How To Create An Affiliate Link and Track Performance

Discover the art and science of how to create an affiliate link for lucrative performance tracking and intelligent commission allocation. In this post, we get into the details of exactly what affiliate links are and how you can create them for your business. We also offer some advice, best practices and examples of great affiliate programs. Most importantly, we show you how you can use referral tracking software like Referral Factory to easily create affiliate links and manage tracking.

Affiliate links are unique URLs that contain an affiliate code or tracking ID. They are used by affiliates to promote products or services and earn a commission for each click, lead, sale or conversion made through their referral. 

These links are crucial to launching a successful affiliate program for several reasons.

First, affiliate links allow for accurate tracking so that clicks, leads and sales can be correctly attributed to the affiliate. Each affiliate is assigned a unique link, which enables the program to track and credit them for the purchases made by their referrals. This ensures that affiliates are properly compensated for their efforts, motivating them to continue promoting the products or services.

Second, affiliate links provide a seamless user experience. When a potential customer clicks on an affiliate link, they are directed to the merchant’s website or a special landing page. This helps to build trust and credibility for both the affiliate and the business.

Additionally, affiliate links enable the measurement of the affiliate program’s performance. By analyzing the data from affiliate links, businesses can determine which affiliates are driving the most leads or conversions, which marketing strategies are most effective, and what optimizations can be made to improve overall performance. This data-driven approach allows businesses to optimize their affiliate program for better results over time.

Affiliate links and affiliate codes are both powerful tools in the world of affiliate marketing. However, they vary in their use, benefits, and tracking capabilities. Here is an overview of the pros and cons of using affiliate links vs affiliate codes:

Infographic illustrating the pros and cons of using affiliate links vs affiliate codes

Affiliate Links

Pros:

✅ User Experience: Affiliate links offer a seamless user experience. Users can click on the link and be directed straight to the product or service without the need for additional steps. For the end user, there is no need to copy or remember a code and for you as the business, there is no need to set up a special input field for these codes in your website. 

✅ Customizable Landing Pages: Affiliate links allow businesses to create customized landing pages that tailor content, design, and user pathways to increase the likelihood of conversion. You can also use these landing pages to offer something special, like a discount or priority service, which makes it more likely that you will get the lead’s details, even if they don’t immediately convert. 

✅ Automatic Tracking: Clicks and conversions can be automatically tracked, enabling real-time performance analysis and optimization. 

✅ Enhanced Analytics: With affiliate links, you can gain richer analytical insights, like user behavior, click-through rates, and the overall customer journey.

✅ Professional Appearance: Affiliate links look professional, contributing to a better brand image.

Cons:

❌ Dependency on Technology: If there are technical issues such as a broken link or site downtime, it could disrupt the user experience and potential sales.

❌ Link Sharing: Since links are digital, they might not be as convenient for offline or verbal promotions compared to affiliate codes.

Affiliate Codes

Pros:

✅ Versatility: Affiliate codes can be used both online and offline, making them versatile for various promotional settings, including verbal or print. They are best suited to e-commerce and retail where you already have a place to input promo codes. 

✅ Simplicity: Codes can be easy to remember and share, which could be beneficial in a conversational or social media context.

Cons:

❌ User Effort: Users have to remember and manually enter the code during the checkout process, which might lead to a loss in conversions if they forget or abandon their journey. In other words, links with custom landing pages often mean you can get the details of your lead pre-conversion, so you can subscribe them to your newsletter or nurture them over time. 

❌ Limited Customization: Unlike affiliate links, codes don’t allow for tailored landing pages, missing the opportunity to optimize the user experience and messaging. It also means that you’ll need to add an input field in your website at checkout or at your point-of-sale that can recognize those codes. 

❌ Tracking Challenges: While still trackable, codes might not offer as robust analytical insights as links, making performance optimization slightly more challenging.

Both affiliate links and affiliate codes have their own strengths and weaknesses in the realm of affiliate marketing. Affiliate links offer a more seamless user experience, customizable landing pages that can include special offers, automatic tracking, enhanced analytics, and a professional appearance. On the other hand, affiliate codes are versatile for various promotional settings, especially if they are easy to remember and share. However, they require users to manually enter the code during checkout, which you’ll have to make possible on your website or at your point-of-sale, they often lack some customization options, and may pose tracking challenges. 

