· Affiliate marketing is one marketing strategy that’s uniquely beneficial to a wide range of operations, including small- and medium-sized businesses.
· This type of marketing follows a performance-based payment model, which promises the flexibility and low spend that appeals to smaller companies.
· Some business types that tend to do well-running affiliate programs include eCommerce, subscription-based, and even local businesses.
With affiliate marketing poised to grow 10.1 percent to an estimated $ 6.8 billion industry by next year, you may be wondering if there’s a piece of the pie for your small- or medium-sized business. Indeed, this is one advertising approach that’s arguably universally beneficial, from the small-scale, family-run operation to the massive corporation on the scale of Uber or Apple. Amazingly, once you learn a thing or two about how affiliate marketing works, you’ll realize that it’s surprisingly low-cost yet high-value, which is part of why it’s viable for all sorts of companies.
How Affiliate Marketing Works
Think of affiliate marketing as a digital referral program where a business partners with a blog, an influencer, or a publisher to personally recommend their product or service or to take a predetermined action, such as signing up for a subscription or a newsletter. Each time the consumer takes the recommended action, the recommender earns a commission.
For a successful affiliate marketing campaign, there must be three willing parties: the merchant, the affiliate, and the consumer. Each of these three entities has a specific role to play, and each one receives a certain benefit throughout the process. The merchant partners with the affiliate to recommend something to the consumer.
· The Merchant (Advertiser)?—?Presumably, if you own a business that you’re looking to market, you are the merchant in this scenario. The merchant is the party that pays the affiliate to promote their product or service. The merchant may be any operation looking to boost sales, leads, or brand awareness.
· The Affiliate (Publisher)?—?The affiliate is the person or company recommending the merchant’s product or service. Often, the affiliate is a blogger, influencer, or publisher with an existing audience. Ideally, the affiliate’s audience will be made up of users that align with the merchant’s target demographics.
· The User (Target Consumer)?—?The consumer is the reader or follower who is prompted to take action through an affiliate link. They may be prompted to make a purchase, sign up for something, or perform an otherwise high-value action.
Naturally, each party is getting something of value out of this arrangement. The merchant is promoting his or her product or service in a highly targeted fashion, while the affiliate is earning a commission, and the consumer is getting a personalized referral. The consumer may also receive a coupon, a discount, or another incentive throughout the process.
Why Affiliate Marketing Works
Affiliate marketing works because it meets and exceeds the modern consumer’s precise expectations. Consumers want authentic, personalized recommendations from people they trust?—?in this case, a blog or social media profile they follow. They also want highly valuable marketing content, which their favorite bloggers, influencers, and publishers are already creating for them. This winning combination can translate to big gains for your business over time, without you having to produce costly content or create your own audience from nothing.
In many cases, this model edges out other types of marketing because it follows a performance-based pricing model?—?also known as a pay-per-click or pay-per-lead model?—?meaning that the business pays a commission only when a certain action is completed (such as a sale, lead, or acquisition). According to the 2018 IAB Internet Advertising Report, 61.8 percent of internet advertising revenue was priced using this model last year, making it the preferred way to pay among advertisers.
Performance-Based Pricing = High ROI and Low Risk
As far as marketing goes, the cost can make certain programs highly prohibitive and, therefore, off the table for small- or medium-sized businesses working with very tight budgets. What sets affiliate marketing apart from the rest is that it works on this very flexible pricing model. This means that you only pay for what you get. In other words, there’s zero risk of launching a high-cost campaign, only to have it return little to none of your investment. You also don’t have to come up with a costly up-front investment?—?which often takes convincing higher-ups for funding?—?to get the ball rolling.
Is Affiliate Marketing Right for Your Business?
Because of the aforementioned benefits, affiliate marketing can help businesses of all sizes earn specific business goals, from growing leads to strengthening brand reputation. Here are some specific business types that can benefit from implementing a full-scale affiliate marketing program:
· Small, Family-Owned Businesses?—?Small businesses are uniquely positioned to reap the benefits of affiliate marketing because of the simple fact that it can work within tight budget constraints. On top of that, you basically get an entire sales and marketing team without having to hire anyone in-house. Once you find the right affiliate marketing software and hone your strategy, your program will be like a well-oiled machine that requires minimal attention from you.
