By Alex Mifsud, CEO of EntroPay.
According to research conducted by Econsultancy earlier in 2009 UK sales from affiliate marketing were worth £3.82bn in 2008, a 22% increase from 2007. And, despite the recession, the study found that affiliate marketing sales are set to grow to well over £4bn by the end of 2009.
With further expansion clearly on the horizon, this form of performance related marketing has significant benefits when budgets are tight.
Firstly, because it is a performance related marketing cost, businesses using affiliate marketing will only spend money if a sale has been completed, that is, if the business has made money. This allows smaller businesses with limited budgets to compete with much larger players.
Secondly, affiliate marketing also provides an additional way for businesses to add new revenue streams from existing customers and visitors to their website – by becoming an affiliate and making referrals to third-party providers and generating commission from sales that result.
Businesses wishing to use affiliate marketing to promote their products or services have one of two options: to run their own in-house affiliate programme or to outsource to an affiliate network. For most small businesses, the investment and expertise needed to set up their own in-house programme is probably not worthwhile.
Piggybacking off an existing network is often the more attractive option, especially as affiliate networks come with an established community of affiliates in addition to having appropriate affiliate management software.
Owing to the sharp growth and online focus of affiliate marketing, various portals have now been established which collate background information around the affiliate marketing sector, such as affiliates4u.com and abestweb.com.
The Affiliate Network Buyer’s Guide from Econsultancy is also an excellent resource for businesses looking to introduce affiliate marketing into their marketing mix.
Common mistakes and top tips
With an estimated £227m paid last year in commission and fees to UK affiliates and networks, according to Econsultancy, frequency of commission payments is one area where the influx of affiliates has led to fresh challenges.
For affiliate programmes that can deliver payments regularly and frequently this is an opportunity to increase loyalty and brand recognition as well as to mobilise smaller affiliates that find it difficult to generate the minimum thresholds imposed by less accommodating networks.
One way that small businesses can maximise the impact of their affiliate marketing scheme is by tapping into the potential of micro-affiliates. The boom in user-generated content has led to the rise of social media such as blogs, forums and social networks, and these are increasingly being used by consumers as commercial retail space.
This has impacted on the development of affiliate marketing through the emergence of micro-affiliates. Whilst individually these smaller affiliates might not drive much traffic to the business’ site, they make up a ‘long tail’ and collectively have the power to drive significant numbers of visitors, or ‘click-through’ as it is known in the jargon.
This ‘long tail’ of micro-affiliates represents a huge opportunity for businesses looking to boost traffic back to their sites, generate buzz and spread messages virally, which all ultimately lead to extra revenue.
However, several affiliate networks and businesses which run their own affiliate programmes impose thresholds as high as £100 that affiliates must meet before they are paid.
This can cause frustration for smaller affiliates or “hobbyists” who often rely on the revenue generated by their marketing activity to pay for web hosting and search advertising in order to maintain their online presence.
Typically micro- affiliates struggle to meet brands’ imposed thresholds, giving them less incentive to promote traffic to a brand’s site. Businesses wanting to make the most of micro-affiliates need to find sector-friendly payments solutions that allow them to generate loyalty through fast, efficient payments even for small amounts.
Marketers who recognise and address the issues surrounding payment will put themselves in a strong position to leverage the collective power of affiliates and micro-affiliates and achieve competitive advantage.
For those setting up an affiliate marketing scheme for the first time look for an Affiliate Network that has an efficient system which allows all affiliates to be paid instantly, regardless of the size of each payment.
Despite the clear growth in the affiliate marketing industry few business are maximising the value of the ‘long tail’ of affiliate marketing. In the past, it was often perceived that the administrative and cost implications of working with so many micro-affiliates would cancel out the potential revenue benefits. However, small businesses can use established networks and new technologies to challenge this reasoning and offer effective ways to take advantage of a booming population of affiliates.
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