How to Boost Your Online Sales with an Affiliate Strategy
Ever since we had products for sale in the offline world, we had
sales agents. You know the ones - the multi-product travelling
sales "reps" carrying products and business cards from different
manufacturers. They made sales without having to carry inventory,
handle payments, and sign contracts. Their focus was to make the
sale by getting the order, which was then processed by the
manufacturer.
In the online world we now have the same model, with a twist.
Instead of agents we have affiliates. Affiliates are highly
targeted pay-for-performance sales agents which pre-sell your
customer and are paid a commission when the desired event occurs.
The most common reward is pay-for-sale, where the merchant pays
the affiliate who referred the paying customer.
Affiliates are treated as a complementary sales channel. The
merchant still receives their own direct traffic and makes his
own sales in parallel to the affiliate channel. The twist is that
the affiliate doesn't need to handle the order. This is taken
care of by the merchant, who has a tracking system to determine
which affiliate sent the business to them. These tracking systems
typically start with what are called affiliate links, which are
the links that the affiliate puts on their site or in an email.
What's an affiliate link look like? There are several variations,
but most have the affiliate link embedded in the linking URL.
E.g. If you ever see a link like
"www.some_clever_merchant.com/shop/?affid=1232" you can be pretty
sure that the affiliate with id 1232 will receive money from
some_clever_merchant when someone buys after clicking that link.
Other affiliate links are more complex, encrypted, or set up so
that the referring domain is tracked so no affiliate id is even
needed in the link. Some sites will cloak their links so that the
curious surfer can't detect that they have clicked or are about
to click an affiliate link.
Amazon has one of the oldest affiliate programs. The Amazon
Associate program rewards sites whenever someone purchases a book
or Amazon product after being sent to Amazon via an affiliate
link.
Other affiliate business models can be:
- "Pay per click" - the merchant pays the affiliate for the
traffic they send them
- "Pay per lead" - the affiliate sends traffic to the merchant,
where the prospects register their interest and a possible
sale occurs later. The merchant pays for the registration
information - usually some sort of application form on the
merchant's site.
- "Pay per subscription" - the merchant has recurring revenue
from the customer and the affiliate benefits accordingly
Merchants who are new to e-commerce usually don't establish an
affiliate network as the first channel. Like the offline world,
merchants typically build their own sales force first and fine-
tune their sales and marketing strategy before taking on dealers
and independent agents. The key for a new merchant is to ensure
that their e-commerce platform will support an affiliate strategy
later on. For merchants having a well tuned e-business, an
affiliate channel has been shown to add 20-30% to their existing
online sales.
However, it's not a free ride and many merchants end up with
failed affiliate strategies due to their lack of investment in
other related areas. The merchant needs to invest in a tracking
system, which is usually an outsourced affiliate network or an
in-house affiliate software system. Another expense to consider
is having sufficient human resources to recruit, screen, manage,
and motivate the affiliates. Without a good support system in
place, the affiliates will not produce the desired results.
What types of businesses use affiliate strategies? It is usually
any online business that sells products which can be pre-sold by
an affiliate. Service businesses can also benefit from an
affiliate program via a pay-per-lead program. If the service
business has recurring revenue from a customer, they need to
consider if they want the affiliate to receive a recurring
commission - it depends on the industry and what the competition
is doing.
Once a merchant has decided to establish an affiliate strategy,
they need to define the unique aspects of their affiliate
offering. Some questions to answer are:
- What are the benefits to the affiliate?
- What is the competition doing?
- What is the pay-for-performance model?
- What criteria should be used to screen the new affiliates?
- Who will manage the affiliates and motivate them?
- How are the affiliate to be paid and does your e-commerce
system support the accounting required?
- What affiliate management features do I need? Which ones will
differentiate me from my competition?
- What affiliate software tracking system or network should be
used?
An affiliate strategy done right can increase your online sales.
There are over 20 affiliate software packages – hosted, in-house,
and networks to choose from. There are over 200 features in
affiliate software and network offerings. Selecting the correct
affiliate software will depend on your strategy and desired
features. With the proper analysis of your strategy, selection of
the correct affiliate tracking system, and an investment into the
affiliate management resources required you will be well on your
way to boosting your online sales.
Peter Koning is the founder of www.Affiliate-Software-Review.com. He has been active in the international IT, telecom, and Internet industries for over 20 years. Merchants can compare affiliate software products side-by-side, see examples of products in the categories mentioned, and instantly create free feature comparison charts by visiting http://www.affiliate-software-review.com
Click here for more of his affiliate strategy marketing tips.
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