiliate offers.
The benefits for affiliate marketers
Firstly, there’s a high probability that you’ll make a profit, but the flexibility of being an affiliate marketer is that you can work from anywhere at any time. As long as you have your laptop and an internet connection, your work can travel with you. You can even earn money while you’re sleeping.
You also don’t have to have any previous sales experience as you’ll never have to be concerned with dealing with the end customer. Better still, you don’t have to worry about processing or shipping orders as the merchant will take care of that.
With your own affiliate business, your income potential is limited only by your drive, effort and creativity. No boss to answer to, no customers to deal with and no delivery costs to manage. It’s the perfect choice for individuals who desire simplicity and freedom from their job.