Is Your Business Suited for Affiliate Marketing?
How would you like other Web sites to market and sell your company’s products and services? And how would you like to pay the Web site only when their users buy your product or service or perform a task? Sounds like a marketer’s dream, right? Well, it can come true with affiliate marketing.
Setting up a successful affiliate program can increase your shelf space, improve company visibility, and help you sell more products or services. You can sign up hundreds or even thousands of affiliates, and they will promote your product on their sites. And you reward them only if they can make sales. In effect, you get a powerful pay-for-performance sales force.
According to Netcraft (www.netcraft.com), there were approximately 7.5 million active web sites on the Net in July 2000. That’s a pool of 7.5 million potential affiliates. In 1999, research from dotcom.com (www.dotcom.com) indicated that 80% of consumers registering a domain name did so for the first time. dotcom.com further indicates that by the end of the year 2000, 15.4% of American households are expected to own a domain name.
The same research indicates these consumers are building sites devoted to family and pets; clubs and organizations; photography; stamp and coin collecting; sports and trading cards; and, finally, computers and technology. Many of these consumers will be looking for ways to generate revenue to help pay for their hosting fees and perhaps generate some additional spare change. And many of these consumer sites are looking to join an affiliate program.
Do
| DO remember that an affiliate program is a two-way street. Your affiliates earn you revenue but they are also your partners in business. |
Because even the biggest affiliate program, Amazon.com, represents only 10% of the 7.5 million Web sites, you can see that a huge opportunity exists to build an affiliate program no matter what size your business. If you offer a service or product that appeals to a limited audience, you will find that these personal Web sites can form a critical basis for your company.
You must also remember that an affiliate program is a partnership. The better you can monitor your affiliates and the way they are promoting your Web site, the more your program will pay off. And the more energy you put into an affiliate program, building a close relationship with your affiliates and training them to sell, the better your program will be. And remember, as a merchant you enjoy the benefits of no-risk advertising, paying only when a sale is made. It’s a great way to brand a product or achieve greater visibility across the Net.
Analysts also agree that affiliates are an important customer-retention tool for all segments of online commerce. In a recent report, Jupiter Communications estimated that if online merchants could increase their affiliate sales to 20% they could cut sales and marketing costs by 10%.
Want more proof? Nine of the top ten retail sites for August 2000, as ranked by Media Metrix (www.mediametrix.com) (see Figure 2.1), currently use affiliate programs. It shows that an affiliate program is a fundamental component in online success.
Figure 2.1. Media Matrix ranks Web sites on the amount of traffic they attract month by month.
You Can Sell Anything
There are thousands upon thousands of affiliate programs currently marketed by companies on the Net offering products and services, literally, from A (adidas.com pays affiliates to sell their shoes) to Z (Zmedia.com pays 40 cents each time an affiliate sends someone who subscribes to one of their newsletters).
The types of products and services sold through affiliates are nearly limitless and range far afield. In addition to the kinds of products and services you’d expect—books, magazines, videos, CDs, clothing, flowers, jewelry, office supplies, gifts, computer products, beauty, health, and fitness items, furnishings, and sports and recreation items sold through affiliate programs—there are many others that you wouldn’t expect. For example, products that show the versatility of pay-for-performance marketing, such as long distance phone services, tickets to sporting events, security services, URL submissions, banner exchanges, classified ads, search engine placement services, Web design, Web hosting, singles ads, domain names, groceries, contests, self help, marketing courses, and seminars. These are just a few of the vast number of products and services that can be sold through an affiliate program.
What’s Search Engine Placement?
| There are many companies that will not only register your web site with the search engines but also will help you get a high placement in their search results. These are search engine placement companies. |
Of course, you can increase the success of your affiliate program by selling products and services that are, or soon will be, the hot sellers on the Net. Fall 1999 and Spring 2000 surveys from Jupiter Communications (www.jup.com) presented its study of U.S. e-commerce forecast by category (see Table 2.2). It showed that computers, travel, and entertainment categories would stay on top in the United States.
