Businesses in the United States will spend nearly $7.5 billion on affiliate marketing this year. Given the growing pace, affiliate marketing spends will soon touch $10 billion per year. That’s almost a third of ecommerce businesses’ favorite advertising channel, Facebook ads! (😲)
Now, you must be thinking: “Why are businesses — even the biggest of all — spending so much on affiliate marketing? They must know something I am yet to discover…what is it? what is it?”
This article will answer your question.
In this article, you’ll discover why businesses invest in affiliate marketing and why you should create an affiliate program for your business ASAP.
Excited? Let’s begin from the start!
What is Affiliate Marketing?
For businesses, affiliate marketing is a performance-based marketing technique wherein they compensate their customers and/or third-party influencers/publishers a pre-set commission for every lead or sale they bring.
For affiliates/publishers/promoters, affiliate marketing means to promote someone else’s product or service for a commission.
7 Reasons To Create An Affiliate Marketing Program
These seven are the fundamental reasons why affiliate programs are appealing to businesses:
1. Affiliate programs cost very little to set up
Affiliate marketing is the cheapest form of advertising there is. To set it up:
- You don’t need an ad team to handle affiliate campaigns.
- You don’t need to buy ad space.
- You don’t need to invest in creatives.
Instead, here’s all you need to do:
- Create an affiliate program: You can use Social Snowball (starts at $0/month) to automate affiliate marketing if you are on Shopify. It auto-converts all the customers into affiliates and assigns personalized code to each affiliate, leading to more shares and conversions.
- Set a commission rate: Typically, businesses pay publishers 10-20% of the revenue they help generate.
- Make the initial effort of attracting quality promoters/affiliates: For most ecommerce stores, all current customers personally know potential customers because the products are everyday use in some way (example: clothes, shoes, fragrances, etc.). So an app like Social Snowball will do most of the job by converting all customers to affiliates. However, if it’s a niche product or service, you’ll have to reach out to relevant publishers to make them aware of your solution.
Then, everything works on autopilot: the affiliates work for the commission and bring the sales for you.
2. You pay for performance
As mentioned in the definition itself, affiliate marketing is performance-based advertising. And it’s the most appealing part of affiliate programs for businesses, from a marketing costs viewpoint.
Typically, you’ll have to pay a percentage of the revenue after the affiliate brings a successful sale. In other words, affiliates will receive their commission after someone buys using their link/coupon code and doesn’t ask for a refund during the trial/return period.
This means not only does an affiliate program cost less to set up, but the required ongoing costs to run it are also minuscule. After all, you’ll be paying a fraction of whatever the affiliate-brought-customer will pay you.
3. Affiliates increase brand awareness
Most affiliates (say Instagram influencers monetizing their accounts using affiliate marketing) already have a decent-sized audience. So, when they mention your product or service in their stories or blog posts or newsletters, it’s likely that many of their followers are discovering your brand for the first time.
In short, you’re increasing your brand’s awareness with affiliate programs, at the least.
4. Affiliates build brand credibility
92% of consumers say they trust earned media, such as recommendations from friends and family, above all other advertising forms.
So when an affiliate — with a relevant audience they built over time — says, ‘Hey, this product is good. Click the link in my bio to buy it.’, the audience believes what the affiliate says. Meaning, not only do affiliates increase awareness, but they also build your brand’s credibility by promoting it.
5. Affiliate programs bring targeted traffic
Affiliates won’t waste their time and effort promoting irrelevant-to-their-audience and non-converting products or services. This means when someone signs up for your affiliate program, they know if they promote your solution, their visitors/followers/readers/viewers are likely to click on the link and buy.
In other words, affiliates bring the most relevant/targeted people to your site.
For example, Ali Abdaal — a YouTuber who talks about learning, productivity, thinking, etc. — promoting affiliate links of Brilliant (a learning platform) is a brilliant idea. However, he likely won’t sign up to promote Dbrand’s skins or cases like MKBHD would because Ali knows his audience. (I am aware it’s a sponsored video, but you get the point.)
Quick Tip: Have a manual vetting process to approve affiliates if your target audience is specific.
6. Traffic from affiliates convert well
When affiliates promote anything, they give some context about the thing they are promoting. For example, here’s Ali explaining what Brilliant is and what the viewers can learn if they sign up for Brilliant (of course, using his affiliate link):
Plus, visitors already trust the affiliate and therefore trust your product, as mentioned earlier.
This means visitors are already halfway through the sales funnel if they click the affiliate link.
Only those at the or past the Consideration stage of the sales funnel click on affiliate links, and hence the conversion rate of such traffic is high compared to any other marketing channel.
7. Affiliate programs boost revenue
This goes without saying.
All the efforts of affiliates will eventually lead many of their followers and visitors to the bottom of the funnel, i.e., purchase. Consequently, your business will make more revenue because of affiliate programs.
What more reasons do you need?!
Ok, here’s one bonus reason to have an affiliate program: Customers brought by affiliates can also become affiliates, leading to a growth loop of more affiliates = more customers = more affiliates.