“Affiliate marketing has made businesses millions and ordinary people millionaires.”
So wrote Bo Bennett, the founder, and CEO of eBookIt.com and president of Archieboy Holdings. He created one of the first web-based affiliate programs. The way affiliate marketing works is simple: it’s a performance-based advertising channel in which a business pays a commission for conversion to one or more affiliates.
The industry involves four players: brand, network, affiliate, and customer. Not all of these players are always involved at the same time; some brands have an affiliate program and they manage the relationship with affiliates directly. In other cases, networks have offers for the affiliates to choose from and they also take care of payments.
While this may sound simple, successful execution can be a big challenge even for the most seasoned marketer. If done without a strategy, affiliate marketing can be a huge waste of time and money. Specifically, in this post I will address the following:
Can affiliate marketing work for your company in 2021? Most often, the answer will be “yes.” Within affiliate marketing, there are several different types of companies, all with different goals that have managed to make affiliate marketing work.
What gets in the way of sales? Don’t be too excited about companies promising affiliates huge rewards. There are a few obstacles between a promise and an actual sale.
The objectives for an affiliate are normally based on a company's overall marketing strategy, as affiliate marketing is just one tool to achieve companies' business goals.
How do companies define the right commission? Since commissions reflect the ROI, it's imperative to know how companies set them up.
We read online that many companies over the past decade have relied on affiliates to produce sales for their brands. We also read that affiliate marketing has continued to grow, and the most recent figures on the industry from research conducted by the IAB concluded that $16.5 billion worth of sales was driven by the affiliate channel, while advertisers spent $1.1 billion on affiliate marketing in 2019, 50% more than in 2020.
But how exactly can you become an affiliate marketer and get a slice of this huge pie?
You need to monetize: can affiliate marketing work for your blog in 2021?
Assessing whether affiliate marketing is right for you should be straightforward. You should look at your product and how you could promote it to your blog audience. Using cloud storage as an example, you will see a number of large US companies such as JustCloud and SugarSync as well as smaller niche cloud storage products such as Backup Genie.
Cloud Storage products tend to work well by paying high commissions to their affiliates due to strong customer retention rates.
pCloud offers $75 for every sale from affiliates:
Cloud storage is a great niche to promote because as a blogger it makes a lot of sense. You need to store your documents somewhere!
Looking outside the obvious partners, cloud storage companies can also benefit from approaching sites that focus on their niche. For example, online backup software could approach anti-virus software.
Affiliates can be paid on a lead generation basis, and SaaS companies (hosting, cloud storage) work very well with affiliates. The reason they work well is the subscription business model represents for an affiliate continuous cash flow every time there is a renewal. Also, subscriptions ensure a brand gets their money back over time, including what they spent for commissions, and will eventually make a profit.
If you prefer to change niche, Canadian pharmacy is surely the way to go. You can start by referring friends and family and earn a commission.
The quality of the product you choose is very important
From what we have said above, I think you can see that successful affiliate marketing is not just about how high the commission is. It’s not just about the money. You need to have a great converting product that matches your niche's needs.
A great converting product is an easy way to repeat conversions, which means more customers for you and higher paychecks for your affiliates. As an affiliate, would you rather earn $100 every 3 days (or whenever the conversion happens) or $50 per sale 10 times a day?
Basically, within the whole customer conversion funnel, from the awareness stage to purchase, there should be a strong match between your product and your audience. In the funnel, customers start with the awareness stage. And when the product has great conversion rates, it means that customers move quicker through the funnel down to the sale stage, where brands and affiliates make money.
Shall I work with a network or approach companies directly?
There isn’t a right answer to this question. You might prefer a network or it might prefer to work directly with companies.
But to find out which you need, answer these questions:
Do you need to find a niche?
Are you actively looking for companies for the first time?
Have you worked out your commission rates?
Do you need to take care of the companies relationship?
Do you need tracking technology?
If you answered “yes” to all these questions, then it’s a no-brainer: you need an affiliate network.
Besides these minimal requirements that networks can help you with, there are other things to consider. Sometimes networks have very useful relationships with big affiliates and can therefore help you grow your program very quickly. And they have a publisher team that builds the relationship with the affiliate for you.
Networks will also manage the payment side of the program, which is a big plus because affiliates want to be paid on time and want to have reporting live as it happens to be able to optimize their campaigns and reduce waste.
What’s the catch?
One of the disadvantages of working with a network is that they charge a commission, which is normally up to 30%. For example, this is how it works: Brand C affiliate program might sell $1 million of clothing. They pay their affiliates a 10% commission, so the total commission of the program would be $100,000. The affiliate network would then charge 30% override on this figure so the brand would pay $130,000. The affiliates would get the $100,000 commission and the affiliate network would get $30,000 override.
Depending on the network, you may also need to pay setup costs. This covers the cost of integrating you to the network and testing tracking etc. Start-up fees can range from nothing to over $5,000. I have been asked for $30,000 before and, obviously, I never started with that network. This cost is often negotiable when you discuss contracts with the network, but it is worth noting when considering the start-up costs.
Building your own affiliate program
If you answered “no” to the questions above, the other option is running a program in-house, which can be a very time-consuming and risky business, but also more rewarding and profitable.
The first thing to do is create a list of affiliates. Online you won’t find any list of affiliates as such, but you can use LinkedIn Groups, search for affiliate networks, CPA affiliates, and related networks, and ask to join that group. Then you can start posting within the group your intention of recruiting new affiliates.
Normally, this method works very well because groups are composed of people that wait to be recruited.
How do you write the perfect LinkedIn pitch?
If you want to explore the LinkedIn option to recruit affiliates, I would suggest you approach like this:
“Hello, we have an amazing product with high conversion rates within these X,W,Z countries in the X industry, and we can pay very good and continuous commissions over time. We would prefer affiliates with product review experience, but everyone is welcome for testing”.
Example of affiliates offers on LinkedIn
Some of the benefits of working with an in-house affiliate program:
Direct relationship with Affiliate Manager. While networks manage the relationship with the company, going directly with a company affiliate program makes you a direct contact, which means you can benefit from offers quickly.
A better understanding of the company products and customer needs. You benefit from account managers’ knowledge of your products or services. This can often be lacking with the network.
Speed to market. It can mean a quicker turnaround on time-sensitive offers. The in-house manager would be able to contact key affiliates instantly and arrange promotions.
Disadvantages of an in-house affiliate program:
Payment and commissions. Affiliate networks normally have a finance team that arranges invoicing and payment. When running in-house, you will be ultimately responsible for affiliates being paid.
Reporting. When using a network or an agency, they are typically responsible for creating weekly report templates and measuring performance. If you want to get insight into a number of variables, this can often be quite time-consuming.
1. Setting your objectives and strategy
Again, it is important to set objectives. This clarity allows you to select the right products and companies and define your strategy.
Some common objectives that you might have for your affiliate activities could be:
To support my audience with relevant products
To increase my revenue by 10% every quarter
To increase the number of active affiliate programs to join
Once objectives are defined, you need to set up the strategy that helps to reach them. This strategy is divided into 3 parts: picking up the right products, understand how companies define their commissions, how to write great reviews, how to do SEO, and promote them.
Within choosing the right product, you will focus on how companies can reward you. The terms and conditions can therefore play a big part in how you are rewarded online and how successful you will be at achieving your objectives.