Affiliate marketing has been around for a while now. Even before the internet became an inextricable part of everyone’s life, word-of-mouth marketing often did quite a lot for businesses back in the day. In the age of digital business environments, however, affiliate marketing is more well-defined as being a marketing arrangement by which an online retailer pays set commission to an external website or individual for generating traffic or sales from their referrals.
In other words, affiliate marketing is a strategy whereby marketing is done by using a third-party resource to increase brand/ product visibility. The domain of affiliates, however, is not just limited to Instagram Influencers as some may perceive, rather, super competitors have been making use of affiliate marketing strategies for a while. Amazon Associates, for instance, is one of the largest affiliate marketing programs in the world as of this moment.
How Affiliate Marketing Works
The How-to’s of affiliate marketing are rather simple yet sophisticated, involving no more than three to four parties in the whole process, all the way from production to conversion. Out of them, three of the most discussed ones are as follows:
- Merchants
Simply put, these are the sellers. A merchant could be an individual selling a product on the market or a properly constructed business with multiple layers of management within it. - Affiliates
Often referred to as ‘publishers’, affiliates are the people who promote a certain product to the market for the merchants, often offering their services at a set commission. Their main job is to make the product appealing to potential buyers. If these affiliates are influencers or bloggers, their responsibility is to sell a given product to their niches and ensure that they can get as much traffic directed to the merchant’s website. - Consumers
When we talk about consumers, the definition is rather self-explanatory, that is, these are the buyers in the scenario, and in particular those buyers who purchase their product or service via an affiliate marketing channel.
These three, along with the affiliate marketing network, form one elegant process that can be beneficial to both big and small businesses alike. The effectiveness of this marketing strategy increases even further as we look into e-commerce and the potential impacts it can have on an e-commerce business.
Market Significance
When it comes to digital marketing techniques, affiliate marketing has been a game changer to say the least. As a matter of fact, Forbes for instance, predicts that “By 2022, the affiliate marketing industry is forecasted to eclipse the $8 billion mark, nearly double what it was worth in 2015.” A successor of e-mail marketing, this strategy has certainly started to stir up some debate in the economic sphere.
On the one hand, we have companies such as Deloitte, a multinational professional services network, which warns that there are potential risks involved when out-sourcing, arguing that organizations lack clarity in their approach to monitoring and managing the risks related to affiliates. On the other hand, however, we observe that many companies report on having an increased number of sales after deploying affiliates. The question then poses itself: Just how much potential does affiliate marketing hold for an e-commerce business?
Effective Budget Allocation
To find an answer to this question, we analyze the various areas a business has to look at during pre-emptive analysis. The first of these, is obviously money and how it can be allocated to yield the maximum results. According to Jeff Bullas, a market influencer, affiliate marketing is one of the only marketing channels which offers a hundred percent ROI. How? Well, the answer is simple, a marketer is only paid post-conversion in the form of commission and not a minute before that. For an e-commerce business this means the opportunity to reach out to potential buyers without spending in advance. In other words, regular cash flows can be ensured, and money does not need to be kept tied up in a marketing endeavor that is likely generating fewer leads in comparison. Since affiliate marketing is a performance-based system, money does not need to be spent in advertisements across other, less yielding touch points.
Entering New Markets
As was the case with word-of-mouth advertisements, affiliates tend to spread the word much faster than other techniques can. The truth is, when an influencer discusses a product, their communities, which are ever-growing in number (especially if their content is good), are introduced to those products from a person they trust. So while a person casually scrolling through their feed is likely to get irritated with a push marketing advertisement, when a vlogger creates an entire ‘feel-good’ video tailored around a certain product, the audience is much more likely to engage and actually be able to see the value that product or service could offer them.
It must be understood, however, that the internet is not a localized event. On the contrary, affiliates tend to have their influence across the globe. From an e-commerce standpoint then, this simple strategy can offer an essentially free method to carry out international ad campaigns, with once again, money only needing to be spent once the conversion has already occurred.
Increasing Brand Visibility
The goal of any business is to be able to get a customer. As mentioned earlier, affiliates allow this to happen by bringing in communities that trust them. But when it comes to the effective use of affiliates, this is just scratching the surface. Even if members of their community do not immediately contribute to conversions, simply having promotional videos present on the internet means that the process of advertisement has become passive. As their list of subscribers grows, so too might the viewership of their videos. For a business, this means an increase in brand visibility.
But even if one were to forget all about that, affiliate marketers can still do wonders when it comes to increasing brand awareness and visibility, simply because they are trustworthy. According to a statistic published on Insider, “Approximately 60% of U.S. consumers look at blogs or social media posts on their mobile devices while shopping in stores, but only 3% would consider buying a product in the store if a celebrity endorsed it. On the other hand, 30% prefer to buy products endorsed by a peer or non-celebrity.” So while on the surface it might appear that only hiring brand ambassadors from a pool of high-end celebrities might make any difference, facts show us quite the opposite trend. When it comes to purchasing goods, shoppers rely on each-other and members of trusted communities far more than they would on even a well-known celebrity. Connecting with such people, therefore, and making them an affiliate marketer helps a business grow and increase customer outreach more than one would otherwise expect.
Allows for Passivity
While passive income may seem like something restricted to small business or individuals, upon closer consideration, it may be seen that having systems which allow for built in passivity are key to growth. Passivity, or the absence of active investment, be it money or time, allows a business to prioritize other tasks and open new avenues for development. Affiliate marketers do just this when they market products for a company. Since payments are not supposed to be upfront, businesses can save money, yes; but even more so, they can save up the time it would have taken to develop an in-house marketing strategy. Conversely, since the debate on inbound versus outbound marketing is still ongoing, with some executives arguing that although longer, an inbound digital marketing strategy is more favorable to them; we suggest that companies can leverage upon affiliate marketing techniques to do the heavy work, while simultaneously developing inbound marketing techniques which they think could help them in the long run.
Immediate Benefits
While inbound marketing techniques might still be the preferred tool for some, the fact is, a good digital marketing program can take anywhere from three to nine months to be set up. Affiliates, on the other hand, guarantee quick returns since the system ensures mutual benefit to both parties.
Increase SEO
While this may not be a high priority target for brick-and-mortar stores, online retailers rely heavily on their websites being search engine optimized. Since Google is essentially a search engine, having a higher number of back-links which direct to other, even more popular websites, allows it to place an e-commerce website higher up in the search results than it otherwise would.
Tracking
Just as the case with e-mail marketing, tracking is an additional benefit to this form of marketing. Click through rates and other in-built web tools allow one to track the effectiveness of one affiliate over another. That is, it is quite easy to find out which marketers are bringing in the customer as opposed to the ones that are not; thereby making it easier to keep the process streamlined.
Seeing the Big Picture
At the end of the day, however, when you take a closer look at it, affiliate marketing is just that- a marketing strategy. And while marketing is great in terms of bringing the customer to an e-commerce website, it might not necessarily keep them there. In order to truly build brand loyalty, business owners need to ensure that their websites are user friendly and that their core processes are up to the mark.
As far as risk assessment goes, however, it is wise to think that the fault does not exactly lie within the concept of affiliate marketing itself but rather, in the way that different companies carry it through to completion. Although it is worth mentioning that several safeguards for both the marketers and companies exist, including but not limited to, the use of insertion orders (IOs) which allow involved parties to set agreements prior to any work being done.
Just as it is for other strategies thus, affiliate marketing holds considerable potential for the growth of e-commerce businesses. Whether this growth happens or not, however, is dependent on the way the process is approached.
