Introduction To Affiliate Marketing

Affiliate MarketingIf you’re looking for a new source of customers for your ecommerce website then consider this…

How would an influx of targeted visitors which you only pay for if they actually buy something? Sound interesting?

I’m talking about affiliate marketing, and for the right types of business it can be a great additional traffic stream.

How Does It Work?

With affiliate marketing you have a number of people (called affiliates) acting on your behalf to promote your website. You set them a commission rate which is either a % of sale value or a fixed amount.

The affiliates then go out and promote your site with a special affiliate code, this code ensures that when a visitors arrives at your site through an affiliate link they are tagged as a particular affiliates traffic source.

If a visitor who has been referred from an affiliate completes a sale online then the affiliate earns their commission.

The whole tracking system is handled by affiliate software and it is a fairly automatic process once set up.

Would It Work For You?

Let’s be clear, affiliate marketing is not a good match for every ecommerce site.

Generally the best affiliate programs are when both the retailer and the affiliate are able to earn a decent profit, this means that you have to have a decent margin on your items.

For example, let’s say that your average transaction value was £35 and your gross profit margin was 30%, this would equate to a profit per sale of around £10.50.

If you offered affiliates a 10% commission level then they would earn £3.50 of every sale leaving you with £7 of profit.

The things to consider with this example are:

  • You are giving away a third of your gross profit margin (£10.50 / £3.50) – Could you still operate at enough of a profit to make your business worthwhile at this level?
  • You may have won the sale without paying an affiliate, if your products are only available at your site then a determined customer might have found and bought from you directly.
  • Does your website generate enough sales to make it worthwhile for an affiliate to bother promoting you? If an affiliate can promote a competitor or another related service and earn more money then they will.

If your answers to these considerations are all positive then implementing an affiliate program could be a very good move for your ecommerce store and should definitely be looked into further.

In future articles I’ll cover more details about affiliate marketing and the different options you have for running a programme.

(Image Credit: Images_of_Money)

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