Instead of spending so much money on ads, why not start an affiliate program and let other people market your product for free?
This strategy is called affiliate marketing—a business model where your members promote your products. You pay them a commission after they make a sale, but you do not pay them directly for their marketing efforts.
Today, you will learn one of the most crucial marketing strategies that online entrepreneurs use to increase sales exponentially—affiliate marketing. These are the things we will talk about:
- What is an affiliate program?
- Why should you start an affiliate program?
- What are the common challenges of launching an affiliate program?
- Things your need to launch an affiliate program
- Success tips for your affiliate program
Are you ready? Let’s get it on!
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What is an affiliate program?
Affiliate marketing is a business model where the affiliate marketer promotes someone else’s products. He does not get paid for doing this unless he successfully makes a sale. The affiliate marketer’s earnings are based on commissions that come from the merchant.
Think of Tupperware for a moment and the moms who sell Tupperware products to their neighbors. The mom has a brochure which she shows to the target consumer. If this neighbor buys, the mom gets a commission off the purchase, but this mom did not invest in Tupperware.
And she certainly does not manufacture Tupperware.
In short, an affiliate marketer is a salesperson who earns money through commissions. If the affiliate marketer does not make a sale despite all his efforts of promoting a product, he does not earn anything.
In a nutshell, here are the high-level steps that occur in an affiliate program:
- Merchant launches an affiliate program
- Affiliate marketers register
- Affiliate marketers receive their special link, called an affiliate link
- Affiliate marketers promote the product
- Customers buy from these links
- The merchant makes a sale
- The merchant pays the affiliate marketers their commissions
So, who is who? Since you are the dropshipper or the e-commerce entrepreneur, you are the merchant. You are responsible for:
- Managing the affiliate program, including the software that makes it work
- Setting up guidelines for the program
- Creating ads and banners that your marketers can link to
- Setting expectations to your affiliate marketers
- Paying your marketers in time
How does this work overall, and what are the links for? Once you have installed an affiliate marketing software, it will automatically issue an affiliate link to the marketer who registers.
This affiliate link is personal and cannot be duplicated. This link is how the affiliate marketing software identifies who makes a sale. Here is a great video that explains affiliate marketing in less than two minutes.
If you need more information, I suggest you read my two blog posts:
Why should you start an affiliate program?
As an entrepreneur, you need all the help you can get to get your products out in the market. If you rely on your own efforts, it will take you some time to build your brand, much less make a sale.
Let us take a look at more reasons to start an affiliate program:
- Pay for sales only
- Have an army of marketers
- Reduce your spend on paid ads
- Passive income stream
- Have brand ambassadors
- Control incentives
Now, let us discuss these reasons one by one.
Pay for sales only
You do not pay your affiliates anything. Even if they spend on ads, these are costs that they have to pay, not you. You only pay your affiliate marketers a commission, which you set at the get-go after they have made a successful sale.
Also, it is up to you to set conditions. For example, you can set the minimum payout to $50, or you can put a rule stipulating that all sales that eventually resulted in a refund will not get a commission.
Have an army of marketers
Depending on the app or plugin you use, you may have a limit to the number of affiliates who can be active in your program at any given time.
For free affiliate software, you can have at least 10. If you upgrade, you can have hundreds of affiliates.
Now, just imagine if there are hundreds of people promoting your products for free. You do not have to spend that much on ads anymore because you have an army of affiliates marketing your products for you.
Reduce your spend on paid ads
With a program like this, you can significantly reduce your ad spend. If you have no affiliate marketers, your marketing channels are limited to the platforms where you launch ads. But with affiliates, your brand can reach far and wide. Your affiliates can market your products through:
Because you do not carry the burden of marketing on your own, you do not have to spend that much anymore on advertising. Instead, you only spend money on marketing costs once a sale is made. If a sale is made, you use the profit from that sale, not money that you take out of your pocket.
Passive income stream
Your affiliates work round the clock. They use their links in their blogs, Facebook posts, YouTube videos, and so much more. Once these links are there, they are available for anyone to see at any given time.
And these links are there forever!
Paid ads stop once you have no money to spend anymore, and your sales can experience a dip. With an affiliate program for your dropshipping store, all these links are active, and your store can make a sale even while you and your affiliates are asleep.
Have brand ambassadors
Your affiliates have their own following. Their followers trust them. As such, convincing them to buy your product is going to be easier.
Expert affiliate marketers are brand influencers. What does this mean? Do not just accept applicants into your affiliate program.
You need to screen them—check how they will promote your products and make sure that they are serious marketers, not just some random person who wants to make a quick buck by dropping affiliate links everywhere.
As the merchant, you are in control how much commission you want to give. Of course, the value of the commission has to be honored. If you promised a 20% commission, you have to keep that promise. You cannot change it and reduce it to 10% just because you want to, or your affiliates will leave you.
Before you start your affiliate marketing campaign, you need to carefully think through your profit margin. How much can you really afford to give without losing money?
