Amazon does it. Disney does it. Walmart does it. Yet, despite the fact that everyone from individual entrepreneurs to giant multi-nationals uses affiliate marketing, it remains an underused and often misunderstood way to generate additional business.
That’s a shame, because the potential exists for companies to create an effective sales force without actually having to employ one. In fact, they only have to pay for when sales actually occur. If that isn’t clear to you, then let’s take a closer look.
The principle of affiliate marketing
Affiliate marketing (also known as performance marketing) is very much an online tool. That doesn’t mean you need a complex website and lots of programming trickery, but you do want a professionally hosted set-up that can adapt quickly to growth.
So how does it work? Put simply, you offer a commission on whatever you sell. That can be physical products (often called “tangibles”) or services, or downloads like software (“intangibles”). People market your items via their own website or blog. When a sale is made, you pay them a commission.
Tracking is handled by code that’s embedded in small ads or text links. You’ve doubtless come across some of these — most likely for Amazon. We can say that with some certainty because it’s estimated that Amazon has more than 2 million affiliates; if you’ve spent any time online, you’ve surely come across some of them!
The potential pitfalls
There’s obviously a degree of effort involved in setting up an affiliate program, and work involved in attracting affiliates. The vast majority of programs — including all the “big name” ones — cost nothing to join, so you’re making an investment with no guarantee of return.
There’s a chance affiliates will misrepresent your brand … although the ability to disqualify offenders should be built into every program. Many affiliates will cross-promote your competitors’ products as well; comparison sites are a popular way to do this.
You might look at that as a negative, or you might decide some sales are better than none. You can always state in your terms and conditions that you don’t allow this kind of promotion.
It also has to be acknowledged that most affiliates will actually do very little to promote your business. They think it’s a good idea when they see the offer, but few are prepared to put any consistent effort into being successful.
The flip side is that there are a number of “super affiliates” out there: people who generate six-figure annual incomes from promoting businesses like yours.
The potential for profit
Affiliate marketing isn’t just for the global conglomerates. Individuals and small companies can take advantage of the services offered by companies like E-Junkie, who provide code that works in tandem with PayPal. It’s easy to integrate into your website and costs from as little as $5.00 per month.
If your company is larger, it might be that outsourcing program management is a better solution. There are numerous networks to choose from, of varying sizes. Shareasale has built an excellent reputation with many SMEs. Commission Junction is arguably the biggest in the sector, with more than 3,000 companies on its roster, including household names like Boden and Home Depot.
So how do you tell if affiliate marketing is right for your company? As Shawn Collins, co-founder of leading industry firm Affiliate Summit says, “The quickest way to determine if an affiliate program is viable for a merchant is to check whether their competitors are running one.”
How can you tell? At the bottom of their websites you’ll often find a link to their details. Alternatively, try typing the business name followed by “affiliate” into a search engine: Amazon affiliate, for example. It will give you the opportunity to find out what they’re doing and how they’re doing it.
It’s estimated that 40% of Amazon’s revenue comes from their affiliates. If that’s correct, then in 2012 those independent website and blog owners generated more than $24 billion. Maybe affiliate marketing isn’t right for your business, but if you’re not already doing it you should certainly look into it.