What is affiliate marketing?
Affiliate marketing is a process by which you hire and external company to promote your business across a number of different websites. While this is a great way to increase the amount of traffic your website receives, it is something that could end up eating in to your profits depending on which company you choose and how successful it is.
Affiliate marketing companies are paid based on commission. Some companies charge a commission on sales made by people who have accessed the store through the affiliate site, while others charge simply based on the click throughs they generate to your site. Like I said earlier, each of these can be more costly than the other depending on the success of the affiliate marketing.
For example, if the affiliate marketing company charges commission based on the click throughs, it means you will have to pay for the service even if it does not generate a sale on your site. However, if you have a high conversion rate in terms of people who visit your store and then make a sale, you will most likely find this will be a cheaper option than a sales commission rate. This is because the commission rate for a sale will be much higher than the click through option as you are actually making money from the transaction.
Looking at the opposite end of the spectrum, if you receive high levels of traffic but a smaller number of sales, you would be better having the sale based commission as it would most likely save you money. However, if you have high traffic but a low sales conversion, it is most likely other parts of your business you need to look at to determine why the conversion rate is so low.
The main problem with affiliate marking comes not in what the concept offers, but how you track which users have visited your store solely because of the affiliate marketing. To combat this you can either purchase affiliate software that allows you to monitor the visitors it generates, or join a affiliate network.
Things to consider
Before making a decision to either use affiliate software or an affiliate network you must consider:
- Will it integrate with your current shopping cart software?
- Is online support assistance available should you require it?
- Is there a no risk trial period for you to give it a go or some form of money back guarantee?
- Is the costs for the software and the commission costs worth it based on how much income are generating?