A beginner’s guide to one of the most potent marketing tools available
Thousands of years ago women would sit around by the fire and chat.
Presumably they would talk about kids, the latest craze in food foraging and how to stay trim while still enjoying the latest hunt.
Today, women turn to social media to talk, swap stories and information and learn about new products and ideas. The number of moms who use social media has risen from 11 per cent in 2006 to 63 per cent today. One of the biggest reasons is recommendations on brands, products and services. Women find other women trustworthy sources of information. This has been going on since the dawn of time – but only recently was given a name.
What is affiliate marketing?
Simply put, affiliate marketing is referral marketing. Perhaps the best example is using one website to drive traffic to another. Used properly, this type of crowdsourcing benefits everyone involved.
There are three roles in affiliate marketing relationships: the merchant (the business or individual selling the product or service), the affiliate (usually many affiliates, all working to help sell the merchant’s product) and the consumer.
The merchant benefits by tapping into the affiliates’ customer base. Instead of spending thousands of dollars on advertising, the merchant gets hand-selected and targeted customers.
Affiliates benefit by receiving payment from the merchant each time one of their “referrals” takes action. This is usually a purchase, but can also be completing a form or registering for an event.
Customers benefit by receiving trustworthy information from a source they’re familiar with. It’s a win-win-win situation.
How does it all work?
Affiliate marketing has evolved since it first began in the early ‘90s. Mark Ling, founder of affilorama.com, stresses that both affiliates and customers are smarter and savvier:
“In the early days of the web, things weren’t really policed at all and people weren’t nearly as discerning as they are now,” says Ling.
The vast majority of affiliate programs use a revenue-sharing or cost-per-sale (CPS) model for compensation. Affiliates earn either a percentage of the sale or a flat rate for each paying customer.
While affiliates often still rely on traditional advertising techniques, they are relying on a network or customer list they have developed themselves. This can be anything from a formal database to blog followers, ezine subscribers, or fellow Tweeters.
“Today you actually have to build high-quality sites that deliver real value,” says Ling.
How do I become an affiliate?
Most websites or programs offer an affiliate program. A well-managed program provides success tools such as copy, tracker counters, and information on how to best market their product or service. It’s then up to the affiliate to develop a marketing strategy that works for them.
Carla Young, publisher of MOMeo Magazine, is a big believer in affiliate marketing. Constantly asked for recommendations and referrals, Young has used affiliate marketing to build a revenue stream from something she was doing already. For busy business owners, affiliate marketing is a good way to maximize communication and revenue.
“As a MOMeo the big challenge is time, so the secret to being successful is to create leverage,” says Young.
“Affiliate marketing helps you get more out of your business model.”
Mark Ling sees affiliate marketing as the next natural step for many entrepreneurs:
“People are going online everyday to find information – and a percentage of them will pay for the best information out there. If you provide good free information, and then offer paid options for premium information, it’s a win-win situation.”
How much money are we talking about here?
Affiliate Summit is a conference held each year in the United States. In 2009 they asked more than 450 affiliates their monthly gross revenues from affiliate programs. The results vary greatly, but show the potential for substantial revenue:
How do I use affiliate marketing to up-level my business?
Affiliates are an extended sales force, and can be leveraged in many different ways.
“Marketing through a network of affiliates is a great way to extend your reach,” says Young.
“Small businesses that don’t have many salespeople or resources can especially benefit by expanding their market reach and communicating to more customers.”
A successful affiliate program requires significant work and maintenance. There are many software packages available to help get started. Increasingly, businesses are turning to hosted affiliate marketing services and outsourced affiliate program management companies.
What method you choose depends entirely on the nature and size of your business, and how you want to work with affiliates. Whichever way you choose, success depends not on how many affiliates you have, but on how well they work.
A world of possibilities
Whether you are a business owner looking to extend your sales force and maximize your impact, or a MOMeo looking for a way to up-level your business, affiliate marketing is a valuable tool. It’s about communicating effectively with your customers and leveraging your network to create success.
Before you sign onto an affiliate program, you need to consider:
Affiliate programs vary greatly in how much they pay and how that pay is determined. Make sure the commission rate is reasonable and worth the necessary time. Product cost will often factor into this; payment is often a percentage of sales. Crunch the numbers before you start.
What’s the conversion rate of the product or service? Is this something that sells well and has good potential? Remember, as an affiliate you share any risk with the merchant and your reputation is on the line. Success takes a lot of time and effort; make sure it is a product you can stand behind.
Is this good fit for you? Affiliate marketing can be so effective partly because it sends a targeted audience to the merchant. In order for you to be successful, it must meet the needs of your network. If you run a tech website and blog, a company that sells knitting supplies would be a bad match.
Making it Last:
Depending on the product, some programs offer an ongoing revenue stream (i.e., memberships renewed annually) while others are a one-time deal. Do your research: find out what long-term opportunities exist. High-priced products can be alluring but a small, ongoing revenue stream may be more lucrative than a few one-shot deals.
Many affiliate programs offer tools and incentives to their marketers. You’re the one doing the work, but make sure you’re being encouraged and supported. Often, programs offer second-tier referrals. This means if a customer you direct to the merchant also becomes an affiliate, you get recognized and rewarded.