What is affiliate marketing?
This term refers to the promotion by an individual or a company (also called. affiliate) of the products and/or the services of another person or company (known as a vendor or merchant), generally through an affiliate network using an affiliate link, to earn a cut of the sales price (or commission).
Parties involved in affiliate marketing
The definition above makes you see that there are 3 parties in affiliate marketing: the merchant, the publisher, and the customer as shown in the image below:
Other sources, including Wikipedia, claim that 4 core players are involved in the industry.
They are, the:
- merchant (also known as ‘advertiser’ or ‘retailer‘ or ‘brand‘)
- network (that contains offers for the affiliate to choose from and also takes care of the payments)
- publisher (also known as ‘the affiliate’)
Let’s look at the party which interests us in this post.
The network, also designated as the program or the platform, is usually the platform that puts the goods or services of several merchants at the disposal of affiliates.
Using complex algorithms, they enable the merchant and the affiliate to handle referral link clicks, purchases, and payouts.
The network also calculates payments due the affiliate from the merchant.
That said, and without further ado, let’s go to the crux of the matter.
What Are Advantages and Disadvantages of Affiliate Marketing?
While doing research on this topic, I hardly found information about it on Google. This surprised me as there were details about the advantages and the disadvantages of affiliate marketing for the three other parties: merchants, affiliates, and customers. However, these parties who often interact with the network should also mind the advantages and the disadvantages for that party so as to have a bigger picture of the sector.
However, since some merchants also act similar as networks, some of the advantages and disadvantages of merchants also apply to networks. And that is what we’re going to see. In that sense, this post will not be radically different from the one for the merchant.
That said, let’s first look at the advantages.
Advantages of affiliate marketing
According to Statistica, affiliate marketing spending in the U.S alone is expected to hit $8.2 billion by 2022.
If you’re a company capable of becoming a network, that’s quite a juicy amount to let go by. But before you jump in, let’s encourage you further with some of the benefits of using affiliate marketing in your business:
For affiliate networks / marketing programs
N.B.: Note that we will be using affiliate networks and affiliate marketing programs to refer to the same thing.
1. Easy to start and manage
Affiliate marketing is easy for you to start and manage.
All you have to do is set up your network and look for merchants to join it.
Here are some of the benefits which will make merchants begin with you:
- Access to affiliate tracking technologies
- Access to audience data
- Access to verified publishers
- Data dashboard for campaign optimization
- Availability of additional resources
- Ease of starting and managing campaigns, including payouts and commissions.
- Enables to control multiple affiliates at a time
- Precise analytics to track the success of campaigns
- Security (Fraud detection, Compliances)
- Minimal investment to start
You can offer your affiliate program solutions straight off of the shelf. All that merchants have to pay to join your network is a small monthly fee. Then you grant them instant access to a variety of publishers looking for a new source of income.
Here are some of the best affiliate networks out there:
- Commission Junction
- eBay Partners
Research each of them to find the one that best aligns with your business goals of sales, brand awareness, leads, etc. and adapt them to your circumstance.
2. Low start-up cost
The fact that you don’t need to create your own products is one of the reasons why affiliate marketing has become such a popular method of marketing for networks. Your initial work consists in setting up the network and then selecting and vetting merchants and then affiliates.
Imagine that to continue your affiliate network program, you do not need to have an advertising team for ad visuals or even purchase ad space. You could depend on your merchants and affiliates to come up with their marketing content.
Anytime I choose to promote a digital product on the Clickbank network, there is a link below the product description through which I can contact the merchant. And it is the merchant, as the product seller or vendor, who sends me the marketing materials for promotion on this website.
When you (the network) reach a point where you feel comfortable working with merchants and affiliates with whom you have built a good relationship, largely you can let them get on with marketing the products and/or services.
3. Low ongoing costs
From above, it becomes evident that most of your marketing activities are done by your merchants and affiliates. They themselves support most of the related costs. Further, you only pay them when sales are generated, since this is a commission-based program.
Another thing: affiliate marketing makes it easy for you to manage costs in addition to the fact that it does not interrupt your cash flow.
Contrary to other marketing models like PPC advertising in which you have to pay for every click leading to your website, with the affiliate marketing model, you only release money when sales are made.
4. Low risk
Low ongoing costs translate into low risk for you.
For example, the risk of losing on non-performing advertisements is low given that the merchants and the affiliates initiate and pay for them. Businesswise, you don’t have any losses because you make payments when and only when there’s an actual conversion.
This makes affiliate marketing perfect for your business, especially if you’re on a tight budget.
5. You bother little or not much with execution stages
Marketers collaborating with the merchants on your platform can pretty much take care of the execution stages. This gives you little to no bother with this process.
6. You gain by generating sources of income for website publishers and advertisers
By acting as intermediary between merchants and affiliate marketers, you enable the former to have access to the latter to sell their products and the latter to have access to the former’s products.
Anytime a merchant makes a sale through an affiliate, you also gain. Since you sign up a lot of advertiser websites that many affiliates join, it goes without saying that you earn a lot of income.