Ultimately, the choice between affiliate links and codes depends on your business’ specific marketing objectives, target audience, and promotional channels. It’s important to weigh the pros and cons of each option to determine which is the best fit for maximizing leads, conversions and success in your affiliate program.

To create affiliate links, you will need to decide whether to custom-build the tracking capabilities with the help of a developer or whether to use a no-code tool like Referral Factory to create the affiliate links for you. Using off-the-shelf affiliate management software is usually the most popular solution as it allows you to get up and running in days — not weeks. This type of referral software comes with a variety of built-in tools and functionalities that are specifically designed for managing referral and affiliate programs, such as tracking leads from affiliates, calculating affiliate commissions, and analyzing performance data. Many of these tools (including Referral Factory) go as far as managing the payouts and rewards for your affiliates, taking care of what can end up being a strain on your finance department. Opting for pre-built affiliate software can also be cost-effective, as it eliminates the lengthy development time and resources required to build a system from scratch. Affiliate software typically comes with customer support, providing businesses with guidance and troubleshooting when necessary. However, one potential downside is that off-the-shelf software may not fully align with your business’s unique needs and workflows. It might also be less adaptable to evolving business strategies and market trends, and there could be limitations in terms of customization and scalability.

On the other hand, building a customized tracking system offers the benefit of tailor-making the system according to the specific needs and objectives of your business. A customized solution allows for greater flexibility and adaptability, meaning that the system can evolve alongside your business and market changes. However, the custom-build route comes with its own set of challenges, primarily in terms of the investment required. Developing a customized system demands substantial time, technical expertise, and financial resources. Additionally, you would then take on the responsibility of maintaining the system, troubleshooting issues, and ensuring continuous improvements and updates, which can be resource-intensive.

To decide, you should weigh the immediate convenience and reliability of off-the-shelf software against the flexibility, adaptability, and long-term strategic alignment offered by a customized solution. The choice should be informed by your business’s specific needs, technical capabilities, resource availability, and long-term vision for their affiliate program.

Crafting a concise, comprehensive brief to your developer is crucial for effectively creating affiliate links. Make sure that you clarify your affiliate marketing goals, desired features, tracking necessities, and the look and feel for your affiliate links.

  1. Set clear and achievable objectives for your affiliate program. 
  2. Mention any required technical functionalities in detail, such as URL parameters and redirect rules.
  3. Specify your preferred affiliate link structure, such as whether you want unique ID’s or alphanumeric codes.
  4. Emphasize the importance of proper tracking. Details should include click rate, conversion rate, and source tracking.
  5. Ensure that the developer understands the need for responsiveness in various browsers and devices.
  6. Give the developer the full spec of your existing tech stack to see what software can be integrated to optimize performance and tracking.
  7. Include a deadline for the project while offering a reasonable time for revisions.

With Referral Factory, you can build, launch and manage affiliate programs without needing a developer. (You can also use Referral Factory to run customer referral programs). Here is a step-by-step breakdown of how to create links for your affiliates using Referral Factory:

1. Build an affiliate campaign from scratch, using AI, or use a pre-built template like this one.

2. Spend some time optimizing the landing page that will open when someone clicks on one of your affiliate links. With Referral Factory, you can customize this page to be 100% on-brand for your business, with your own logo, fonts, colors, and text. You can also add images and videos to make the page more dynamic and engaging. This page should have a clear call to action and can be automatically personalized to each of your affiliates. We recommend adding some kind of special offer or exclusive deal as a way to drive conversion.

3. Consider whether to make affiliates opt in for their links. By forcing affiliates to agree to the Terms and Conditions of your affiliate program, you cover your legal bases. However, you also have the option to enrol your affiliates on their behalf and automatically generate their affiliate links. You can do this by uploading a spreadsheet with your affiliate’s names and email addresses, or even sync their details via your CRM.

4. Build an affiliate dashboard so that your affiliates can have easy access to their affiliate link and performance metrics.

