What is Affiliate Marketing and How Do Affiliate Programs Work?

Affiliate marketing is one of the most efficient performance channels in a brand’s toolkit: you pay for outcomes, not impressions. But to unlock its full potential, you need more than links and promo codes, you need a strategic, well-structured program.

This guide breaks down how affiliate marketing works, why it matters in 2025, and what it takes to build a program that drives meaningful, measurable growth.

What Is Affiliate Marketing?

Affiliate marketing is a performance-based channel where brands partner with people or platforms — called affiliate partners — to promote their products. These partners earn a commission when someone clicks their link and makes a purchase.

The affiliate program is the engine that powers this channel. It includes:

• Goal setting and performance tracking
• A commission model
• Partner recruitment and management
• Tools for attribution, reporting, and compliance

Affiliate = the channel
Affiliate partner = the people who drive traffic and sales
Affiliate program = the infrastructure that makes it all work

Why Affiliate Marketing Matters in 2025

In 2025, affiliate marketing is more relevant than ever. As customer acquisition costs (CAC) continue to rise and paid media efficiency declines, brands are under pressure to diversify spend into scalable, performance-focused channels. Affiliate marketing delivers results. You only pay for successful outcomes like sales or leads, which means less wasted ad spend and a better return on your investment (ROI).

It also reflects consumers buying behaviours. Shoppers trust peers, creators, and publishers more than traditional ads. Affiliate programs leverage that trust, turning authentic, intent-driven content into a performance channel.

Why Every Brand Needs an Affiliate Program

According to Demandsage, affiliate drives 16% of all online purchases in the U.S. It’s not just a complementary channel; it’s a core revenue lever.

Brands are investing because affiliate delivers:

• High ROAS (return on ad spend)
• Diverse acquisition outside of Meta and Google
• Lower CAC compared to paid media
• Minimal upfront costs, you pay when there’s a conversion

As creator-led content outperforms traditional ads, affiliate is quickly becoming a key strategy for reaching high-intent buyers who scroll past brand-first messaging.

Best Practices on How to Build an Affiliate Program

Affiliate programs fail when they’re treated as passive revenue streams. The best-performing programs are treated as strategic growth engines with clear goals, smart partner strategy, and ongoing optimization.

Set Clear Goals and KPIs

Start with what matters: revenue, CAC, and brand lift. Establish benchmarks like:

• ROAS targets (e.g., 4:1 or better—$4 in revenue for every $1 spent)
• Conversion rates by partner type
• New vs. returning customer split

Track core performance indicators like conversion rate, average order value (AOV), and customer lifetime value (LTV) to ensure your program is actually driving incremental growth.

Partner With a Network Platform

Networks like Refersion, Impact, and Awin help with tracking, partner management, and payouts. When selecting a platform, prioritize:

• Look for clean integrations with your e-commerce platform
• Make sure it tracks first-party data (especially with cookie loss)
• Prioritize clear reporting and partner-level performance insights
• Clean integrations with your e-commerce platform
• First-party data tracking
• Transparent reporting and partner-level insights

Develop Your Commission Structure Strategy

Your commission model isn’t just about paying partners, it’s how you guide performance. The right structure encourages the kind of results you want, helps you attract better partners, and makes it easier to grow your program over time.

Match your commission model to what you want to incentivize:

• ​​Are we focused on acquiring new customers? If so, use dynamic rates to prioritize acquisition over repeat purchases.
• Do we have high-margin SKUs or subscriptions? If yes, percentage-of-revenue or recurring models are often more scalable.
• Are our top partners underperforming? If yes, a tiered structure can help boost motivation and push volume.
• Are we trying to drive specific products or LTV? Depending on your answer, use category-based rates or test AOV-based tiers.

In SaaS, recurring models often make sense. In eCommerce, percentage-based or AOV-tiered models are common. You should also know the standard commission rates in your vertical by publisher type so you can stay competitive and efficient.

Recruit the Right Partners

Finding the right affiliate partners is one of the most important steps in building a high-performing program. And it’s not just about working with influencers, strong affiliate programs are built on a diverse mix of partner types, each serving a different role in the customer journey.

Funnel Fit: Partner Types by Stage

Funnel Stage	Partner Type	Role
Top of Funnel (Awareness)	Content creators, YouTubers, bloggers	Build awareness and introduce your brand to new audiences
Mid-Funnel (Consideration)	Review and comparison sites, editorial publishers	Provide product validation and help shoppers compare options
Bottom of Funnel (Conversion)	Loyalty and cashback sites, coupon partners, BNPL platforms	Close the sale with incentives or financing tools

 

Not every partner will be a right fit for your brand, so it’s important to evaluate them carefully before bringing them into your program. Start by looking at relevance: does their content or audience naturally align with your product and brand values? Next, assess traffic quality, are they sending engaged, high-intent users, or just driving low-value clicks? Finally, review their performance history to see if they’ve proven they can influence consideration or drive actual sales for brands like yours.