7. You track and compile statistics to provide reliable and current client behavior on trends and demands
Some affiliate marketing programs do this from affiliate merchants’ sites at no extra cost. This information enables merchants and affiliates to earn more. And as affiliate marketing is a symbiotic relationship for the three, you gain more too.
Want to know how you can track business activities? Check AnyTrack.
8. You do not pay salaries, social security or pension
As a network, you are not an employer of merchants and affiliates. So you owe them neither wages nor social security benefits, nor even pension.
9. You get targeted traffic
Since merchants are handpicked by you, and others themselves come to you, and you do the same with affiliates, the traffic that comes to your site is from individuals that find your (merchants’) products and/or services attractive.
Because they resonate with your (merchants’) brands, they will most likely send you prospects from their area of influence who’ll also appreciate the brand.
You can make your affiliate network program small or big at little to no cost to you. You can also scale up your business without breaking the bank.
11. High Return On Investment (ROI)
Affiliate marketing helps you to get your marketing done right. For this reason, it brings you a much higher Return On Investment than most of the other marketing strategies.
In effect, your affiliates will promote the products or services on your marketplace to the merchants’ target audiences that are within their spheres of influence. This is like channeling your marketing efforts through a source having direct access and influence over a highly targeted audience that is receptive to what you have to offer.
12. Helps your business grow quickly
Anytime a customer buys something, your affiliate gains, your merchant earns income, and you also make money.
If you were to work alone (of course, with a staff), and you did it well, you would make money too and grow your company. But imagine the rate at which your business flourishes with all those merchants and their affiliates bringing you business from all over the earth and round the clock!
Affiliate marketing is therefore an excellent way for you to make your business grow with the help of third parties, through reward by performance.
13. You easily scale your business
Creating an affiliate network program can help you grow your customer base, boost your revenue, and make constant improvements to keep up with shifting consumer preferences and help you stand out from the competition.
You can use that additional revenue and cash flow brought in by your new revenue stream through referral commissions to grow your business.
In that wise, you could sign on new merchants, purchase new tools to improve your business processes, or build software that will enhance how you connect with your affiliates.
These improvements help you better satisfy your affiliates and grow your business.
14. You gain free ad space and only pay on results
As it is affiliates who promote your merchants’ products, you get free ad space; you pay only for proven results (Pay Per Sale, Pay Per Click, Pay Per Lead).
15. You gain broader brand exposure and better recognition
Many publishers promote your merchants’ products, making your name to appear on their pages. Thus, you reach a vast audience. This gives your brand more visibility and recognition, increasing your reach and visibility on the Search Engine Results Pages.
16. Consumers provide you trends and demands
Consumers from the affiliate’s site can provide you important information about the latest trends and demands.
17. Motivated, creative affiliates to sell your products and/or services
People and companies you recruit as affiliates are looking up to a system that can help them make extra money.
They know they’re not employees you’d pay just for doing their 9-5. This obliges them to be inventive and imaginative as their success depends only on themselves.
By trying different ways to promote and sell, your affiliates move your merchants’ products.
18. Bigger market to sell your products and services, bringing you more customers and more sales
Affiliate marketing is a business which is possible anywhere there is an internet network. And this is available in every country and almost everywhere in those countries.
Then your affiliates use social media marketing which makes promotion possible all over the world. So, your products reach almost everywhere there are consumers for your products.
This makes you reach more consumers and therefore generate more sales.
19. Little to no cost to acquire more customers
Affiliate marketing uses many commission models to pay affiliates. The most common one is where you only pay the affiliate for leads they generate with sales. You’re therefore spending money on guaranteed results
To gain income, the affiliate uses their time and money in trying to reach people who may be interested in your products. This brings you buyers practically without lifting a finger.
20. You get a profitable sales channel
If you go into affiliate marketing, you could find it your most important sales channel that can boost your sales and brand awareness over time.
In effect, signing up just one super affiliate can bring you much more traffic, leads, and sales than a traditional marketing campaign or even a highly effective online advertising campaign.
Unlike affiliate marketing, your sales team can’t work 24/7, bringing you money round the clock. Yet passive sales funnel is necessary for you to expand and scale faster. Especially if the affiliate campaign has been properly built with great products and services and enticing opportunities for marketers.
Payment for affiliates being based on results, the cost for their upkeep is far lower than for a sales teams.
As an affiliate network, you may even work without a sales team. But if you use one, affiliate marketing can help it specialize. In the sense that affiliates would bring cold traffic or leads that your sales team can nurture into customers.
21. You sell a range of products
As a network, your platform or marketplace harbors a large number of different merchants offering various products.
If the products offer high affiliate commissions, they will bring you more affiliates. A product with the following characteristics can bring you affiliates too:
- Fits a niche
- Shows growing trend
- Is high end or has high margin
- Is Online (or is distributed online)
- It’s scalable
- Shareability for virality
- Social traction
In general, a variety of products paying different percentages of commissions can make your affiliate marketing network viable.
22. Access to influencers and their networks
As a network, you can reach out to influencers to help you connect with their target audiences. Doing this gives you access to valuable customer data vital for effectively scaling