Pros and cons of affiliate marketing

As modern marketing channels and tactics continue to evolve mercilessly, businesses have to fight to survive in their respective niches. And more often than not, they will need assistance to accomplish that. Therefore, the introduction and implementation of affiliate marketing as a strategy becomes a notable solution that has a lot of potential. As a successful New York digital marketing agency, Digital Dot understands the importance of helping others boost online presence and grow brand awareness. In this article, we look to explore the definition, implementation, and pros & cons of affiliate marketing.

What is Affiliate Marketing?

Let’s start with the basic notion of understanding what something is before we delve into the pros and cons. By definition, affiliate marketing is a strategy that employs the assistance of others to promote and sell your products for a commission. An affiliate likes your product/service, which they then sell to others to receive a commission from you as a business. Affiliate programs, when implemented correctly, can:

  • Improve sales efforts and secure more leads;
  • Boost conversion rate;
  • Increase ROI as a holistic concept.

Affiliate Marketing vs Referral Marketing

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The difference between a referral and an affiliate program is in the motivation.

Many have difficulties drawing the line between affiliates and referrals because both are based on the same principle. However, there is a difference to be made between the two. While referral marketing relies on long-term customer satisfaction and their will to promote your business for diverse benefits (discounts, coupons, products, etc.), affiliate marketing focuses solely on financial gain. With affiliates, you have a more professional understanding of what needs to be done and what you will compensate them for.

How does one become an affiliate?

It really comes down to finding products/services that you like. Once you find them, you can join the affiliate program and promote those products/services for a commission, thus becoming an independent promoter. Each affiliate is assigned a unique ID that is incorporated into the links they share. This link enables conversion tracking based on which a company can determine the number of conversions that came from the affiliate. And based on that conversion rate, a business can then determine the overall payout that they owe to the affiliate.

As with each type of marketing strategy, there are certain pros and cons that one has to consider before implementing it. And the same goes for affiliate marketing. So, let’s take a closer look at some of the advantages and disadvantages of affiliate programs for businesses:

What are the pros of affiliate marketing?

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What advantages can affiliates bring to the table?

Low investment costs

Starting an affiliate marketing program is very cheap. Since you only pay affiliates once you close a sale that they sent your way, you have no upfront payments. Instead, you can start up your affiliate program at any time. You only need to select a payment plan and add a tracking code to your website. It requires no additional resources such as a marketing background, a screening process, or training courses. You simply pay for what you get, and if affiliates are unable to get you anything, they don’t get paid. It’s that simple and it’s that cost-effective.

Flexibility

There is more than one way to set up your affiliate program, which is a great way to attract publishers (affiliates). And so, here are three general examples of affiliate reward programs:

  • Pay-per-click. This is where you give commission based on the number of users that an affiliate leads to your website.
  • Pay-per-lead. Where affiliates are rewarded for every person that fills out a contact form and leaves their personal information.
  • Pay-per-sale. The most basic principle, where you give a commission for each customer that comes to you via affiliate marketing.

Access to developed customer bases

Instead of investing resources into generating additional traffic on your website, you can turn to the existing audience that comes from your affiliates. Having strong affiliates with their own websites and a promo banner for your website can create additional traffic with minimal costs for you. And if the affiliate websites have a well-established follower base, the chances of broadening your customer base become all the higher.

No limitations for revenue streams

Affiliate marketing does not limit you to employing the support of a single affiliate. This is a strategy that you can implement on multiple websites, with promotional banners and other types of content that will engage audiences. Statistic data shows that over 71% of companies use three or more affiliates in their affiliate marketing strategy.

What are the downsides of affiliate marketing?

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Do your homework on both the good and the bad sides of a strategy before implementing it.

The commission costs

The stronger your affiliates are, the higher their commission rates will be. And so, at a certain point, you might come across affiliate fees that will bite off 3-8 percent of your overall revenue from that affiliate. So, it can be difficult to come across a quality affiliate and create a cost-effective collaboration. But the very definition of what pays off for a business will depend on the industry and type of product/service that it sells.

Unpredictive income

Affiliate marketing is a great backup plan for companies to have because it doesn’t create a steady income flow. Instead, there are good periods and bad ones. And so, it should never be a primary tactic for creating revenue for your business. Instead, you need to target spike periods based on historic data to avoid wasting time and resources.

Scams

With affiliate marketing being a popular multi-billion dollar industry, it’s only normal to have fraudulent activists out there. Cookie stuffing is among the more common frauds that you can come across. And the way it works is simple. Rather than actually referring people to your website, affiliates will secretly drop affiliate cookies into users’ devices without their knowledge.

Fierce competition

Since it is so easy and cheap to implement, affiliate marketing is a tactic that can intensify your competition. You might be opening the door for your competitors to apply the same method to their business plan. And then, it will come down to who will be able to secure the better affiliates. So, if you are set on taking this path, you might as well do it right from the start and opt for an affiliate with SEO experience, or simply turn the task over to a New York SEO consultant.

False advertising

People that work on commissions walk a thin moral line between using skill and improvisation to succeed or manipulating with false information to get their way. And so, one of the risks of affiliate marketing is that it only takes one bad affiliate to stain your brand. Another difference can be that your brand values might differ from that of your affiliates. All of this can negatively impact your overall online presence.

Does affiliate marketing work for big brands?

Affiliate marketing scheme
All types of businesses can profit from affiliate programs.

This is a strategy that any type of company can use. Whether we’re talking about large or small businesses, B2B or B2C companies, they can all gain from affiliates. The only difference is in the approach you take in setting up the program. Big brands have more to lose simply because there are a lot of ways in which affiliates with different values or principles can damage a reputation. But this is something that a simple screening and approval process can put right. That way, you can not only make sure that you have legitimate affiliates but also ones that agree with your brand message and values.

Start your affiliate program today

With all the pros and cons of affiliate marketing that we laid out here, it falls to you to make that final call. However, if you do opt for diving into this strategy, you should do so with the initial support of someone that has experience. Digital Dot is a company that understands digital marketing trends and how best to approach them.

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