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- A win-win for consumers
- Advantages for companies partnering up with affiliates
- Disadvantages for companies partnering up with affiliates
- Top 3 reasons why companies love Affiliates
- 1. Free website promotion
- 2. Low-Risk Opportunity for Revenue
- 3. Boosts Search Engine Ranking
- Example: The power of the two-tier model
Businesses of all sizes use Affiliate marketers. Partnering up with an affiliate, or many affiliates can exponentially increase sales, and it can happen fast. In fact, companies realize the huge benefits of partnering up with affiliates and are scrambling to set up affiliate programs on their websites. There, they invite affiliates to promote their products & services and get paid a commission on every sale.
See how this company’s sales went from 4 million to 11 million by utilizing affiliates.
It’s an incredible deal for businesses or anyone who is selling a product/service. They just set up their website to enable the administration of an affiliate program. Then they can tap into their vast consumer bases.
An affiliate program is an automated sales system that will promote a company’s products and services 24/7/365.
A win-win for consumers
Consumers who are on an affiliate’s mailing list or follow them on social media, build trust over time if the affiliate finds and promotes excellent products and services. Thus, the affiliate’s “list” becomes very valuable.
Consumers who have previously had a good experience by purchasing an affiliate’s products or services will have access to other good quality products, and will also be able to participate in special deals that the affiliate may have been able to secure for them.
Advantages for companies partnering up with affiliates
- No marketing costs.
- Fully Automated process.
- No commissions paid until a sale is made.
- No additional salespeople to hire and manage.
Disadvantages for companies partnering up with affiliates
- Need to optimize the company’s website to administer an affiliate program.
- Affiliates may not be loyal to the company’s brand.
The cost to modify a company’s website to enable it to process affiliate sales is easily offset by not having to pay for any print, video, or any other promotional media. Also, there is no need to hire, train, and manage any additional salespeople.
A company should accept the fact that some affiliates will not promote its brand as much as others. This will depend on whether the company has an exclusive deal with an affiliate, or allow anyone to promote its products.
An exclusive affiliate partnership would naturally include some sales expectations, whereas having 100’s of affiliates brings the power of numbers to the table immediately, and eliminates the loyalty issue.
Top 3 reasons why companies love Affiliates
The reasons for signing up Affiliates far outweigh any negatives. A company will immediately broaden its consumer reach. Its marketing reach can go from local to global as soon as an affiliate starts their promotion of the product/service.
Affiliate programs let a company create and customize their own team of ‘remote’ sales representatives. Also, it can do this without meeting any of them. All of these sales representatives just happen to have their own websites and visitors lists. Moreover, the company gets their product or service in front of all of them. So if the Affiliate doesn’t make a sale, they don’t have to pay them.
It’s a great way to promote a business and reach a large online audience in a short time.
1. Free website promotion
One of the best things about joining an affiliate program is that the marketing partners promote your website for free. In effect, other businesses, along with their customers, become your marketing team. You are not required to pay your affiliates unless they generate a sale or direct customers to your site, whatever the terms of your agreement are. This is quite helpful because you can benefit from both a sales force and marketing team at the same time.
No matter if the visitors to your site are buying something or not, your overall traffic is increasing. Not to mention, more people are getting to know about your brand. They might end up signing up for the blog or bookmark your site. Affiliates can play an integral role in driving traffic to your website, which leads to brand exposure and recognition.
2. Low-Risk Opportunity for Revenue
Another benefit of engaging an affiliate program is that it offers a very low-risk opportunity for making additional revenue for companies. They can let affiliates promote their products or services through established channels that the company may never have been able to accomplish through traditional methods.
Nowadays, viral marketing is all the rage. It is a method of promotion where the customers market a product or service by telling their friends about it via social media, email, or a public review. One could say that using an affiliate program is a version of viral marketing because it has virtually unlimited potential. Affiliates can reach hundreds and thousands of people with a single post.
When customers market/review a company’s product via their social media accounts, it boosts the company’s profile because generally the public trust other consumers more than they trust companies.
3. Boosts Search Engine Ranking
Having links to a company’s website plays a crucial role in their Search Engine ranking with the major search engines like Google, Bing, and Yahoo. As more sites direct visitors to the website, it is beneficial for the company’s ranking. Joining an affiliate program and then getting affiliates to link back to the website can bring amazing results for the company’s Search Engine Optimization.
The incredible power of Two-Tier Affiliate models
This is a great way to boost revenue for both the company AND the Tier-1 affiliate. The sub-affiliate (aka – Tier-2 affiliate) gets the standard affiliate commission when they make a sale.
A two-tier affiliate model allows an affiliate to earn commissions, not only from their own sales but also from their Tier-2 affiliate’s sales. The commission from a Tier-2 affiliate sale is less than the general affiliate sales commission, but it’s an excellent way for the affiliate to vastly increase earnings. This is especially so if the Tier-2 affiliate has many followers who might buy the product. Companies love it too because they get many more customers, while only having to pay a little more than the standard affiliate commission. It’s a win-win for everyone!
Example: The power of the two-tier model
Let’s suppose a company pays the following commissions:
$40 commission to any affiliate for selling their product.
$10 extra to a Tier-1 affiliate for every sale a Tier-2 affiliate makes.
As per the diagram above:
Let’s assume that Tier-1 has 2 affiliates, and Tier-2 has 20. (A total of 22 affiliates)
Let’s assume every affiliate (Tier-1 & 2) brings in 10 sales.
Tier-1 affiliates make 20 sales (2 people x 10 sales each).
Tier-2 affiliates make 200 sales (20 people x 10 sales each).
Let’s apply the following sales and commission amounts.
Each sale generates $100 revenue for the merchant.
Each affiliate gets $40 per sale.
Each Tier-1 affiliate gets an additional $10 each time their Tier-2 affiliate makes a sale
Now let’s look at revenue and commissions.
Tier 1 sales revenue: 2 x 10 x $100 = $2,000.
Tier-2 sales revenue: 20 x 10 x $100 = $20,000.
TOTAL SALES REVENUE: $22,000
Tier-1 total commission: (2 x 10 x $40) + (20 x 10 x $10) = $2,800
Tier-2 total commission: 20 x 10 x $40 = $8,000
TOTAL COMMISSION PAID: $10,800
The chart below shows a 933% increase in profit by having a two-tier model.
Two-tier model – Advantages for companies
- Can boost sales by an incredible amount.
- The customer base grows exponentially.
- Brand awareness and the company profile increases exponentially.
- Website ranking increase dramatically.
Two-tier model – Advantages for Tier-1 Affiliates
- The affiliate earns commissions on their own sales AND from their Tier-2 affiliates.
- The affiliate adds to its existing commission revenue without having to do any more work.
Two-tier model – Advantages for Tier-2 Affiliates
- Tap into Affiliate programs that are already being promoted by experts.
- This gives the affiliate a better chance of promoting a reliable product.
This article shows the power of affiliate marketing. Companies get to increase their revenue with very little additional expenditure dramatically, and affiliates get to make sales commission by introducing existing products to their followers from trusted brands.
It is a brilliant model where everyone benefits.
If you want to make some additional income, consider starting your own online business. This company has a great platform for training on how to set up your own affiliate marketing business. It’s free to try out, with no credit card required. Check it out here.
Additional information on Affiliate Network in Wikipedia.