· Local Businesses with Geographic Boundaries?—?You may think that local businesses are an exception to the rule and that affiliate marketing has little to offer them. In fact, localized affiliate marketing is on the rise as brick-and-mortar and regional companies seek out new and unique ways to grow their local footprints. Restaurants, photographers, hotels, lawyers, accountants?—?they historically thrive on word of mouth advertising, so they’re uniquely positioned to work with this type of marketing. Naturally, it does work better in larger cities where there are more influencers to serve as affiliates.
· Subscription-Based Businesses?—?Whether you’re a subscription box or a new SaaS company looking to pick up new clients, affiliate marketing isn’t a strategy you want to overlook when growing your customer base. You can create an affiliate program policy that rewards affiliates for earning you new adopters or even for signing up for a newsletter or free trial to stay in the know as you grow.
· Startups and Disruptors?—?One of the most ideal business profiles for a successful affiliate marketing campaign is one that shakes things up or solves a specific problem. Unlike a typical pay-per-click ad, an affiliate link is packaged neatly within long-form, user-generated content, which can help explain to the user why your product or service is different from the status quo. It can also be a big win for your organic search rankings when users are explicitly searching for solutions to specific problems, hoping to discover a company such as yours.
· eCommerce Shops and Marketplaces?—?We have eCommerce giants like Amazon and eBay to thank for helping to legitimize affiliate marketing across the industry. Unsurprisingly, companies that sell online can gain a lot from strategically placed affiliate links. Just run a Google search for, for example, “the best vacuum cleaners in 2019,” and the first several organic listings are chock-full of affiliate links (even on Consumer Reports, which says it uses its affiliate marketing revenue to support its nonprofit mission). Amazon launched its affiliate program of July of 1996, making it one of the longest-running affiliate programs still in operation. eCommerce was the original use case for this type of marketing, and it still works like gangbusters in this realm!
· Business-to-Business (B2B) Companies?—?Like local businesses, B2B companies are often assumed to be less-than-ideal candidates for affiliate marketing. However, we’re starting to see more and more business-facing operations building this type of marketing into their budgets. The fact of the matter is that the decision-makers and gatekeepers?—?which are historically difficult to get your product in front of?—?are using the internet to research tools and services as much or more as they’re using traditional channels like direct sales and trade shows. We generally see that this type of marketing is just as viable for B2B companies as it is for B2C ones.
Questions to Ask Yourself
If your business doesn’t fall into one of the above categories and you still aren’t sure if affiliate marketing is a good match, consider asking yourself the following questions. This will help guide you to a more concrete answer:
· Are Your Competitors Using It??—?This is one of the easiest ways to gauge whether or not this format is one that might positively contribute to your business, especially if there’s a competitor who matches up in terms of size, revenue, and performance. You may even want to look at bigger or further along companies in your industry to see if?—?and specifically how?—?they’re leveraging affiliate marketing. If the answer is yes, a trial may be in order.
· Are You Looking to Scale on a Budget??—?As we’ve already covered in-depth, affiliate marketing is one of the more budget-friendly marketing strategies and, therefore, can be an amazing asset to companies working within tight financial constraints. We all know scaling, boosting sales, and growing our base of leads costs money, but this is a highly targeted method that you can implement without a high upfront spend.
· Will You Be Able to Keep Up with Demand??—?Affiliate marketing programs only create extra work in the sense that more sales=more work. However, that is something that you need to take seriously if you’re already struggling to keep up. We often recommend that strapped companies roll out their first affiliate marketing program in stages, starting slow at first and working their way up to a higher volume of affiliate links as they scale along with their program.
· Do You Believe in Your Product or Service??—?You have to believe in what you’re selling in order to get influencers excited about it. Remember that affiliate marketing works because it gives advertising a more personable, authentic feel, and the best affiliate marketing campaigns are the ones where the promoter is promoting because he or she genuinely recommends the product. If you and your team care about what you do, you’ll be able to turn your affiliates into actual fans or users, which means they’ll have a natural excitement when working with you.
· Do You Want to Provide Added Value to Your Audience??—?One of the coolest parts about affiliate marketing versus regular pay-per-click ads and other modes of marketing is that it’s packaged neatly within blogs, articles, and other formats, which leaves plenty of room for adding information, explanations, long-form testimonials, and more. It may also contribute to your organic search rankings, especially if you’re not doing your own separate SEO or content marketing. Many companies find this to be a really valuable hidden bonus after launching their first few campaigns.
Ultimately, because of the performance-based payment model and because of the ease of implementation (especially when using the top affiliate marketing programs), many companies roll out a trial for a month or two to see where they wind up.