In my previous post, Affiliate Marketing – Part 1: A Return on Marketing, I went over how:
- Online retail is getting a lot more competitive;
- Affiliate marketing is a relatively low risk (i.e. cost) way to maintain a competitive edge; and
- The medium is a much more legitimate online sales strategy than some perceive it to be.
In this post, I’ll elaborate on the second point and discuss how affiliate marketing is an online sales/marketing strategy that is based on results
Why Affiliate Marketing
The two most important part of any marketing campaign is that:
- There is a way to measure results (ROI); and
- It targets the right demographic.
Since affiliate marketing is a performance-based model, it does both rather well because:
- You only have to pay for ads when they actually convert into a sale; and
- It allows you to target the right audience when they’re in the right mood.
Pay Only for Performance
To recap: through affiliate marketing, merchants/advertisers deploy their ads through a network of affiliates. Affiliates in that network who are interested in promoting that product place those ads on their site.
If a user clicks on an ad, a cookie is used to track them over to the advertiser’s site. If the user ends up making a purchase, the affiliate gets a commission on that sale. If the user doesn’t purchase anything, there is no cost to the advertiser.
In this respect, affiliate marketing is like tapping into an army of freelance salesman that work only on commission. Even if shady affiliates are advertising your product, it’s not going to cost you to advertise on their site.
Because affiliates only get paid when their ads convert, the affiliates that are going to promote your product are going to do so because they have targeted traffic. In other words, they are already running sites with content that’s relevant to your product line.
For example, if you’re a cloth diaper retailer with an affiliate program, I, as a content publisher, will only join your program if I have family-oriented traffic. If, on the other hand, I have adult or sports traffic, I don’t stand a chance at making a commission through your ads because none of my users are going to click on your ads.
Consequently, your ads are distributed according to user-demographic and mindset/mood. Users on affiliates’ sites are only there because they are actively interested in your type of product at that moment. It’s like you’ve got hundreds or even thousands of tiny, highly-targeted boutique sites on the internet aligning your product offering with relevant content.
One of the things that has made affiliate marketing a popular and smart choice for product marketers recently is the rise of blogging. A number of bloggers are looking for ways to earn money for their efforts. By placing affiliate ads on their highly targeted niche content, they have a low-effort/potentially high-value way to earn commissions.
Choosing the Right Network
Of course, just as every retailer has its own business model and range of product offerings, so does every affiliate network. Although most any affiliate network will likely welcome you in, that doesn’t mean that they’re going to connect you with the right affiliates to promote your product.
There are a number of other considerations you need to make when shopping around for an affiliate network, I’ll be taking a look at what those considerations are in my next post.
Photo credit: PICT4730.JPG by gothick_matt