Affiliate Marketing for Your Business: Ally or Foe?
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Affiliate marketing has seeped into nearly every branch of business, offering a new way to promote brands, earn passive income, and go mainstream. Over 80 percent of publishers (clients who want their product to be promoted) and affiliates (persons or companies that spread the word about the client’s products or services) benefit from some sort of affiliate program. But are affiliate programs really so great? Let’s uncover the truth. We’ll start by discussing what affiliate marketing really is.
What is affiliate marketing?
Affiliate marketing is a marketing strategy where affiliate sends customers to the publisher’s website in exchange for a percentage of the sales derived through these leads.
For instance, the StartUp Survival channel shares survival tips and attaches affiliate links to reviewed products, directing users to publishers’ sites.
Like any strategy, this has its own pros and cons. But I bet you want to hear the upside first.
Why should you adopt affiliate marketing?
Nearly 9 in 10 publishers admit that affiliate programs are very important to their overall marketing strategy and are an efficient source of revenue, raising on average 20 percent of their annual revenue.
Moreover, affiliate programs help increase number of orders, conversion rate, and return on investment (ROI). Lacoste obtained a 70 percent higher ROI due to Rakuten’s affiliate strategy.
Let’s explore the additional benefits of implementing affiliate programs in your business.
Low barrier to entry
You can start affiliate marketing anytime you want with no marketing skills or additional resources required. All you need to do is select a program and add a tracking code to your website. You don’t even pay upfront: you only need to reward an affiliate once a sale has been made.
Affiliate programs lure publishers with their diversity. Here are the three most common reward types:
- Pay-per-sale ‒ You pay a percentage of the sale price for every purchase made by a customer who comes to you via affiliate marketing.
- Pay-per-click ‒ Commission is based on the number of users an affiliate directs to your website (regardless of whether a sale is made).
- Pay-per-lead ‒ Affiliates are rewarded once referred visitors have left their personal information on your site by filling out a contact form.
You don’t need to spend extra money to generate traffic to your website. An affiliate website’s banner ad can do it for you. What’s more, strong advertisers like Amazon Associates, CJ Affiliate, and ShareASale have established communities, which means more chances to broaden your sales audience.
Multiple revenue streams
No one says you need to limit yourself to merely one affiliate: you can employ this marketing strategy on multiple websites to maximize your opportunities. In fact,71 percent of publishers belong to three or more affiliate networks.
Nevertheless, we can’t say that affiliate marketing is flawless.
What are the pitfalls of affiliate marketing?
Let’s explore the downsides of affiliate programs. Here are the major difficulties you might face when following an affiliate strategy.
Some affiliates impose hefty fees for their services. American Bullion, for instance, charges $30 per lead, $60 per call, and 3 percent of direct sales. Suppose you close a deal for $100,000 with a client who came in through affiliate marketing; in this case, you would have to reward your affiliate with $3,000.
Affiliate programs don’t generate traffic on a regular basis: one day you can have dozens of customers, and afterward none for a whole month. This is why we recommend checking spike periods in sales in order to invest your money wisely.
Cookie stuffing is one common fraud you might suffer from. Cookie stuffers earn money not by referring people to your website but by secretly dropping affiliate cookies into a user’s computer without their knowledge. eBay’s two biggest affiliates ‒ Shawn Hogan and Brian Dunning ‒ swindled $35 million in commissions over several years using this method.
One of the main advantages of affiliate marketing ‒ the low barrier to entry ‒ also can backfire by creating intense competition on the market. Why shouldn’t everyone try it if it’s so easy to start? You’d better choose an affiliate with great SEO skills to stand out from the crowd.
In their pursuit of quick income, some affiliates may do and say literally anything: disregard your brand’s voice and identity, grossly exaggerate the benefits your product offers, or even market non-existent features. Furthermore, you may share different values from your affiliates, which also influence your brand’s positioning.
Notwithstanding the downsides mentioned above, affiliate programs still remain a lucrative source of income and are an efficient tool for drawing new clients to your website. And affiliate marketing on the whole is showing its potential to produce more and more successful advertisers.
“The biggest positive change I’ve seen has been the change of perception around affiliate, from spammy, bottom-feeder sites to ones like ours, where we’re focused on a great user experience. Two years ago, a CMO wouldn’t go to his board and say, ‘We’re doing great in affiliate!’ but now they see it delivering.” ‒ Vice president of sales at a US-based online publisher.
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