2016-02-19 00:00:00Grow your BusinessEnglishIf you're a small business, affiliate marketing can help you acquire new customers, if you understand the costs and risks involved.https://quickbooks.intuit.com/global/resources/row_qrc/uploads/2016/02/2016_2_16-small-am-small-business-guide-to-affiliate-marketing.jpghttps://quickbooks.intuit.com/global/resources/grow-your-business/small-business-guide-to-affiliate-marketing/What Is Affiliate Marketing and Is It Right for My Business?

Small Business Guide to Affiliate Marketing

5 min read

Affiliate marketing is a method where a retailer, merchant or brand can acquire customers by using an “affiliate network” to put ads, banners or information on third-party websites (known as the affiliate). If the concept is foreign or confusing, you’re not alone. This form of marketing is rather unique to the online world and using it correctly can get rather complex.

To put it more simply, here is how affiliate marketing works:

  • A website displays banner ads or buttons promoting products or services from other retailers or companies.
  • The website then receives a commission if site visitors perform a desired action, ranging from a simple click-through to the retailer’s website to lead generation to making a purchase.
  • The retailer pays a fee for the click, which is collected by the affiliate network company.

If you’re a small business with a product to sell, affiliate marketing might seem like a slam dunk. Similarly, if you’re a website or blog owner looking to monetize your site, this might be a lucrative option. Let’s examine the ins and outs of affiliate marketing and determine if it’s right for your small business.

Why Affiliate Marketing?

As opposed to standard online marketing, affiliate marketing gives advertisers more control over how they spend their advertising money. By limiting the payout to only the websites that perform, the advertiser is not “wasting” dollars on unseen or ineffective impressions. As a model, it’s more aligned with cost-per-conversion advertising than cost-per-click advertising, meaning the affiliate gets paid only when the retailer makes a sale.

For website publishers, affiliate marketing is a way to get advertising on your site without having to employ a sales or creative team to build ads. The network that runs the affiliate ads will be in charge of reporting on analytics and keeping track of your site’s performance. While it may seem that this is an easy way to make some money, the truth is that affiliate sites have their own responsibilities and demands too.

Pitfalls of Affiliate Marketing, For Advertisers

1. You Might End Up Competing With Your Own Ads

Most online advertisers use a mix of digital advertising options, including search engine marketing, pay-per-click, relationship marketing and more. Many affiliate networks use the same tactics, so you might end up competing with your own ads. While this might turn into a very interesting A/B test, chances are the cost you’re paying for your other online display ads is high, and you don’t want to waste that money.

2. You Can’t Fully Control Your Brand’s Exposure

Because you aren’t necessarily vetting every website that will carry your affiliate ads, it’s possible that your products or brand might be presented alongside questionable content. Also, some sites use less-than-reputable tactics, such as email spamming or false advertising and the consumer might come to associate you with these tricks.

For the sake of protecting your brand, make sure to set very strict guidelines, especially around promotions and pricing, and hold your affiliates accountable if those guidelines are broken.

3. You Might End Up Paying Commission to an Affiliate That Didn’t Earn It

While the instances are few and far between, there have been cases of affiliate sites and networks defrauding retailers out of money. One such tactic tries to make it appear as if a user visited the affiliate site before making a purchase, when in actuality they didn’t. Another is leading users to your site under false pretenses, such as the promise of a coupon or discount code.

The best way to avoid this is to keep close track of your analytics, especially in the beginning, and evaluate what sites are really working for you. You can also take a look at metrics like referring URLs to really determine if the affiliate has earned its finder’s fee.

Pitfalls of Affiliate Marketing, For Affiliates

1. You Might End Up Doing More Work Than You Anticipated

While many people believe you can simply set up a website, place some affiliate ads and then let it go, that simply is not the case. Like all online advertising, best practices apply, like including updated content and offering valuable information to consumers that Google’s bots can pick up on. If you simply put up your website and then let it sit, Google will penalize your site in their search results, and that inaction will bring any of your organic traffic to a grinding halt.

2. You Might End Up Not Making Any Money

If your website is new or caters to a very specific niche, chances are your daily site traffic is pretty low. Steady, maybe, but it’s still low. This makes earning commission through click-throughs or purchases very difficult, since you’ll have a smaller pool to start with. Carefully consider if your site is equipped to generate the type of traffic that makes affiliate marketing worth it before committing any time or effort to it.

3. You Might End Up Not Getting Paid

Make sure you do your research when starting off in the world of affiliate advertising. Does the affiliate network have a good reputation? What is the average monthly payout for an affiliate site? How much can you hope to make?

While these questions and answers are very specific to your site, the campaign and the advertiser, the network should have some statistics they can share. Also, be sure to carefully read the terms and conditions. You want to fully understand the requirements for earning and receiving commissions, as well as the restrictions and types of support you can expect.

Even if this all seems feasible and your research yields a few good options, remember that affiliate advertising is not the perfect fit for every small business or website. To truly find success, you must:

  1. Diversify your affiliate campaigns. This is true for both affiliate sites and advertisers; affiliates shouldn’t pin all of their hopes and dreams on one advertiser and advertisers shouldn’t assume a handful of sites will earn them success.
  2. Pay close attention to the type of products. Make sure that the affiliate is a good match for the product and the product is a good match for the affiliate.
  3. Carefully monitor your results. Whether an affiliate or advertiser, you want to be fully aware of your results. As an affiliate, are you getting paid decent commissions? Is there anything you could do to improve your success rate? As an advertiser, are you using the right websites? Do your affiliate sites genuinely provide you with qualified leads or customers?

If you decide affiliate marketing is right for you, look for a trusted affiliate marketing network. In many cases, this is the easiest way for retailers to get started. If you are interested in becoming an affiliate, you have a few more options and can go it alone, but you might also want to explore your options in finding an affiliate network to join. Whatever you decide, affiliate marketing is here to stay, and you don’t want to miss out on the opportunity to bring in some money and increase your products’ online exposure.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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