The
Four Myths of Affiliate Marketing
The Four Myths of Affiliate Marketing
Visualize your perfect customer. Right now, the people you're
trying to reach are on the Internet... or are they?
I was asked this question recently by a client targeting small
businesses through affiliate programs. This is one of the hardest
audiences to reach, because these folks are short on time and generally
not interested in receiving commercial messages in a business context.
At the same time, I know most of my customers surf the Net at work,
listening to radio and looking at sites -- visiting the virtual
water cooler, if you will.
How can I find these customers, real small businesses, with an
affiliate program? Figuring out the answer to this question requires
dispelling some of the myths about affiliate marketing. After all,
there's no reason for companies starting new affiliate programs
to repeat the mistakes of those who've gone before.
Finding an audience, whether it's of small businesses or consumers,
is still a game of measuring risk. You have risk as the advertiser.
The affiliate has risk as the publisher. The new affiliate game
is to weigh these risks to find the perfect formula of price, margin,
and performance.
Myth No. 1: If I open an affiliate program, I will automatically
get new customers without having to pay much.
Yes, you will get more new customers than if you didn't have a
program. This myth probably got started by complacent Internet companies
that figure the Net enables them to avoid contact with their customers
and pay very little to affiliates that generate sales. Offline,
these same businesses know you get what you pay for, but because
it's online everyone thinks it has to be cheaper.
A new trend is emerging, however. Good traffic is costing more,
because it is worth more. Cheap deals will only get you onto the
small sites. You get what you pay for.
Among sites with an audience of small businesses, the best have
huge CPM prices and fight cost-per-action (CPA) deals. They have
pieces of the small business audience, but no one site has been
able to be the resource for small businesses. (Sorry, AllBusiness,
Business.com, and smallbusiness.com. Although your sites are good,
I still believe there's no single site for small business.)
It comes down to the basic principles of direct marketing:
* The right offer. The offer must be relevant and interesting
to the users.
* The right list. The list must be composed of interested recipients.
Sound easy? You should try what I'm doing -- targeting small businesses.
* The right time. Emails in August die because it's a dead time
for direct marketing. Knowing when your customers buy is an essential
but overlooked piece of the puzzle. What will your affiliates do
during the dead seasons for your product or service?
Myth No. 2: Performance-based marketing is risk free since
I only pay on results.
Remember, you have less control with performance-based marketing
than with straight media buys.
Affiliates may be grabbing your links and promoting your products,
but:
* What if the quality they generate isn't so great?
* What if the volume generated is higher than what you have budgeted
for?
* What if your product is misrepresented?
If you play an active role in the program, you can minimize all
of these risks. Paying on results is nice, but affiliates need to
generate some revenue, too. Recently we've seen better affiliate
results selling higher-priced products with higher margins.
Surprised? It's harder to get 1,000 people to register at $1 a
registration than it is to sell a $297 product that garners you
$100 per sale. For this small-business campaign, we don't have a
$297 product. But we can set up a tiered reseller program, paying
based on volume of customers delivered within a month.
The best way to minimize risk is to handpick your affiliates, building
a reseller channel. Performance works when the risk of both the
advertiser and the publisher are evenly weighted.
You don't get that balance by posting a link on the Net and hoping
for the best. You get it by taking control of your affiliates as
a serious reseller channel.
Myth No. 3: Buying media based on CPM is bad because it's
risky. By opening an affiliate program, I won't have to pay on CPM,
only CPA.
Affiliate programs often can generate 33 percent of overall revenue
if merchants focus on them. Obviously, the other 66 percent comes
from somewhere else.
Smart affiliate program managers also buy CPM and use their affiliate
programs to benchmark deals. That way, when they strike those CPM
deals, they know what results should be expected. This is one of
the most powerful tools affiliate programs give, but folks like
to live in a black-and-white world in which it's either CPA or CPM.
Smart companies know you have to live in both worlds, blending
the risk on both sides to find the best solution for you, the affiliate,
and ultimately your customer.
CPM can be risky, if you don't know the metrics behind your media
buys. However, if you know that an ad drives X number of new customers
and it cost you Y dollars to run that ad, you can determine if this
meets your acquisition cost goals.
Your affiliate technology will allow you to track these metrics
in a turnkey way to determine whether buying on CPM makes sense
for you. In fact, once you look at your metrics, you may find buying
on CPM is cheaper than paying CPA.
Plus, more top publishers are now looking for hybrid deals, in
which you pay both a CPM and CPA component.
Myth No. 4: Success in affiliate marketing is driven by
having thousands of mom-and-pop Web sites promoting my products/services.
There are a lot of small Web sites that will begin promoting your
products, but the key to success is finding a small number of partners
who will drive results.
For example, one financial services company has over 30,000 affiliates
in its program, but 80 percent of the resulting revenue is generated
by only about 40 affiliates. Your results will be dependent on finding
the right partners, big or small, that drive results.
What's the formula for a successful affiliate program aimed at
small businesses? You need to create a system that generates performance
for both the advertiser and the affiliate. To do that, you need
to identify sites that will perform, and make sure you pay them
enough to make it worth their while. It's not as easy as the mythology
might suggest, but if you do it right it will certainly be worth
your while.
About the Author Declan Dunn is CEO
of ADNet International, a direct marketing services provider that
focuses on select projects and its own super affiliate network,
including the Net Profits business training systems delivered at
ActiveMarketplace.
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