| 1998 | 2000 | 2003 | |
|---|---|---|---|
| Over 10% in 2003 | |||
| Software | 8.6% | 20.7% | 48.9% |
| PCs | 11.1 | 24.3 | 40.4 |
| Peripherals | 5.6 | 10.9 | 20.9 |
| Air Travel | 2.6 | 10.3 | 15.4 |
| Books | 2.5 | 6.3 | 14.3 |
| Music | 1.1 | 3.8 | 14.0 |
| Event Tickets | 0.7 | 2.8 | 12.5 |
| Car Rentals | 1.1 | 5.5 | 11.2 |
| Videos | 0.4 | 3.0 | 10.3 |
| 5% to 10% in 2003 | |||
| Hotels | 1.7 | 4.6 | 9.8 |
| Toys | 0.3 | 1.9 | 5.6 |
| Nutrition Products | 0.0 | 0.7 | 5.1 |
| Sporting Goods | 0.3 | 1.1 | 5.1 |
| Flowers | 0.8 | 1.9 | 5.0 |
| Less than 5% in 2003 | |||
| Tours | 0.1 | 1.5 | 4.7 |
| Consumer Electronics | 0.4 | 1.5 | 4.7 |
| Apparel | 0.3 | 0.8 | 3.7 |
| Personal Care | 0.0 | 0.5 | 3.6 |
| Medical Supplies | 0.0 | 0.5 | 3.5 |
| Cruises | 0.1 | 0.7 | 2.8 |
| Office Products | 0.1 | 0.5 | 2.8 |
| Specialty Gifts | 0.2 | 0.6 | 2.5 |
| Footwear | 0.1 | 0.3 | 2.1 |
| Furniture | 0.0 | 0.1 | 2.1 |
| Housewares | 0.1 | 0.3 | 2.1 |
| Movie Tickets | 0.0 | 0.2 | 2.0 |
| Over-the-Counter Drugs | 0.0 | 0.2 | 1.9 |
| Groceries | 0.0 | 0.2 | 1.5 |
| Prescription Drugs | 0.0 | 0.1 | 1.5 |
| Home Improvement | 0.0 | 0.1 | 0.5 |
Source: Jupiter Communications
In April 2000 Forrester Research forecast European e-commerce by category (see Table 2.3). It showed that Europe’s strong sellers are the same as those in the united States.
| % Of Total 2005 Retail | |
|---|---|
| Over 10% in 2005 | |
| Software | 39% |
| Computer Hardware | 36 |
| Music | 20 |
| Books | 15 |
| Videos | 13 |
| Flowers | 12 |
| Event Tickets | 11 |
| 5% to 10% in 2005 | |
| Toys | 9 |
| Leisure Travel | 9 |
| Consumer Electronics | 9 |
| Sports Equipment | 8 |
| Apparel | 7 |
| Health & Beauty | 7 |
| Housewares | 6 |
| Autos | 5 |
| Less than 5% in 2005 | |
| Garden | 4 |
| Groceries | 4 |
Source: Forrester Research
But just because your product or service didn’t make the analysts’ cut doesn’t mean you can’t successfully sell it through an affiliate program (see Figure 2.2). If you take the concept of collaborative commerce networking to heart and truly build a targeted network of business partners, you can be successful selling your product or service across the Net.
Figure 2.2. Affiliate programs are not just for selling products. Virtualis sells a Web hosting service through their affiliate program.
Consider the following example.
Allan Gardyne runs Associate Programs.com (www.associateprograms.com), a top affiliate directory in which he also rates affiliate programs. He lists the top 10 affiliate programs (www.associateprograms.com/search/favourite.shtml) that are earning the most money for AssociatePrograms.com—and there isn’t a commodity product in the bunch. The number one product for this site is a book by Ken Evoy entitled Make Your Site SELL!, which describes how to sell what ought to be virtually impossible to sell, and coming in a close second is Make Your Knowledge SELL!, showing you how to sell what you know on the Net. The number 10 best selling product is a service—Virtualis Systems. They offer high-quality Web hosting services.
Plain and simple, almost every product or service online will be more successful if offered through an affiliate program. All this proves that you can sell just about anything through an affiliate program if you build the proper affiliate network.
Ask These Questions
So is your business suited for an affiliate program? Ask yourself these questions. If you answer yes, then your business can take advantage of this unique form of marketing.
First, look at your product or service. No matter how good your intentions towards building a marketing program, it’s all for naught if there is no market for your product or service. If you’re selling successfully from your own Web site, you should be able to sell it from others. And though you may think your product or service is the greatest thing since sliced bread, potential affiliates may think otherwise. Any good potential affiliate will be looking closely at your offer. Is your product or service a quality one? Is it priced competitively? Do they feel they can sell it to their site visitors?
Do
| DO invest time and resources building an affiliate support team inside your business. |
Next, think about the program itself. Are you prepared to offer not only a good affiliate program for your business but also for you affiliates? The affiliate game has to be a win-win situation. Both you and your affiliates must profit from it.
Next, do you have enough margin in your product or service to offer a competitive commission rate? In today’s competitive affiliate marketplace, are you prepared to offer residual income to your affiliates? Will they own the commission on all sales made by customers referred to your business and continue to do so into the future? Will you offer a click-and-buy program and not a click-and-bye one, keeping the affiliate’s visitor on their site after the sale? What about offering a re-marketing program on behalf of your affiliates where they can gain additional revenue from the prospect list and referrals they build for you on their sites?
Will you invest in an affiliate manager—even a team, if necessary—whose sole responsibility is to create and manage your program on an ongoing basis while communicating constantly with your affiliates to keep them happy? Will you invest the time and effort in recruiting good affiliates and offer real-time statistics showing how many visitors your affiliates have referred to you and how much commission they are entitled to?
Finally, will you take the time to educate your affiliates on an on-going basis on how to properly market your product or service to their site visitors? Are you prepared to constantly offer new product or service promotions to keep your offer fresh on your affiliate sites?
If you answered yes to all these questions, then your business is suited to take advantage of the benefits of an affiliate program.