How to Boost Your Online Sales with an Affiliate Strategy
by Peter Koning
Published on this site: October 21st, 2005 - See
more articles from this month
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
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