Tracking Affiliate Performance

To ensure the success of your affiliate program, it’s really important to understand the various key metrics. These may include click-through rates, conversion rates, and overall sales or conversions by affiliates. These are the basics of tracking referrals.

You should also familiarize yourself with what affiliate marketers call “conversion path analysis”: the journey that a lead will take before they make a purchase or become a customer. 

Understanding the Importance of Tracking Performance

Performance tracking is the backbone of a successful affiliate marketing program. It unlocks valuable insights, and helps your grow your  affiliate program into a powerful marketing channel. You should track your performance because: 

  • It will show the effectiveness of your affiliate marketing strategy 
  • It will help you notice high-performing affiliates that you can offer special incentives to 
  • It will identify the platforms where the affiliate links are driving the most traffic
  • It will help you recognize the affiliate marketing tactics that are not working, allowing you to make timely changes
  • It allows you to measures the ROI (return on investment) of your affiliate program

How To Analyze Your Performance Metrics in Referral Factory

With Referral Factory, you can pinpoint the following data:

1. Reach/ Clicks: How many people are clicking on your affiliates’ links

2. Leads: How many people are registering their interest via an affiliate link

3. Conversions / Sales: How many people are qualifying or converting via an affiliate link (this means they make a purchase) 

It’s important to track all these metrics so that you can see which of your affiliates are promoting their links the most (reach/ clicks) and which or your affiliates are generating the most interest (leads). But, most importantly, you want to know who your money-making affiliates are (conversions/ sales). So, being able to track whose affiliate link generated the most sales is key!

Allocating Rewards or Commissions

When it comes to affiliate marketing, payment structures are usually designed to be performance-oriented, ensuring that affiliates are compensated fairly and accurately for the traffic, leads, or sales they generate. Payment to affiliates is mainly based on the completion of specific actions, commonly referred to as conversions, which are determined and agreed upon by both parties beforehand. There are three main actions on which you can pay your affiliates: Cost Per Sale, Cost Per Lead and Cost Per Click:

Cost Per Sale (CPS): Affiliates earn a commission or flat rate when the referred customer makes a purchase or pays for a service. This is the most common compensation model. 

Cost Per Lead (CPL): Affiliates earn a commission or a flat rate when a referred user becomes a lead — when you get their contact details — such as signing up for a trial or subscribing to a newsletter.

Cost Per Click (CPC): Affiliates are paid based on the number of clicks generated through their referral links, regardless of whether or not the customer makes a purchase. 

Whatever you do, don’t agree to an affiliate deal on this payment structure! Cost per click affiliate deals are riddled with fraud. Paying per click means there is no incentive for the affiliate to bring you REAL customers, just clicks. This method is not advised. 

How Much Commission Should You Pay Your Affiliates? 

Even though we’ve just said this, it bears repeating: you should ideally being paying per sale, and in some rare cases per lead. Paying per click is an invitation for fraud!

But how much do you actually have to pay per sale? 

We have a slightly different view on this to most of the advice out there: we recommend paying out a fixed rate per conversion. This helps affiliates know EXACTLY how much they will get per sale and helps you budget accordingly.

In many cases, however, affiliate programs run on commissions — and the industry standard is to pay 15% to 30% of the customer’s total spend. The newer your brand and more unknown it is, the higher commision you should typically pay. This will attract affiliates to try promote something new.

Some affiliate programs pay commissions once-off and some pay them on a recurring basis, and the latter is especially popular with subscription based models like in SaaS (software-as-a-service). We advise paying a once-off commission because, well, it’s simply easier to manage! However, in some cases companies pay a quarterly commision based on total spend. 

Whatever you choose, the best approach is to keep it as SIMPLE as possible. 

How To Pay or Reward Your Affiliates

Having an automated payment system can make or break your affiliate program. It simplifies everything and reduces the manual work behind managing your referral program. You want to focus on MAKING money not PAYING money 😆

We suggest finding a plug-and-play affiliate solution that handles the payments for you. This means less admin for you and a smoother payout process for the affiliate too. Most affiliate software out there will offer payouts via platforms like PayPal, Wise, and more – they will also take care of getting the relevant invoices from the affiliate,  and worry about the tax implications of making payments to affiliates. So all in all we feel it’s safer to outsource this part! 

