Affiliate Marketing: Discount Codes & Cash Backs, Friend or Foe?

Let’s be honest: the majority of online success stories can be attributed to the basic concept of affiliate marketing. Amazon, for example, stands as the world’s largest online retailer, largely due to its mastery of affiliate marketing with its Amazon Marketplace and numerous direct merchant partnerships. This affiliate-driven model has propelled countless retailers, from massive players like Play.com to smaller, independent businesses.

But as affiliate marketing continues to evolve, the question remains: is it still as effective as it once was?

What Is Affiliate Marketing?

Affiliate marketing is a performance-based marketing strategy where businesses reward external partners (affiliates) for driving traffic or sales to their website. Typically, this is done through links or ads on affiliate websites that redirect customers to a merchant’s site. If a sale is made, the affiliate earns a commission for the referral. Online marketplaces, such as Amazon, eBay, and Play.com, leverage this model, expanding merchants’ reach and benefiting both parties: the merchant gains additional sales, and the affiliate receives a cut.

Pros of Affiliate Marketing

Low startup costs: Affiliate marketing allows businesses to expand their reach without the need for significant upfront investment. Merchants only pay affiliates when a sale or desired action occurs, meaning there’s minimal financial risk.
Extended reach and exposure: Affiliates can help businesses tap into new markets and audiences. By partnering with affiliates who already have an established audience, merchants can promote their products to people they might not have reached otherwise.
Performance-based: Affiliate marketing is performance-based, meaning businesses only pay when specific actions are completed, such as a sale or lead generation. This ensures that marketing expenses are tied directly to measurable results.
Scalable and flexible: With affiliates across different channels (blogs, social media, email, etc.), merchants can scale their marketing efforts without having to hire more employees or invest heavily in traditional advertising.
Less administrative burden: Once an affiliate program is set up, much of the administrative work (like traffic tracking and reporting) is handled by affiliate networks or software, saving time for businesses.

Cons of Affiliate Marketing

Dependence on affiliates: Merchants rely on affiliates to drive sales, and if affiliates do not perform as expected, the merchant may see lower revenue. Additionally, poorly managed affiliates can harm a brand’s reputation.
Low-quality traffic: Not all affiliates generate high-quality traffic. Some may bring in visitors who are unlikely to convert into customers, which can lead to wasted resources and marketing spend.
Commission costs: While affiliate marketing is performance-based, merchants must still pay commissions to affiliates. Over time, these costs can add up, particularly when commissions are high or if there’s a large volume of sales driven by affiliates.
Difficulty in tracking ROI: With so many affiliates and marketing channels involved, it can sometimes be challenging for merchants to accurately track the return on investment (ROI) from their affiliate marketing program, especially if tracking systems are not integrated properly.
Limited control over branding: Affiliates represent your brand, but they don’t always have the same level of control or consistency in messaging. If an affiliate doesn’t align with your brand’s values or tone, it can hurt your image or confuse potential customers.

How Affiliate Marketing Works

Affiliate marketing is a performance-based marketing strategy where a business rewards third-party partners (affiliates) for driving traffic or generating sales through the affiliate’s marketing efforts. The process works through the use of affiliate links, which are unique URLs assigned to affiliates, allowing businesses to track the performance of each affiliate in driving traffic or sales.

Here’s a breakdown of how affiliate marketing works:

The merchant: The merchant, also known as the advertiser or retailer, is the business selling the product or service. They set up an affiliate program and provide affiliates with resources like banners, links, and unique affiliate tracking codes.
The affiliate partner: The affiliate (or publisher) is an individual or company that promotes the merchant’s products or services. Affiliates can operate across various platforms such as blogs, websites, social media, email marketing, or paid advertising. They use affiliate links to direct potential customers to the merchant’s website.
Affiliate link: The affiliate link is a unique URL that includes a tracking code specific to the affiliate. When a customer clicks on the affiliate link, the code tells the merchant that the sale or action (like a form submission) came from the affiliate. This link is usually embedded in the content (e.g., in blog posts, social media, or email newsletters).
Customer action: After clicking on an affiliate link, the customer is taken to the merchant’s website. If the customer makes a purchase or completes the desired action (like signing up for a newsletter), the affiliate earns a commission.
Commission and payment: The merchant tracks the actions generated through the affiliate link, calculates the commission based on the agreed-upon rate (which can be a percentage of the sale or a fixed amount per lead), and pays the affiliate accordingly. The payment typically occurs on a regular basis (e.g., monthly).

Affiliate marketers are the backbone of affiliate marketing programs. They serve as promoters of the merchant’s products or services but don’t have to handle any of the logistics like product creation or customer service. Instead, their job is to drive traffic or affiliate sales to the merchant’s website. They will also help you start an affiliate marketing program if you don’t have one set up already.

