In that short period of time, it has become a major source of global revenue, continuing to grow at a rapid rate compared to other slumping industries. Describing the way companies work with third parties to sell their products or services online, Affiliate marketing constitutes as much as 20-25% of all e-commerce sales.
Affiliate marketing provides companies with an alternative channel to acquire customers and generate incremental revenue. The beauty of affiliate marketing for e-commerce-empowered companies is that, unlike traditional marketing, online advertisers only pay affiliates based on performance.
For very little upfront investment and risk, companies can work with a team of professional e-marketers to grow their business. Essentially, companies get a remote access sales force that is paid solely based on results. They also have the power to decide what results they are willing to pay the affiliate for, such as new leads or sales.
From an affiliate’s perspective, there are many benefits. Affiliates do not need to develop and maintain a product or provide customer service; instead, they can focus their energy and resources on attracting customers and converting sales.
An Alternative Channel to Grow Your Revenue
All products and services available online can benefit from affiliate marketing; however, the most common industries include health and fitness, financial, travel, retail, gaming and software.
Companies can work with affiliates to generate new customer leads or sales in a variety of ways. Products that are easy to sell online might opt for a pay-per-sale program while others might rely on the affiliate partners to generate leads for the sales force to close. Companies can choose what works best depending on the sales process and available resources.
Very few companies use affiliate marketing as their only sales channel. Affiliate marketing is best used with other channels including bricks and mortar retail, direct sales, and resellers. Yet there are some companies that only rely on affiliate marketing for international sales.
Working with Affiliate Networks
Affiliate marketing programs can be set up in two ways: create an individual program or work with an affiliate network. While both require a dedicated strategy and ongoing management, there are pros and cons to each option.
Running an individual affiliate program requires the company to keep in direct contact with the affiliates, maintaining complete control of the program. However, it also requires staffing and managing the program, recruiting affiliates, providing a secure online interface for affiliates to access data feeds and track their performance, and processing the payments to affiliates on a bi-weekly basis (this is the de facto industry standard).
Working through an affiliate network will alleviate some of the burden associated with managing the program. By creating an account with an affiliate network, companies only need to load their products into a catalog and watch the sales roll in. For less effort and cost than running an individual program, an affiliate could be selling the company’s product within days. The only downside to working with an affiliate network is limited access to the affiliates.
Optimizing Your Products for Affiliates
Although companies might market products online, it doesn’t necessarily mean that using affiliates will be a successful avenue. Since affiliates are only paid for results, they tend to be particular about the types of products they market.
Affiliates will evaluate a product’s quality, price, consumer demand, brand awareness, search volume and competing sales offers as well as assessing the product’s suitability to their expertise. They will also evaluate whether or not the commission or revenue is going to be worth their investment. Affiliates are very focused on ROI since they have to make the up-front investment to generate a lead or sale before they get paid.
Keep in mind that this ROI varies depending on the type of marketing the affiliate uses to generate a lead or sale. Affiliates use a number of e-marketing methods to attract customers but the most common are content based websites, pay-per-click advertising and email campaigns. While content based websites and email are generally lower cost, an affiliate who uses pay-per-click is going to generate a higher volume of sales more quickly but expect a higher return on investment.
As with any new marketing program, a company needs to determine if affiliate marketing is right for its business, and give it enough time and investment to succeed.