Entrepreneurs get into e-commerce for various reasons. Some want to be their own boss while others want to scale a solution to a problem they’ve personally solved.
Whatever the reason for launching an online business, it’s safe to say that a central goal is to make money and grow. Of the countless customer-acquisition models that can drive revenue and growth, affiliate marketing, while nothing new, is gaining a lot of momentum.
Nearly 90 percent of advertisers cite affiliate marketing as an important part of their overall marketing strategy. In the U.S., the industry is forecasted to grow 10 percent between 2015-2020 to reach $6.8 billion. But just because everybody’s doing it doesn’t mean you should.
Let’s discuss whether you should leverage affiliate marketing for your e-commerce store, but first, a brief breakdown of affiliate marketing:
What is Affiliate Marketing?
Affiliate marketing can be thought of as performance- or commission-based marketing in which third parties are rewarded when they bring a company a lead or sale. Some popular affiliate modes include blogs, vlogs, social media accounts, apps, review sites, live (in-person) events, paid SEM advertising and more. The entities marketing the product or service could be bloggers, influencers, media networks, niche sites, companies with an app, ad agencies, online communities and so on.
Why You May Not Want to Leverage Affiliate Marketing for Your E-Commerce Store
The idea of having various mediums and partners helping to bring you traffic and only having to pay them when their efforts result in a positive action sounds pretty great. However, affiliate marketing is not without its pitfalls. Perhaps the most significant potential downside is the variance in quality among partners, a side-effect of the industry’s popularity. With so many potential partners in the ecosystem, and companies vying for their attention, it’s easy to encounter fickle associates. As the BalanceSMB points out, affiliate loyalty can vary. You might experience an initial boom in sales only to find that your affiliate partner has moved on to promote the next product from another brand.
Additionally, while affiliate commissions won’t sink your business’ profit, it’ll certainly eat into your bottom line. You’ll never be able to earn a sale without kicking back some commission. It’s also a possibility that as your affiliate sales increase, your overall sales will stagnate. This is because affiliate partners are savvy about getting customers to click their affiliate links. After the “honeymoon” phase, you could easily find yourself competing against your affiliates through SEO, SEM and other promotions. Not exactly what e-commerce stores planned for when they envisioned “casting a wider customer acquisition net.” Finally, when you build a network of affiliates, your brand might be portrayed differently than you'd like; the affiliate partner could misstate your offer, misrepresent your brand to their audience—or any combination in between.
Why You May Want to Leverage Affiliate Marketing for Your E-Commerce Store
As unattractive as the downfalls sound, they’re merely possibilities. Affiliate marketing carries a ton of potential to not only generate traffic and conversions but generate traffic and conversions from the right customers. When your affiliates share audiences that overlap with your buyer personas, you stand a higher potential of winning repeat customers. This is because trust is the crux of the affiliate model. The power of affiliate trust drives 16 percent of e-commerce sales in the U.S., the same as email marketing, and more than both display advertising and social.
And the best part is that it’s performance-based. Unlike PPC advertising in which you pay money every time a user clicks, regardless of what happens afterward, you can set your affiliate network up to only pay commission when a sale is made. Of course, some affiliates do work on click- and lead-generation models, so make sure to steer your affiliate agreements toward purchases. Another benefit of establishing an affiliate network is rapidly increasing traffic to your store, which is especially helpful if you’re only paying for conversions. And when each affiliate links to your store, you’re netting that backlink. If you partner with a lot of blogs with good domain authority, your store could skyrocket in the organic rankings based on the influx of backlinks.
How to Setup an Affiliate Marketing Program
Now that we’re clear on the pros and cons of affiliate marketing, how can you set one up for your store? It’s best to focus on a specific niche market and audience base. Then put together a list of websites that align with your niche. Your website criteria should be website traffic, domain authority and active social engagement. From here, you want to conceptualize how these affiliates will promote your products. Remember, they’re looking for an attractive business opportunity just as much as you are. If you approach a potential partner with no plan, you likely won’t get far. Think about your creatives, your messaging — anything that will make the affiliate’s promotion job easier.
Now it’s time to approach partners. When discussing a contract, be sure to set specific expectations regarding your commission model, as well as things you don’t want them to do (such as compete with you for traffic and customers). You might lose some affiliates stating such, but it’s better than these initiatives backfiring later.
As you start to bring on affiliate partners, don’t get content in what you’ve established; always be on the lookout for more associates that can drive results. If all this sounds like it’ll take a lot of time, you’re correct. Affiliate marketing is a major time investment. Unless you’re partnering with an agency, you’ll also need tools to keep track of your network’s results. If you’ve already learned how to set up an e-commerce site through a provider like Shopify, you can install a plugin that allows you to build your own tracking system. Otherwise, you’ll have to research affiliate tracking platforms to see what you like best.
As the internet continues to populate with more products and content, the power of affiliate marketing keeps growing. When debating whether you should leverage affiliate marketing for your e-commerce store, think about the quality of partner(s) you have an opportunity with which to collaborate. The right partners will drive more traffic and sales, and may even increase your repeat customer base. The wrong ones will drive up marketing spend and net you little-to-no results.