As an entrepreneur or a marketer, the risk for you to use affiliate marketing is extremely low and the reward is high. You only need to pay affiliates when a customer converts, not when they drive people to your website.
Neil Patel and Dan McGaw discuss how to increase your revenue with affiliate marketing. Neil also co-founded Crazy Egg and has spoken at over 100 marketing conferences.
He has tons of experience with affiliate marketing, both from being an affiliate and driving the revenue of other companies, as well as through an affiliate program trying to recruit affiliates.
Among all of the companies Neil has created, he has had to deal with affiliates, whether that was running affiliate programs or driving affiliate traffic or potential revenue to other companies.
Foundation of Affiliate Marketing
Affiliate marketing can be thought of as outsourced marketing, in which you’re hiring affiliates who are paid to bring you customers. If they drive visitors to your website, you don’t have to pay them. You only pay them if they convert visitors into customers.
While you are trying to generate traffic as a marketer, the main goal is to increase the number of customers. If you generate a million visitors a month, but the visitors don’t equate to more leads or revenue, it’s almost useless. This is why the affiliate marketing space is so popular, especially in the web hosting industry, where most of their business is from affiliates.
How affiliate marketing works:
- Affiliate is assigned a tracking URL:
This is to track which affiliates are driving your traffic.
- Affiliate markets your company:
Affiliates can promote your company through several different ways: paid traffic (like Google Ads), a YouTube video of the product and link to it with the affiliate ID, email blast, blog post, reviewing products, etc. The possibilities are endless. When you sign up affiliates, you should also limit how they can promote it.
- Customers or leads are acquired:
This is when the visitor purchases the product or signs up.
- Affiliate receives a commission:
When the affiliate drives you a customer or lead, you pay them out.
Something to know is that affiliate marketing and referral programs are different. Referral programs are great for people who are already customers. For example, if a company had a referral program, and a current customer tells his or her friend about the product, the customer can receive some sort of reward through the referral program. With affiliates, they don’t even need to be customers. Anyone can be an affiliate. You can recruit them in any fashion: affiliate.com, LinkShare, blog posts, etc.
Advantages of Affiliate Marketing
There are a number of advantages to using affiliate marketing, especially for startups:
- Pay only for results.
- Can be more cost effective:
Neil says he hasn’t seen any other marketing form more effective than this.
- Affiliates may be better at creating copy and reaching segments:
Why would someone sign up to be an affiliate and spend time and money if they think they won’t be able to drive you customers?
- You know your cost per acquisition:
This will help you determine if you’re actually losing or making money.
- You almost never lose money:
Sometimes affiliates are a bit shady and unethical, and you’d want to drive them out as soon as possible.
Drawbacks of Affiliate Marketing
There are also drawbacks:
- You don’t control the message:
You want to be careful of this because you don’t want them to lie or poorly represent your brand. They’re just looking to make money, so they aren’t seeing if they are driving good or bad leads.
- Lead quality may not be as good:
Chances are, the quality of the people are going to be as good as the ones going directly to your website.
- If mismanaged your traffic may come from an unreputable source. This could make your brand look bad.
Want to learn more about affiliate marketing? Then check out this video: