Avoid Pitfalls In Affiliate Marketing

Affiliate marketing is one of the oldest and most common form of online marketing. In this type of marketing arrangement, an online retailer pays commission to an external website or partner site for traffic or sales generated from its referrals.

The affiliate industry has many players. Affiliates are marketing partners. They include bloggers, review sites and organizations and can prove to be effective in selling a brand or service as affiliate marketing helps to drive new customers to a company. While this form of marketing has many benefits and helps to create a new customer base, there are also some watch outs.

Not All Affiliates Are Beneficial

In affiliate marketing, a company primarily benefits from the efforts of affiliates or channels. However, there could be some affiliates that are not really generating value. For example, some affiliates design their business models to capture customers who are already in the buying process in the shopping cart. Such affiliates get credit for transactions when the customer tries to make a purchase though they have done nothing to initiate or offer incremental value. It is important to scrutinize the contribution of affiliates to avoid this type of low and no value activity.

If you don’t do so, it can also negatively impact affiliates who are actually selling your brand and getting you new customers via blogs, social media or review sites.

Not All Affiliates Share Your Values

While affiliates give more significant value to the company, some involve in deceptive marketing activities to collect commissions. This kind of fake online marketing can put the brand and the integrity of your company at risk.

Many companies turn a blind eye to these wrong marketing techniques as it generates revenue. Sometimes companies do not have any idea of these types of affiliates who are promoting their brand in an illegal way. But remember it neither reflects well upon the company nor demonstrates a successful marketing program. To avoid unethical affiliates getting into your company you should screen all your partners carefully, have transparent insights into what they are doing to promote your brand and monitor their activities once they are taken into your program.

Over the years, the affiliate marketing domain has evolved and matured but some of the above problems still exist because they benefit the many players involved and shutting down this can mean less profitability. However, it has been observed that today companies are now becoming more concerned about how they partner and with whom. They prefer to pair with partners who share their values and can representing their brand with integrity.

Is Affiliate Marketing Right for You?

In most industries today, small business owners will find that e-commerce is the only true route to success. If you’ve already built your online business and are now struggling to turn a small but devoted customer base into a large and vocal fandom, maybe it’s time to recruit your customers to sell your product for you. If you’ve already come this far, maybe it’s time to look into affiliate marketing.

Affiliate marketing is often confused with multi-level marketing (MLM). In light of the recent Herbalife settlement, people are once again thinking of MLM as a bad word – just Google “MLM” and you’ll see that one of the first results is “Is multi-level marketing a pyramid scheme?” But that’s missing the point of the settlement, which we believe is actually a good thing for the industry.

In 2012 Bill Ackman, founder of Pershing Square Capital, a hedge fund, began a campaign against Herbalife, accusing the 35-year-old dieting supplement company of being a pyramid scheme. After a lengthy investigation, the company agreed to establish a $200M fund to reimburse distributors for lost wages and the Federal Trade Commission (FTC) found that Herbalife was operating legally.

This settlement is meaningful because, despite the fine, it reinforces that MLM is a fair and legitimate business model. In the words of Herbalife CEO Michael Johnson: “The settlements are an acknowledgement that our business model is sound and underscores our confidence in our ability to more forward successfully.”

While it shares superficial similarities with MLM, affiliate marketing is itself a distinct business model from both multi-level marketers and illegal pyramid schemes:

Pyramid schemes require that people pay to participate in the scheme and only profit when they recruit others to participate. The “product” is only redistribution of money pumped into the scheme: the business is built on recruitment. It’s a closed system and the money flows overwhelmingly toward the top. With no incentive to actually sell a product, those at the bottom of the pyramid eventually run out of new recruits and the pyramid collapses.

Multi-level marketing companies rely on the sale of real products for their cash flow. New recruits are brought on board and the company incentivises recruiters, but the profits at all levels still come from actual sales. Rather than profiting off fees charged to recruits, the company rewards recruiters with a percentage of profits based on sales. In other words, the product is everything.

Affiliate marketing is a single-tier system which rewards affiliates for each visitor or customer the affiliate directs to the business. The affiliate is not selling the product but is instead marketing the business and directing traffic to the company’s website.

Affiliate marketing is often overlooked by digital marketers. Though the methods are more or less identical – SEO, SEM, PPC, email campaigns, etc. – instead of coming from the business directly, the content is actually being promoted by a third-party “publisher” (the affiliate). This is a powerful tool for building trust in a brand; when somebody else speaks up for your product, it makes a greater impression on consumers than hearing it directly from the merchant.

The product is still everything, however. Some people get into affiliate marketing or MLMs because they seem like a solid, profitable business model, and then figure out what the “product” is later. But the medium is not the message. There is no product that is a poor fit for affiliate marketing as long as you’re doing it for the right reasons. Get your product right first – the best time to introduce affiliate marketing to your business is once you have a small but growing customer base, a group of potential brand ambassadors who can prove to you and others that you have a great product.

Affiliate marketing is not a “get-rich-quick scheme” and it’s certainly not a scam. It’s good business. If you know you have a great product and a great online business, affiliate marketing is right for you.
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