The commissions you payout can be based on percentages or fixed amounts. You can also set rules where the commission is based on the product cost only, not including the shipping cost.
This decision is up to you. Your profit margin and business costs will influence how much you can give to your affiliates. Just make sure that the commission is attractive enough to make it worth their while.
What are the common challenges of launching an affiliate program?
A lot of entrepreneurs do not want to dive into an affiliate marketing program, saying that it is too difficult or that they do not have the time. Let us explore some of these challenges. I will give you my recommendations on how to fix them.
Challenge 1: It is too techy
You need an affiliate software to run this campaign. Without one, your only alternative is to code the program yourself, which can take you months, if not years, to complete.
An affiliate program is just like any app or plugin that you install in your WooCommerce or Shopify store. The only alternative so you can avoid the technicalities of building an affiliate campaign is to use an affiliate program app.
Challenge 2: It is too expensive
Yes, it can be expensive, especially if you already have hundreds of affiliates. The trick to avoiding these monthly subscription payments is to choose affiliate program software that has a free plan but with a limited number of affiliates.
What Amazon does is to cull affiliates that do not bring a sale three months after an affiliate is approved for registration. You have to this, too. Make it clear to applicants that if they do not make a sale in three months, they will be removed from the program.
Challenge 3: It is difficult to manage
Yes, it can be difficult to track affiliate performance, how much money you have paid, and who should get paid and for how much.
An effective affiliate program app or plugin mass have a payment system baked into it. I, for one, use Affiliate Manager in my WooCommerce store. This WordPress plugin is integrated into PayPal Mass Pay, and records payments I have already sent to the affiliates.
The other alternative to this is to use a spreadsheet which you update often.
Challenge 4: It is risky
Yes, there is a risk involved in running a program like this. There are some affiliates who do not exercise ethics –they do what they can to earn a commission at the expense of your reputation.
How do you fight this?
Before you ship an item, make sure that your customer understood your terms and conditions, that they know what they are buying.
Another solution is to ensure that your rules and policies are in place. All affiliates who register must agree to these guidelines. For example, they should not be making false promises or misleading claims.
As you can see, all these challenges have a solution. There really is no way I can list and discuss them all today; you will learn more about your affiliate marketing challenges as you move forward, and you can always drop me a message if you need help with anything.
Things you need to launch an affiliate program
Now, I will itemize the things that you need to launch your very own affiliate program. These things are:
Affiliate app or plugin – download and install this to your WooCommerce or Shopify content management system
Terms and conditions – most affiliate software comes with a terms and conditions page; if it doesn’t, write your own or get the services of a freelance writer to do it for you. This is critical, as you do not want to get into legal trouble later on—always protect your interests.
Rules and Policies – this is a basic list of rules and policies that affiliates must know. Examples of these are your payout rules if a refund was made, how long it takes to pay the affiliate, how they will be paid, how often they will be paid, etc.
Banner ads for your affiliates – you have to support your affiliates and create banner ads that they can use to market your products. You can use free software to do this, or you can hire a freelancer to do your posters and banner ads.
Welcome page – a welcome page is a page on your website that is only accessible to your affiliates. Nobody can access this without being approved as part of your team. On this page, you motivate your affiliates and share your expectations and what’s in it for them.
Commission matrix – this is a simple table that explains to your affiliates how much they can earn and how long it takes to get the commission Payment processor – you need to have a payment processing system like PayPal, Skrill, or other online payment methods. This has to be mentioned on your welcome page, so your affiliates know how they will get paid.
To help you further, read these resources about affiliate programs for WooCommerce and Shopify:
Success tips for your affiliate program
As the merchant, your affiliates rely on your leadership to make them successful. They need a ton of content to help them understand what you offer and why consumers should buy what you are selling. Here are some tips to help your affiliate program become successful.
- Establish a partnership – your affiliates are not your employees; they are your business partners. As your marketing army, they need your attention, guidance, patience, and support.
- Provide transparency – your offers and commissions must be transparent. Do not hide ridiculous rules in the fine print of your T&C page. Make sure that affiliates have clear expectations of what they can and cannot do in the program.
- Communicate often – you will have the email addresses of your affiliates after they register. If you made any changes to your website and your pricing, make sure they know. If you are offering a discount, make sure that they know.
- Keep your commitments – if you promised to pay on a certain date, make sure that you keep that commitment. You will get into legal trouble if you do not pay out your affiliates. Worse, they can go to their social media channels and ruin your reputation.
Remember, your affiliates are your ambassadors. Nurture them and provide them with what they need to help them find success. Their success is yours, too.
Affiliate marketing is one of the most effective and most affordable marketing strategies today. Not only will you have active marketers for your business, but you also do not have to pay anything if a sale was not made.
You are also in control how much they can earn, what the conditions are, how much the minimum payout is, and when you will pay them.
Over time, an affiliate marketing program is what is going to drive sales to your store. If you choose your affiliates carefully and purge those who are not performing, you do not have to upgrade to a higher tier account.
So, are you ready to add an affiliate marketing program for your store?
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