3 Key Components of Affiliate Marketing

Affiliate networks: Many affiliates join networks that connect merchants with potential partners. These networks manage the tracking, reporting, and payment processes, simplifying affiliate marketing for both merchants and affiliates. Examples of affiliate networks include ShareASale, Rakuten Marketing, and CJ Affiliate.
Tracking and analytics: Successful affiliate marketing largely depends on accurate tracking. Merchants use tracking software to monitor the performance of affiliate links and determine how many clicks or conversions come from a specific affiliate. This ensures that affiliates are paid fairly for the actions they generate.
Commission structure: The merchant and affiliate agree on a commission structure. This could be a pay-per-click (PPC) model, pay-per-sale (PPS), or pay-per-lead (PPL). The most common structure is pay-per-sale, where the affiliate earns a percentage of the sale price.

Is Affiliate Marketing Still Effective?

For established online retailers, affiliate marketing remains more successful than ever. But does this hold true for newcomers or latecomers to the affiliate marketing world?

Traditionally, affiliate marketing involved third-party websites promoting a merchant’s products, typically through product links or redirecting customers to the merchant’s site. If a sale resulted from the referral, the affiliate received a commission. Online marketplaces like Amazon, Play.com, and eBay helped merchants expand their reach by directly connecting them with consumers, benefiting both the merchant and the affiliate.

However, affiliate marketing has not been without its challenges. There have always been instances of dishonest affiliates using underhanded tactics, such as brand bidding or click fraud, to unfairly profit. These concerns have caused some merchants to hesitate in adopting affiliate marketing. Yet, over the past few years, many affiliate programs and networks have actively worked to clamp down on these unethical practices, offering merchants tools to minimise such risks.

The Rise of Discount Codes & Cash Back Sites: Friend or Foe?

In recent years, online shoppers have become increasingly savvy, with many actively seeking out discount codes and cashback offers. Websites like MyVoucherCodes.co.uk and Quidco have seen a sharp rise in popularity, providing consumers with discounts on their purchases or cashback rewards after a sale is completed. These sites operate under the same affiliate marketing principles as traditional affiliate programs, but are they truly serving the best interests of the merchant?

While these discount and cashback sites do make money through affiliate commissions, their impact on the merchant can be more complex. From a merchant’s perspective, it’s important to examine more than just revenue and ROI when evaluating the effectiveness of affiliate programs. Many shoppers, myself included, now incorporate a final search for discount codes or cashback offers before completing a purchase—even when they are already fully committed to making the purchase. At this stage, the customer is ready to buy regardless of whether they find a discount code, so is it fair for an affiliate to take credit for the sale?

This growing trend challenges the traditional affiliate marketing model. While discount and cashback sites do generate sales, it’s crucial to question how many of those sales would have happened without the affiliate’s involvement. In many cases, these sites are not driving new customers or creating additional demand—they’re simply capturing sales that would have occurred anyway. As such, merchants may be paying commissions for sales that didn’t truly require an affiliate marketing campaign.

The Bigger Picture: New Customer Acquisition & AOVs

It’s essential for merchants to look beyond simple revenue numbers and ROI. Instead, focusing on new customer acquisition and Average Order Values (AOV) provides a clearer picture of an affiliate program’s true impact. Are these discount and cashback sites attracting new customers, or are they merely facilitating repeat purchases from existing ones? Are affiliates contributing to long-term customer loyalty, or are they simply offering one-time discounts?

Tools like referral marketing software can provide valuable insights into affiliate marketing performance, allowing businesses to track and optimise their strategies more effectively. This kind of software helps differentiate between sales that generate real, incremental value versus those that simply shuffle revenue around.

The Role of Discount and Cashback Sites in Affiliate Marketing

While discount code and cashback sites are often seen as the “go-to” for consumers seeking a bargain, it’s essential for merchants to evaluate the role these platforms play in their overall marketing strategy. Websites like HotUKDeals.co.uk and Shopper.com do more than just collect discount codes—they actively spark sales and generate buzz. These platforms can help ignite interest in a product, but it’s crucial to assess how much real value they add to the overall customer experience.

Voucher and cashback sites may not always create demand from scratch, but they can drive significant volume. This volume often compensates for the lower margins merchants might experience when working with these affiliates. However, merchants should carefully monitor these sites’ effectiveness to ensure they’re not simply attributing sales to an affiliate without generating any true additional income or customer loyalty.

Conclusion

Affiliate marketing remains a powerful tool for online retailers, but it’s important for businesses to consider the evolving landscape. Discount code and cashback sites certainly have their place, but they can skew the true value of affiliate marketing. By focusing on metrics like new customer acquisition and average order values, rather than just revenue and ROI, merchants can gain a more accurate picture of how affiliate marketing is truly impacting their business. As affiliate marketing continues to grow, understanding its nuances is key to maximising its effectiveness.

Article by

Nicholas Turner

For over 12 years, Nick has been conjuring creative experiences that entertain and - most importantly - resonate with users. He holds a Film and Television Production bachelor's degree from the Cambridge School of Art as well as a degree from the University of the Arts London for Brand Strategy. Whenever he's not willing creative ideas into existence, Nick spends his time travelling, consuming comics and movies as well as writing his own scripts, short stories and novels.