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How to Build a Reliable (and Profitable) Affiliate Network From Scratch Many brands remain uncertain of just what exactly affiliate marketing is. Here is Lesson One.

By Jennifer Spencer Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

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According to industry expectations, by the year 2020, total spending on affiliate marketing will reach $6.8 billion, according to a recent article in Inc. Despite the increasing prevalence of this advertising tactic, however, many brands remain uncertain of just what exactly affiliate marketing is -- or how they can leverage it in their own strategies.

Related: Affiliate vs. Influencer Marketing: Which Should Your Company Use?

In a nutshell, affiliate marketing is a method in which brands team up with third-party channels to promote their products. These affiliates share links to products and earn a small commission for sales or web traffic generated by their content. Unlike standard ad placements, your brand isn't responsible for producing the ad content. Rather, the affiliates create the content themselves.

There are a wide range of partners that can fall under the affiliate marketing umbrella, which makes building a reliable and relevant network an important priority for today's brands.

Understand your networking options.

Before you start building your own affiliate network, you should understand the types of affiliates that are out there. After all, different partners may be better suited for your brand than others.

A recent article from LinkTrust, an affiliate marketing software solution, noted that most affiliates fall under one of three categories: publishers, solo marketers and influencers. "Each uses their reach to promote your product, the article said. "Typically, the best affiliates will garner a certain audience that will be interested in your product. For instance, if you sold gym equipment, a fitness Instagram influencer might be a good choice for an affiliate partnership."

In that regard, a fitness magazine would be another excellent choice, the article pointed out. A magazine could promote the gym company's products the way the company wants that to happen. Advertisements, social media updates, or links within content would all be potential channels, the article said.

The good news is that you and your own company don't have to feel overwhelmed about managing partner relationships. Affiliate marketing software platforms (like the previously cited LinkTrust) provide a system that helps brands manage their affiliate campaigns. These systems also manage payments and transaction tracking to further simplify your workload.

Related: Top Affiliate Marketing Trends to Watch in 2019

When selecting partners, you should focus on affiliates that seem like the best logical fit for your niche. Research those affiliates' audiences and messaging tactics to determine if any match your brand image. These are the partners most likely to be interested in promoting your products, while also delivering quality traffic to your site.

Create an attractive opportunity.

Affiliate marketing is ultimately about creating a win-win situation for you and your partners. Many enter this field as a secondary source of income, or with the goal of seeing it become a primary source of income.

For example, a case study from the online marketing company I Am Dawn-Marie revealed how the site CB Passive Income earned its founder over $12,000 in commission during its first three months in operation. This happened thanks to a mix of blogging, email marketing, targeted landing pages and more.

Such case studies illustrate why many people want to become affiliate marketers. They also show that those marketers are actively trying to filter out the best partnerships.

As a brand, you need to make your own affiliate marketing program as attractive as possible. This starts with paying a quality commission rate; and what is deemed a fair rate will typically vary by industry.

Take Amazon. The ecommerce giant's commission structure is based on product type. While commissions for video games are a mere 1 percent, fashion products earn an impressive 10 percent commission. Other programs offer even higher commissions for affiliates who sell more products.

As Mark Hayes wrote in a Shopify blog post, "You'll have to do some math to figure out how much of a percentage you can afford to give up to do affiliate marketing. Can you part with 5 percent of the total revenue that comes from a sale? How about 10 percent?

"The higher the percentage, then generally the more affiliate traffic you will receive."

Have clear expectations.

Even with the help of an online network, you should constantly be on the lookout for new potential partnerships, while trying to make things as easy as possible for your current partners.

In a blog post for The Balance SMB, Laura Lake recommended, "Provide your affiliate partners with creative and promotional materials. You want to make their job of marketing your products or services as easy as possible. The less work they have to do and the more conversions they see, the more likely they are to promote your products or services."

So, actively communicate with current affiliate partners when you add to or change your product line. Be sure to provide any marketing guidelines related to your products up-front to avoid costly or reputation-damaging misunderstandings.

The tragic California wildfires provide a case study: As Digiday reported, several influencers sparked controversy in 2018 when they used those devastating fires to promote their personal accounts and brand partners -- a move that undoubtedly hurt the brands' overall image. When working with affiliate marketers, establish clear rules or guidelines to prevent such reputational problems.

In sum, building a strong affiliate marketing network may require a bit of work, but once your network is in place, this kind of system is relatively low-maintenance compared to other advertising strategies.

However, one thing will remain constant: You should always keep networking! The more affiliates you reach, the larger your sales potential. Be willing to invest the time to continually recruit quality partners.

Related: How to Earn Passive Income With an Amazon Affiliate Store

By using a commission-based setup to incentivize others to promote your products, you will essentially create a modern word-of-mouth system that delivers more customers than ever before.

Jennifer Spencer

CEO of Energent Media

Jennifer Spencer is the founder of Energent Media, a digital marketing firm for tech startups. She is passionate about helping brands leverage content to share their stories with the world.

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