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Is Affiliate Marketing Right For Your Business?

Affiliate Marketing

For those unfamiliar, Affiliate Marketing is a performance-based marketing strategy that rewards affiliates (or partners) for certain types of conversions (usually acquisitions or leads). If you sell shoes, for example, you could join an affiliate network, allowing other people to sell your shoes for you. They would then be rewarded (usually a flat fee or % of revenue) for every sale they made.

Many online marketers have a love/hate relationship with affiliate marketing, and many businesses are torn between its potential benefits (i.e., growing their business) and its potential problems.

So how do you know if affiliate marketing is right for your business?

Affiliate Marketing Pros and Cons

Pros

  • No marketing expenses – The obvious downside of Pay-Per-Click (PPC) is that you actually have to pay for that click! With affiliate marketing this is a non-issue; others are putting forth their own money and time to promote your product/service. If they fail, it’s their loss. If they succeed, you pay them a percentage of the profit and it’s a win-win.
  • Brand Advocacy – On the same note, affiliate marketing is recruiting brand advocates. Affiliate marketers have a choice, and if they choose to promote your product/service amongst the sea of other options they have, that’s saying a lot! Either they love your product, know how to promote it, have the right infrastructure/network to do so, or all of the above.
  • Reach and Expertise – A growing network of affiliate partners has the potential to find you new demographics, verticals and marketing channels that would require an army of a sales/marketing team to match. You would also benefit from each affiliate marketer’s skill set and “know how” in promoting your product.

Cons

  • Brand control – In a way, affiliate marketing is a Pandora’s box. You never really know what you’re going to get. Ultimately, you rely on people you don’t know who, in some cases, might resort to dubious techniques for selling your product. Some examples: using copy that isn’t appropriate to your brand or your messaging; advertising your product on unsuitable sites; spamming inboxes with advertisements of your product; and much, much more. Although there are many steps you can (and should) take to minimize the risk involved (mainly due diligence and approval of every potential partner), this can be a demanding task and you still won’t have 100% control over your brand once you give them the green light.
  • Sales Cannibalism – In many cases, when you let someone sell your product, you’re creating competition with yourself. Your partners may be bidding against you in PPC. They may be pushing their websites up the organic rankings for your keywords, resulting in your site losing its rightful organic placement. Or, they may be marking up your product for a higher price. In any case, be very clear with your affiliate partners about where they can and can’t sell your product. Sidenote: This is why Google is wary of affiliate marketers – rewarding them only if their techniques actually provide real value to consumers (i.e., additional valuable information, reviews, comparisons, etc…).
  • Affiliate Marketing Arbitrage – The affiliate system can only work sustainably if affiliate marketers can sell your product in a way that’s profitable for them and for you. Your affiliate partner is getting a piece of the pie (assuming every sale is divided between yourself, your affiliate partner, and the affiliate network you’re using), and if that piece is still a profitable engagement for them, you might want to check whether you might be better off spending your own advertising money while cutting out the middle man.

To sum it up, here are some of the key questions you should be asking to decide whether or not affiliate marketing is right for your business:

  • How important is controlling your brand?
  • How engaged are your consumers with your brand?
  • What are your marketing budget and resources?
  • What product/service do you sell?
  • How high is your profit margin?
  • Can other people be more effective at selling your product than you?
  • Do you have the right infrastructure in place to deal with sudden peaks in demand?
  • Are your competitors utilizing affiliate marketing? If so, how? If not, why?

Agree? Disagree? Have anything to add? Feel free to share your thoughts below!

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