To summarize, these are the reasons you should use a platform to make your affiliate links, track the performance of your affiliate campaigns, AND handle the payments to each of your affiliates…  

  • Speeds up the process: No delays in handling payouts, resulting in satisfied and motivated affiliates.
  • Help you avoid tax implications: Affiliates that earn more than $500 from your company will need to be registered as official contractors if you pay them directly. 
  • Avoids human errors: Reduces the risk of errors in calculation and actual distribution, thereby ensuring precision in handling financial transactions.
  • Saves time: Frees up resources that could be utilized in optimizing marketing strategy and affiliate partnerships.
  • Smooth and transparent system: Makes tracking and visibility easier for affiliates, helping build trust in your affiliate program. 

With Referral Factory, you can set up flexible rewards to automatically reward your affiliates based on rules that you set.

Best Practices for Successful Affiliate Marketing

In this section, we will explore some key best practices for successful affiliate marketing, providing valuable insights and actionable tips to help you navigate the intricacies of running a successful affiliate program. Whether you are new to affiliate marketing or looking to enhance your current efforts, these best practices will set you on the path to success in the world of affiliate marketing.

Choosing the Right Affiliates or Partners

In most cases, quality is better than quantity: your time and resources are saved by managing fewer, more productive affiliates. Choose affiliates who showcase genuine engagement with your brand and have a strong online presence. 

Identifying high-engagement affiliates for your program is a strategic task. Look for those who have a high amount of traffic or followers, but also take note of their audience engagement. It’s crucial that your product aligns with their content and audience. 

Selecting the right affiliates is an ongoing process requiring consistent evaluation. As your business grows and shifts, revisit your selection criteria to ensure your affiliates can effectively promote your products for maximum return.

Building and Nurturing Relationships with Affiliates

The key to running a thriving affiliate program lies in nurturing your affiliate partnerships. Successful links come not only from creating them, but also from maintaining strong relationships with affiliates. A one-time partnership rarely leads to monumental growth, so think long-term and always provide value, both for your affiliates and their audiences.

A successful affiliate program functions on a value-for-value relationship. Prioritize open dialogue about their needs, feedback about your products, or services, and continually revise your strategy based on this input. This way, you ensure mutual growth, success, and loyalty.

Sustaining affiliate relationships involves consistent and transparent communication and fair, on-time payouts. We recommend regular updates or an affiliate dashboard of some sort, where they can track their performance. 

Staying Ethical and Compliant in Affiliate Marketing

It is essential to adhere to ethical and legal boundaries when running an affiliate program. Ensure your affiliates are aware of these limitations. Promote honesty, transparency, integrity, and respect for your brand and its values.

Familiarize yourself with the legal aspects of affiliate marketing. If you’re in the USA, these include complying with the Federal Trade Commission’s (FTC) guidelines, data privacy laws, and advertising standards. 

Any breach of these rules can harm your brand image and relationship with consumers. Therefore, keep monitoring and maintain regular, open communication with your affiliates to prevent any compliance issues.

Examples of Successful Affiliate Programs

Drawing inspiration from successful affiliate programs should be an integral part of an effective affiliate marketing strategy. Case studies of top-performing affiliate programs can offer invaluable insights, guidelines, and work as instructive models.

Learning from the winners means understanding what successful affiliate programs do right. These can range from skilled selection of affiliates, compelling content creation, smart incentivization strategies, to comprehensive performance tracking.

Amazon Associates Program: This program effectively leverages the impressive range of products on Amazon. It offers up to 10% in advertising fees with easy linking tools and detailed reporting.

Booking.com’s Affiliate Partner Program: Booking.com provides helpful promotions, banners, and a search box feature. It also presents partners with an opportunity to earn a minimum of 25% of the commission received by Booking.com per booking.

Sephora’s Affiliate Program: This beauty retail giant offers data feeds, text links, and banners, along with an attractive commission rate. They also provide affiliates with exclusive previews and newsletters.

Bluehost’s Affiliate Program: Bluehost utilizes a tiered commission structure that delivers rewards based on performance. It also provides creative banners and promotional content for affiliates to use.

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