Is Affiliate Marketing Worth it? (2022) An In-Depth Rundown
There are an endless amount of ways to make money online. And each business model comes with its own unique list of pros and cons.
Dropshipping, SaaS, Print-on-Demand, and then there's the method you clicked on this article for:
But is affiliate marketing worth it?
With a plethora of options to choose from, it can be hard to know which ones are worth their salt.
Today, we're going to be talking about what affiliate marketing is, how to implement it, and whether it's worth it for your business model in the first place.
So let's get right to the good part.
What is Affiliate Marketing?
Typically, it's solely up to a business to market its own product.;
They can pay for ads, build content for organic traffic, purchase billboards, and more.
But affiliate marketing allows a business to share some of its profit with customers in turn for extra marketing help.
Affiliate marketing is the process of paying commissions to people outside of your company to refer more customers to the brand.
These people are called affiliate marketers.
But if you clicked on this article, you probably know that already. So let's talk about how you can start making money through affiliate marketing- and if it's worth it in the first place.
How to Make Money Through Affiliate Marketing
There are two ways you can make money through affiliate marketing.
You can become an affiliate marketer and market products for other businesses. An affiliate marketing business can be highly lucrative, but it's not a get-rich-quick scheme. It'll take time and effort to get there.
This article isn't so much about that, though.
Today we're going to focus on why you might want to use affiliate marketing to market your own business.
And what better way to do that than to talk about the ups and downs of affiliate marketing in the first place?
So let's start with the pros.
The Pros of Affiliate Marketing
Affiliate marketing comes with quite the list of pros, hence why many businesses take advantage of it.
And one of the main pros behind it is the amount of financial risk it involves for a business.
1: It Comes with Low Financial Risk & High Potential Rewards
Since affiliate marketing comes with little to no upfront monetary costs, it's a relatively low-risk endeavor.
And since affiliate marketers are paid on a commission-based premise, it means you'll never pay unless you're already making sales.
Though the commission-based pay structure does make affiliate marketing a less lucrative option for businesses with small margins, we'll touch on that in the con section.
2: It's a Scalable Model
Scalability is a vital piece of the puzzle for companies with significant growth in their roadmaps.
After all, the last thing you want to bottleneck your growth is your business marketing channels.
And that's why affiliate marketing is an excellent option for those businesses. Since it's highly flexible and relies on outside marketers to expand revenue, it's easy to scale your affiliate marketing operation with the rest of your business.
3: It's Great for Businesses with a High Retention Rate
Another of the main pros?
Affiliate marketing can be a perfect match for businesses with high retention rates, and that's for a few reasons.
First, high customer retention rates mean you'll have more people in your pool of potential affiliates. If your business primarily consists of customers who make one purchase from you and hop ships, they likely won't stick around long enough for the affiliate program to be worthwhile.
Compare that to a brand with a loyal following behind it- You'll have more room to offer incentives and rewards like in-store credit and bring more marketers into the fold in the first place.
And the last reason is that since you generally pay commissions to your affiliates on the first purchase a referred customer makes, every returning purchase builds up to an even higher ROI for you.
With all that being said, just with anything- affiliate marketing still has downsides that come with the package.
Those downsides are well worth it for some businesses, but for others, the cons could be deal-breakers.
The Cons of Affiliate Marketing
1: It Can Be Harmful to Branding
One of the most significant downsides to affiliate marketing is that you don't have the same level of control over your affiliates as you might with full-fledged employees.
Since affiliate marketing relies on people who aren't employees of your business, they may not follow your brand as closely as you'd like.
This can come with potential risks to your branding.
With an affiliate program, marketers can use materials that conflict with your brand's values and voice or go against them entirely if left unchecked.
And in the worst case, it's even possible that they use "black hat" tactics to misinform or mislead consumers into buying a product.
With good policies and management over your affiliate program, you can keep the brand risk to a minimum though.
2: Affiliate Marketing isn't as Viable for Businesses with Low-Profit Margins
A commission-based payment model means one big thing for businesses:
Affiliate marketing is not a good match for products with low-profit margins.
If you operate off of thin margins, every cent from each transaction is a huge deal- so giving away a percentage of that to your affiliates can be detrimental to your business's long-term health.
That's why we recommend that you only utilize affiliate programs for products with large enough margins to justify them.
3: It Can Be an Inconsistent Marketing Channel
For most businesses, affiliate marketing shouldn't be your primary channel of income.
And that's because it can be inconsistent at times.
When you rely on outside marketers to drive your business forward, you're letting the ship's sails down and drifting where the wind takes you.
Instead, it's much more reliable to use an affiliate program as just another piece of a larger marketing puzzle.
And there you have it, while it's not a comprehensive list of pros and cons- it should give you a pretty good idea of whether it fits your business.
And if you've decided it does fit your business, then it's time to decide how to fit it into your current model.
How to Implement Affiliate Marketing into Your Business
Implementing an affiliate program the right way is vital.
Go about it the wrong way, and you'll have sunk time into a fruitless endeavor.
Instead, you'll want to design a system that nets you returns over time and grows with your business. And the best way to design that system is by setting your foundation down.
Decide on a Model for Your Program
First, you'll need to decide on the model for your affiliate program in the first place.
The perfect model is going to be different for every business, but here are a few tips to help you get started:
Which Products are Included in the Affiliate Program?
First, you'll need to decide the exact products that affiliates can make a commission off of.
Remember, as we talked about before, low-profit products aren't ideal for affiliate programs, so it's usually best to exclude them.
But aside from that, are you only going to offer commissions for a select few products, or for a wide variety?
Which products do you think will net the most benefit from affiliate marketing?
We recommend you stick to high-ticket items (or products that are commonly repeat-purchased) to maximize ROI from every referral.
What is Your Payment Model?
Next, you'll want to decide your payment model, let's elaborate on that.
The first question you need to ask is when you'll pay affiliates.
Are you going to pay for impressions, leads, or only when affiliates facilitate a purchase from your business?
And after you've decided the payment basis, you'll have to decide what you're paying affiliates.
Generally, the higher your profit margin, the higher you can justify your commission rates.
Digital products tend to have large commissions because the margins are so high, whereas physical products will often have lower rates.
Make Your Policy Transparent to Affiliates
The last thing you want to do is mislead your affiliates, which is why after you've decided on the rules for your affiliate program, you'll need to get them into writing in clear, concise language.
This should not only include your payment model, but also your policies on how affiliates can, should, and shouldn't market your products.
The clearer you can be with these rules, the less hassle you'll have down the road, so it's best to take your time to get everything right here.
Now, after the groundwork and rules are set, it's time to start integrating the program into your business.
Use an App or Join an Affiliate Network
The first step is to find a platform for the affiliate program in the first place.
For simpler referral-based programs, you can use a simple Shopify app to get it set in place, configure it, and get it set up relatively quickly.
But if you plan on creating an in-depth affiliate marketing strategy, you might be better off joining an affiliate network.
Educate Customers & Affiliates
And lastly, after everything else is set up- You'll need to educate affiliates and customers about the program itself.
If you intend on taking a more active approach, you can promote the affiliate program through email marketing, newsletters, and social media.
Or if you'd like to take a more passive approach with less time investment, you can create a page on your store and/or list your affiliate products on the aforementioned networks and let the affiliates come to you.
The Wrap Up
And there you have it, the full rundown on affiliate marketing programs for business.
Is affiliate marketing worth it for your business? Why or why not? Let us know in the comments below!
And if you found this useful, make sure to check out some of the other content on our blog!