Affiliate Marketing For Ecommerce
For quite a while now I have been wanting to write this blog. The whole aim is to try and help a few of you better understand the ins and outs (of which there are many) of Affiliate Marketing and how it can work for you. This blog has been written specifically thinking about Australian eCommerce companies. If you have any questions reach out to me directly, details here!
Good morning campers!
I’ll cut to the chase…
What is Affiliate Marketing?
Affiliate Marketing is not a new channel, but it is often a seriously misunderstood one. Essentially Affiliate Marketing is the process of building relationships with 3rd parties in exchange for either a fixed fee or a percentage of the sales they refer. I’ve heard it called “no win no fee” advertising because if no one buys, you don’t pay! Sounds too good to be true? Well, it’s not.
How It Works
For this, I’m going to invent an eCommerce company, let’s call them Spartacus Clothing (yes, I have a dog called Spartacus). Spartacus Clothing is a generic men’s clothing retailer based in Sydney but covering both Australia and NZ. Let’s say this brand has been running for 6 months and using other channels effectively, but now wants to expand and so is looking into Affiliate Marketing. Spartacus Clothing would have to decide on one big question:
“Do we want to do this in-house or use an agency?”
Both are valid options and both can be rewarding but be prepared for a long learning curve if you bring it in-house. To run it in-house you will need to be able to dedicate a lot of time to the mundane part of affiliate marketing which is building the network of affiliates in the first place. This means hitting the phone and email to all the sites and players in your sector that you think will be interested.
For Spartacus Clothing this would mean coupon code sites, price comparison sites, loyalty sites, influencers across all social channels, and email marketing list owners. When after all that has been done Spartacus Clothing would then have a closed network of affiliates that will drive traffic in exchange for a percentage of any sales.
Option 2 is to go with an advertising agency (shameless self-promotion 😉) that will be able to navigate the murky waters of Affiliate Marketing on your behalf. If in this example Spartacus Clothing decided to contract Direct Clicks to run the advertising for them we would then use existing relationships with sites and influencers to rapidly build the traffic and sales from the site.
What It Costs
Cost is the key issue with Affiliate Marketing. Again, there are two key options here, you can either pay a percentage or a fixed fee to your affiliates.
As Spartacus Clothing has lots of product lines and most orders are for multiple products it makes sense to offer the affiliates a percentage of the sales they drive. Our recommendation is always to look at the current CPA from other channels, to look at that the current true ROAS and calculate what you are comfortable in giving away per sale. A word of warning though: set it too low and no affiliate will be interested!
If Spartacus Clothing only sold 1 item, let’s say an expensive leather jacket, we might advise they set a fixed fee. This would be appealing to the affiliates if they could see exactly how much they would make per sale. It also makes internally tracking all sales easier.
Maintenance of the Campaigns
Once Spartacus Clothing was up and running on its affiliate campaign the next steps are straightforward:
- Continue to grow the network and find new affiliates.
- Reward the affiliates who drive good sales with increased percentages in exchange for preferential positioning on their site.
- Make sure any new offers, campaigns, or sales are communicated to the whole network.
Affiliate Marketing is a very powerful channel for driving sales and revenue with a positive ROI but it does have its drawbacks.
The key problem is that you are essentially relying on other people to make your sales for you! This means managing relationships and egos for an unlimited number of partner sites, and following up on all those email chains and communicating all the new sales to the network.
But, even with all that it’s still “no win no fee advertising!” so what have you got to lose?
Affiliate marketing is a very powerful channel with unlimited scope and truly global reach. It can drive sales and revenue for any eCommerce business and if it doesn’t there is no cost. There is a lot of work, however, so if you are going to run it either work with an experienced agency or be prepared for the long road ahead.
It is the genuine opinion of at least this advertiser that any eCommerce business who is not currently running an Affiliate Marketing campaign should be.