Marketing your small business involves creating campaigns, testing, tweaking, optimizing your website and getting your customers to act, all while maintaining a strong return on investment. One simple way to scale your marketing efforts is with affiliate marketing. Affiliate marketing is an excellent strategy for increasing sales and online revenue. In fact, U.S. affiliate marketing spending is expected to top $8 billion by 2022. That's up from $5.9 billion in 2018.
Affiliate marketing has a strong return on investment (ROI) for small businesses. While using affiliate marketing for your website can increase your revenue, this selling technique comes with other benefits as well.
What is affiliate marketing?
Affiliate marketing is the process of choosing and working with other people or businesses that will market your products and send traffic to your site. You pay those people or businesses, called affiliates, a commission on each conversion.
Affiliate marketing is a great tactic for small businesses because you only pay commissions on sales after they occur. The benefit for affiliates is in promoting products and services that they enjoy while earning a percentage of the profit from each sale they make.
How does affiliate marketing work?
After signing deals with affiliates, you will track how many sales and how much online traffic they are responsible for through affiliate links that connect one website to another. The main objective of affiliate marketing is to split the responsibility of product marketing and creation between the seller/product creator and the affiliate/advertiser.
10 reasons to use affiliate marketing
Here are 10 reasons your small business should use affiliate marketing.
1. Progress tracking
Affiliate marketing programs offer real-time online tracking, which lets you know precisely when a visitor clicks a link and goes to your site. Affiliate platforms also provide metrics on impressions, clicks, sales, and custom conversions like form submissions or email signups. Everything is trackable, and with this information, you can see how your affiliate marketing strategy translates into online revenue and benefits your business.
2. Enhanced promotions
Affiliate marketing lets you supplement your promotions with affiliate links. For example, if you have a product launch just before Christmas, you can send that product information to your affiliates so they can create buzz around your product and include your promotions on their websites.
Your online promotional campaign may include a product launch countdown where you offer a discount on a different product each day until launch. Perhaps you're giving a behind-the-scenes look at the product or in a Facebook Live video, or hosting a live Q&A.
3. Social proof
Affiliate marketing is one of the strongest ways to incorporate social proof into your online business.
Social proof is the idea that customers will conform to the actions of others if they believe it is the right choice. Social proof exists all around us, but it's especially powerful in the form of customers' reliance on product reviews, suggestions and testimonials.
According to a BrightLocal survey, nearly 79% of customers say they trust reviews they read online as much as personal recommendations. An affiliate relationship shows online customers that another business believes in your product or company so much that they are willing to endorse it themselves.
4. Performance-based payment structures
Affiliate marketing differs from traditional marketing in that you only pay your affiliate when a sale is made. If the affiliate's work is not producing sales, you don't have to pay them – and you also have the opportunity to shift your focus to other affiliates, which may have audiences who are more interested in your product or business. Most e-commerce affiliate commission rates are around 5% to 15%, so you can enjoy a return on ad spend (ROAS) of 10-to-1 or higher. This is a cost-effective marketing tactic that guarantees a return, because you set your own commission rates.
5. Online business scalability
When you incorporate affiliate marketing into your online business, your affiliates act as an indirect sales team, able to promote your products on their own websites and generate more revenue for your small business because they engage with their audiences daily. Here's a couple of tips to scale your affiliate's reach and create more revenue:
- Diversify your affiliates. No one affiliate should bring in more than 25% of your affiliate revenue. Use coupon sites, customer loyalty sites and other content sites to ensure you don't become too reliant on one affiliate.
- Know your competition. Do your due diligence to know which affiliate programs or influencers your competitors are using and what their commission rates are. When you make your brand easy to work with and offer a solid commission, affiliate bloggers and businesses are more inclined to work with you.
6. Website sustainability
One of the top reasons websites fail is lack of traffic, which calls for greater SEO efforts. Use affiliates to create brand awareness and supplement with strong social media engagement to help build your traffic.
7. Strong ROI
The ROI when using affiliate marketing is usually extremely high. This strategy can increase average order value, per-customer order average, and average customer revenue.
8. Increased sales
Building relationships with strong affiliates takes time and guidance, but if you're committed to putting in the work, your time will pay off. The more exposure your products and services get, the higher your sales will be, and affiliate marketing is a great avenue to achieve this.
9. Leveraging different skill sets
Given the large pool of affiliates available, you'll have access to an extensive collection of varying skill sets. This raises the chances of further sales of your products, as each seller uses their particular skills to attract different audiences.
10. A different marketing stream
It's important to never use only one form of marketing. Affiliate marketing provides an extra level of protection against using only one form, as affiliates employ a variety of advertising techniques to ensure that every possible avenue is covered.
Sean Peek contributed to the writing and research in this article.