The Benefits and Risks of Affiliate Marketing

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The Benefits and Risks of Affiliate Marketing

22 MAR 2017

Posted by: Arun Nagegowda. Category : Sales and Marketing

I recently heard some rumors that affiliate marketing is not a great revenue driver for online business. When I heard this, I decided to write a blog about the importance of affiliate marketing to an online business and the proven ROI it brings to vendors of digital goods.

    “Affiliate Marketing has made businesses millions and ordinary people millionaires” – Bo Bennett, super affiliate and author of Year to Success.

It has been proven in the software industry that when affiliate marketing is utilized correctly, 10-15 percent of total sales revenue is affiliate driven.

The Benefits of Affiliate Marketing

As an online advertiser, you know the importance of web traffic and how expensive it can be to secure. The cost of SEO and other customer acquisition methods continues to increase. Companies are always looking for cost effective, low-risk ways to increase their web traffic and win new business.

What can help you with this? Simple, leverage affiliate marketing which brings numerous benefits:

    It brings in a larger volume of web traffic.
    It helps your company reach new customer bases in different countries.
    It builds key relationships with high-volume affiliates.

In the end, affiliate marketing brings unique opportunities for your business that results in more site traffic, more customers and most importantly more revenue.

When a network uses a cost-per-acquisition (CPA) model, affiliates are commissioned based on performance. This is a great benefit for your company. It allows you to work with all types of affiliates through paid search, blogs, review sites, download portals, social media, etc. All these affiliates are paid only after they generate sales.
The Challenges of Affiliate Marketing

When I was speaking with some vendors recently about affiliate marketing many seemed to share the same questions and concerns.
Fraudulent affiliate activity

The main concern was fraud and “shady” business. Well, we all work online and we know that there will always be fraudsters and shady activities. But how is this overcome?

Simply by putting the right affiliate application review and reporting in place. Your affiliate management platform should have fraud prevention teams who monitor all online activity for vendors and affiliates and have reporting available which helps monitor cases like “cookie stuffing.” If any fraud-like activities are flagged, you have the option to deactivate those affiliate accounts and halt commissions.
The costs of affiliate marketing

Other vendors are concerned with the cost associated with affiliate marketing. Starting an affiliate program can be expensive. Vendors should look to partner with affiliate platforms that have a low set-up fee and also take a look at payment structures. For example, is the network charging on a percentage of gross revenue or percentage of affiliate payout? These are the most common payment methods with affiliate platforms.

You also need to consider your affiliate commission structure. It may help if you create a tiered affiliate commission. Have a lowest value for newcomers or low performing affiliates and a high commission available for your top performing affiliates. Map this out to ensure that affiliates still produce a high ROI for you over the lifetime of the customer.

Affiliates are business people too. They are not doing this for fun, but for a living. They are masters at online marketing. They know how to drive traffic and sales using paid search, customer lists, and other online advertising skills. They should be seen as an extension of your own marketing activities. Utilize their knowledge — the more you work together, the better the results.

In some cases, an affiliate website may be a better known brand than your own. Use this to your advantage! Creating custom promotions links, personalized landing pages, can all go a long way for your business.

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