If you have been around the e-commerce world for some time, then you will likely be familiar with the concept of affiliate marketing. If you are new to the game then there some things you may want to know.
There’s no real mystery to affiliate marketing – you are just piggy-backing onto someone else’s website to drive traffic to yours. And, as we know, traffic plus relevant content and good, well priced, products equal sales. But like most traffic generating activities, there is no free lunch!
You will almost certainly have to pay something for the privilege of receiving potential customers - but the main advantage is that you only pay if you make a sale, so it’s a truly variable cost.
So who are these ‘affiliates’? Well, they can be anyone at all with a website of their own, They may be companies set up specifically to generate affiliate revenue such as search engines, shopping portals, voucher and discount specialists, bloggers or perhaps sites that give free expert information to attract the traffic themselves. Some of these companies rely on display advertising to monetise their site while others create affiliate revenue by sending traffic to e-commerce sites and sharing in the revenue generated from completed sales.
For an affiliate process to work there must be a mechanism that will enable you or your traffic provider to track the traffic (click-throughs) and calculate their share of any agreed payment for a successful sale. So you have a choice of routes for this.
1. You can use one of the plugins available for Shopify to create an affiliate network tracking system.
2. You can sign up with one of the many ‘affiliate’ platforms’ that sit between you and the affiliate. As always there are pros and cons to both solutions.
Self –Managed Affiliate Operation
Using a ‘plug in’ you can set up the platform yourself using one of several apps such as:
Using this method, you do all the work to find and manage the affiliates, but there are some advantages:
- You get to set the revenue split with the affiliate
- You get to have a more ‘personal’ relationship with your affiliates
- You avoid the fees from the affiliate platforms
So if this is your chosen option, then you will need a strategy for identifying and recruiting affiliates.
Usually, they’re happy to provide links from their sites if they can see there is a financial advantage. So if you are in the business of selling pet jackets, then you would probably want to try to find all those other sites that have pet owners look at them. It could be as a simple as a directory of pet stores or a discount voucher site with a pet product category, or it could be a video blogger who puts up daily videos of their latest cat antics. All of them would be targets for your affiliate program.
Several years ago we saw significant growth in the number of companies willing to set up affiliate programs on behalf of e-commerce site owners. However, with the emergence of the self-managed option, there has been a noticeably more competitive edge to their offerings.
The main advantages of using a platform are:
- Access to a huge number of ‘pre-vetted’ affiliates in multiple categories
- Ease of management – the platform tracks all the transactions and makes automatic calculations of the affiliate fees to be paid.
However, the costs can be significant. Most platforms will usually take 25-30% of the fees paid to affiliates in addition to those affiliate fees. So for example if you agree to pay an affiliate 10% of your sale revenue, then you may have to pay a further 3% to the platform provider. There are almost always set up fees also, and these can often rule out a start-up business because the provider knows it will be a slow growth and cover their costs early on. Remember also that if you include discount voucher sites in your affiliate network, then any discounts you offer them are a further erosion of your margin.
Perhaps the main disadvantage to using a platform is the fact that most providers (despite their claims otherwise) are very ‘affiliate-centric’. Their programmes are primarily designed to increase revenue for themselves, so they try to convince you to pay more commission and include more affiliates than may be good for your business.
Last Cookie Wins!
Affiliate tracking is widely done with Cookies – particularly if you are using a platform. So while you may have several affiliates who all pass traffic to your site, it’s only the one that last did so before a sale occurs that earns the commission.
So if you think that an affiliate strategy may work for you, then perhaps talk to a few platform providers and compare their charges for your business. If you have a good digital community already in place, then maybe consider running the process yourself. Affiliates can give you some quick wins and remember that just like PPC, once a customer has found you through an affiliate click through, they may become a long term customer and access your site directly next time.