Accounting for 16% of US eCommerce sales in 2015, affiliate marketing is a channel partner that businesses can’t afford to ignore. What is a channel partner? Marketing channel partners direct clients to a company’s store or sell products on behalf of a manufacturer. Distributors and retail stores are common channel partners for companies that distribute food and physical products. However, in the digital age, more and more products are being sold online. Therefore, the use of email and affiliate marketing as channels is growing. In 2015, 15% of the digital media industry’s revenue was generated from affiliate marketing.
How does affiliate marketing work? Companies contract with an influential internet site or personality who agrees to work as an affiliate. This affiliate includes links to the company’s products on their website. When a product is sold on the company site through the affiliate’s link, the affiliate receives a portion of the sale as commission. In many cases, this is a win-win for both the company and the affiliate. The company receives more sales through the affiliate’s link, and the affiliate can generate revenue from a website link.
One of the most well-known affiliate partner programs is through Amazon. Any Amazon user can sign up to work as an affiliate. Amazon provides a unique link to a product for each affiliate. When a product is purchased through the link, the affiliate receives a small commission. Book reviewers sometimes use these links to monetize book blogs. A book review contains a link to the book on Amazon. Any book sales through the link generate a commission for the book reviewer.
Of course, a company doesn’t have to be as big as Amazon to build an affiliate partner program. Any company that sells products online can benefit from building strong affiliate channel partners.
Pro of an Affiliate Partner Program
Affiliate marketing has many of the benefits of advertising, but with a lower price tag. Like advertising, affiliate marketing is a method of displaying the company and its products. A blogger writing about a company’s product can have a similar effect to a trusted speaker reading a radio advertisement. However, unlike advertising, there is no large upfront cost. Most sites require a large deposit before posting advertisements online. Affiliate links are different. Companies only pay the affiliate if sales are made. If the affiliate is not making any sales after a few months, the contract can be ended. No one has lost money. However, if sales are being made, both parties share in the increased revenue.
Affiliate marketing is quickly becoming a powerful way to increase eCommerce sales. Business Insider estimates that 16% of eCommerce orders in 2015 came through affiliate marketing channels. In comparison, email marketing accounts for another 16% and social media accounts for only 1%. With the right affiliate partner program, companies are likely to see an increase in the channel sales.
Cons of Affiliate Marketing Programs
Although affiliate marketing is a win-win for both the affiliate and the company, some affiliates use unscrupulous means to achieve sales. For example, some affiliates may create toolbars that enable the affiliate’s codes on every customer purchase, whether or not the customer used the affiliate link. This type of abuse is not visible to the customer, but it steals money from the company. The manufacturing company is forced to pay commission on sales that the affiliate did not actually generate.
Another example of an affiliate abusing the system is obnoxious links. For example, a button can follow the user’s mouse until he or she clicks, enabling the affiliate’s link to the product. While these methods look like increased sales to the company, clients may be annoyed or dissuaded from purchasing due to these tactics. Affiliates using these methods may damage the company’s reputation with clients.
To avoid damage to the company’s image and deter commission theft, careful affiliate partner relationship management is required. Like a store or distributor, affiliate partners represent the company to the client. Therefore, it is essential that affiliate partners provide high-quality experiences for clients.
Best Practices for Maintaining Affiliate and Client Relationships
Find affiliates in the appropriate product niche
One of the keys to successful affiliate marketing programs is aligning the company’s product with the affiliate’s audience. Many affiliates are bloggers or online publishers. To be successful, they often cultivate a specialized audience for their content. For example, a blogger may focus on natural cleaning products. This blogger would be a poor choice for an affiliate partner program that sells farming equipment. The affiliate’s niche does not match the company’s niche.
Trying to force a product into the wrong niche does a disservice to both the company and the affiliate. The company image might be negatively affected by appearing to advertise in a place that seems improper. A tractor link on a cleaning site will look out of place. The affiliate’s audience may also be alienated by a product that does not align with their thinking. If an affiliate that usually promotes natural products switches to chemical products, it is possible that the link will alienate her normal readers. Therefore, the company product and affiliate’s branding should be in alignment for a marketing program to be successful.
Choose the right products for affiliate marketing
Not all products are a good fit for affiliate marketing. Marketing channels should be matched to the right product. Storefronts may be better for some products. Others might be better suited to advertising. As Entrepreneur explains, the price should suit both the affiliate partner channel and the company itself. In many cases, these products range from $60-$100. The dollar value (and related commission) is high enough to inspire affiliates to promote the product. However, the product is cheap enough that there could be a high volume of sales. More expensive products (greater than $100) may not be sold as often, which may dissuade affiliates from promoting them.
While Entrepreneur provides excellent recommendations, it’s always a good strategy to match the product to the affiliate. A book reviewer posting affiliate links to $8 – $20 books is not likely to generate a high dollar value in commissions because the commission is often a percentage of the product price. However, if the book reviewer has a high volume of sales, he or she will likely be happy with a lower commission per product. It depends on the price and volume of the product being sold. Partner relationship management is successful when both the company and affiliate’s needs are being met.
Monitor affiliate activity closely
Even carefully crafted affiliate marketing programs must be monitored. Affiliates that act in unscrupulous ways can be damaging to the company’s reputation. Unfortunately, it is difficult to determine which affiliates are unscrupulous from the sales numbers. Pushy affiliates may have strong sales numbers. However, they may also be doing long-term damage to the company’s reputation. Affiliate partner relationship management should include visiting the affiliate’s website to see how the company is represented. The sales numbers do not tell the whole story.
Some of the tactics that unscrupulous affiliates use may not be visible to the customer, but they are taking money from the company. For example, when a company pays commission on a purchase that wasn’t promoted by an affiliate, the company is losing money, and the client is not. The theft is invisible to the client, but it is damaging to the company in the long term.
Therefore, it’s critical to incentivize managers to spot unscrupulous affiliates. Managers often have to track down affiliates with great sales numbers. If a manager is paid primarily on commission, he or she is unlikely to look into the activities of his best affiliates. The affiliates paying his paycheck may also be stealing from the company. Affiliate marketing program managers must be carefully trained to spot thefts, which often take the form of incredible sales numbers.
Affiliate channel sales can be a great way to do business online. However, the automated process of paying commissions enables some affiliates to abuse the system. Therefore, companies need to craft a careful partner relationship management plan. A good affiliate marketing strategy selects affiliates that align with the company’s values and products. It also matches the company’s products to the affiliate’s desired commissions to motivate the affiliate to promote the product. Finally, a good strategy includes careful monitoring of the affiliates to make sure that the company’s image remains undamaged and the affiliate’s sales are legitimate. With a good plan, both affiliates and the company will benefit from the sales of the company’s products.