Optimize and Scale Your Program

A high-performing affiliate program isn’t “set it and forget it.” It requires:

• Continuous offer and messaging testing
• Active partner communication
• Incentives and segmentation for top performers

As your program scales, integrating affiliate efforts with your broader paid and owned media strategy becomes essential. For brands that lack the time or resources to manage this complexity in-house, a strategic partner like WITHIN can help. Learn how we build and scale full-funnel affiliate campaigns with our affiliate marketing strategies​.

Stay Compliant and Ethical

Your program must follow FTC guidance and ASA rules. Disclosure isn’t optional and today, tools exist to automate and monitor compliance at scale.

How Affiliate Marketing Fits into the Customer Journey

Affiliate doesn’t just drive last-click sales. It contributes at every stage of the funnel:

• Upper funnel: Blogs and creators build awareness
• Mid funnel: Review and comparison sites guide consideration
• Lower funnel: Loyalty and coupon partners close the sale

By aligning partner types to funnel stages and tracking impact accordingly, you build a program that supports the entire customer journey, not just conversions.

How Affiliate Marketing Supports Omnichannel Growth

Affiliate is even more powerful when integrated across your marketing mix.

• Use affiliate insights to refine paid search and identify new keyword opportunities
• Let lifecycle and email nurture affiliate-driven leads
• Repurpose affiliate content across organic channels

When connected to your broader media mix, affiliate becomes a lever for stronger performance across the entire funnel. Explore how WITHIN unifies paid and owned media to drive full-funnel growth.

Spotting Affiliate Marketing Opportunities: Where to Start

If you’re not sure where to begin, start with a competitive and category audit:

• Who are your competitors working with?
• Which partner types are missing or underutilized?
  Which content partners rank for key search terms?

From there, prioritize partners with strong organic presence, proven performance, and strategic alignment with your brand. 

Common Affiliate Program Mistakes to Avoid

Any affiliate programs can fail if the basics aren’t managed correctly. Below are common mistakes — and what to do instead — to help you identify issues early and improve performance.

1. Common mistake: Relying too heavily on one partner type

What to do instead: Diversify your partner mix across funnel stages—include content creators, review sites, and niche publishers alongside bottom-funnel partners.

2. Common mistake: No mid-funnel strategy

What to do instead: Proactively recruit mid-funnel partners who help validate your brand, drive SEO visibility, and influence purchasing decisions.

3. Common mistake: Inaccurate tracking or broken attribution

What to do instead: Ensure your tech stack supports first-party tracking, attribution windows that reflect your buying cycle, and partner-level reporting.

4. Common mistake: Poor partner support and communication

Do this instead: Create a simple communication plan. Offer new creatives, refresh promo codes, and share performance insights monthly or quarterly.

5. Common mistake: Failing to optimize toward efficiency and ROI

Do this instead: Regularly evaluate your ROAS by partner. Adjust commission tiers, pause underperformers, and reinvest in what’s working.

Affiliate programs don’t fail because the model doesn’t work, they fail when they aren’t treated as strategic growth channels. Keep your partner mix balanced, your tracking tight, and your communication consistent.

What a Successful Affiliate Strategy Looks Like in Practice

Affiliate marketing works best when treated as a growth channel, not just a last-click tool.

For example, Hugo Boss partnered with WITHIN to transform an underperforming affiliate program into a scalable, brand-aligned revenue channel. By focusing on premium partner recruitment, tailored commission structures, and integrated attribution, the program now attracts higher-quality customers and drives measurable ROI.

See the full case study on how we revitalized Hugo Boss’s affiliate program.

Turn Your Affiliate Program Into a Scalable Revenue Channel

Affiliate programs aren’t just for side revenue. When done right, they drive efficient, scalable growth. But to see real performance, you need more than links and commissions. You need structure, strategy, and ongoing optimization.

Key Takeaways for Building a High-Performing Program:

• Start with clear goals. Define what success looks like whether it’s new customers, incremental revenue, or higher ROAS.
• Choose a commission model that aligns with your priorities. Incentivize the right behaviors from your partners.
• Recruit strategically. Build a diverse mix of partners that support each stage of the customer journey.
• Optimize continuously. Test offers, review partner performance, and adjust payouts to improve efficiency.
• Stay compliant. Monitor disclosures and follow FTC and ASA guidelines to protect your brand.

Want Affiliate to be a real growth driver for your brand? WITHIN helps brands design, launch, and scale affiliate programs that deliver measurable results. See how we do it.

 

Author:
Taylor Kim, Affiliate Director