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Should You Consider Affiliate Marketing?

By Amanda Bono | October 04, 2016

Business owners are always looking for ways to expand their reach online. Some have invested in Paid Search, Remarketing, have a great site, and have created a solid social media strategy, yet still want more traffic volume and revenue. Affiliate Marketing, or Performance Marketing, could be a great next step to add to the marketing mix.

Affiliate marketing (If you're unfamiliar with the concept, check out our article, Affiliate Marketing 101: Expanding Your Reach) is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate's own marketing efforts.  So, what makes a business an ideal candidate for affiliate marketing?

1. You have large margins to work with

Because affiliates (or publishers) are paid per sale, you’ve got to have the margins to cover the payout. With a decent margin you have room to make commissions higher than competitors, influencing key affiliates to work with you over your direct competition. You also have margin to play with and test out different tiered offers, bonusing certain affiliates, or rewarding met goals. This creates opportunity to customize your program to align with your goals. Generally speaking, having margins of at least 50% is ideal because, with all costs included, you’re looking at approximate payouts of 15-25%. These guidelines are broad, so if you have questions about margins and payouts feel free to inquire for further direction.

2. You have a decent conversion rate and/or average order value

While having a good conversion rate won’t affect your ROAS in affiliate marketing (as it’s pay-per-sale not pay-per-click), having a good site with decent conversion rates (>1%) will be an encouragement to affiliates to send you more traffic. If your conversion rate is low (<0.5%), affiliates will notice that the traffic they worked hard to send you isn’t converting, and thus not paying off for their efforts. This will lead them to stop promoting your business. If conversion rates are lower due to your sales cycle or time of year, but you have a large AOV, affiliates will most likely still want to send traffic because even if only 0.5% convert, the payout of 10% on a $500 order is still $50 in their pockets.

3. You’re mainly B2C

While there are successful B2B affiliate programs out there, it is much more common and simple to reach individual consumers through affiliate marketing. As affiliate marketing capitalizes on individuals’ current online behavior, the intent for a B2B shopper just won’t be the same. B2C businesses can be on a variety of mediums that are in sync with the industry, allowing for more real-estate to work with.

4. You have a short conversion window

This one is not super necessary, but is a big plus. Affiliates’ goal is to send qualified traffic that’s ready to convert, so if your sale cycle is long this means affiliates won’t get paid for a while. This will decrease the incentive for affiliates to promote your brand.

5. You have a unique value

Being unique in an industry is a basic marketing principle that also applies to affiliate marketing. If we look from the affiliate’s perspective, would they rather promote a business with a great selling point or just a run-of-the-mill widget maker? Affiliates are looking for brands they can stand behind and make money from, so being unique is required.

6. You keep your customers on your website

Keeping the traffic affiliates send you on your site is mandatory. If your site leads shoppers to another ecommerce platform (i.e. Amazon) affiliates will not promote you. This is because the affiliate pixel that tracks sales is on your confirmation page, not Amazon’s. Therefore, they will get not credit for the sales they bring you.

7. You’ve got fans

If you already have fans talking about you online, that’s a sign affiliate marketing will work well for your business. Non-incentivized fans sending traffic to your site and converting is a good example to potential affiliates that they will have great opportunity to send qualified traffic to your site that will also convert. This is a win-win. They get paid, you get more new customers.

 

Affiliate marketing is often overlooked despite its potential to be a valuable asset in any marketing strategy and for businesses with these characteristics, implementation is highly recommended.   If you would like to know more about affiliate marketing, contact Logical Position today!

Amanda Bono

Amanda is fascinated by online purchasing behavior and the influence affiliate marketing holds. When she’s not working on client affiliate programs, she’s enjoying the Northwest with its great outdoor scenes, coffee, kombucha, and Mexican food selections.

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