Last Updated: December 2023
Billion-dollar brands like Amazon have proved beyond all doubt that affiliate marketing works. Since the late 1990s, it has delivered consistent returns for e-commerce businesses. Research shows that 81% of brands use affiliate marketing to drive sales and find new markets today.
Building your own affiliate network can help you meet many business goals:
- Attract new customers
- Improving brand recognition
- Increasing average order value
There are many variables that affect the performance of your affiliate program. For example, recruiting quality affiliates is a key factor. Secondly, commission structures, benefits, cost per lead, etc. also need attention if your affiliate program is to be successful. Ecommerce brands have also been diversifying their affiliate marketing channels through social media and influencers over the years. However, e-commerce marketing does have its limitations. So, marketers must be realistic in their expectations about their impact on the bottom line.
To maximize your ROI, it is important that you use affiliate marketing in a strategic manner. For all its benefits, there are many scenarios in which affiliate marketing could produce mixed results. In this article, we will discuss some of them.
When to use Affiliate Marketing?
It is best to adopt a slow and steady approach when it comes to affiliate marketing. It is not a quick fix solution that you can expect instant results from. Here are the scenarios in which affiliate marketing makes perfect sense:
1. When other forms of paid advertising are not yielding enough returns:
Affiliate marketing can multiply the reach of your brand by helping you tap the audiences of your partners and can improve your conversion rate. It can help you make up for poor SEO and inefficient ad campaigns. As an e-commerce store owner, you only need to pay on a per-sale basis. This makes affiliate marketing extremely cost-effective compared to paid ads, for example. By increasing traffic to your store, affiliate marketing can boost brand recognition even if every visitor does not convert.
2. When the influencer you are considering is a great fit for your product:
The right product market fit is essential for survival in business. In much the same way, the influencers you choose must be a great fit in terms of niche and brand values. This is not always easy. However, a poor product-influencer fit can impact conversion and even engagement.
Customers instinctively know it when an influencer tries to push a product that does not sync well with their usual offerings. Such influencers can thus come across as dishonest, impacting conversion and revenue.
3. If the repeat purchase rate has been dropping:
The repeat purchase rate is a key metric that e-commerce businesses are tracking as marketing costs increase steadily. This is because the pandemic has disrupted buying habits triggering major shifts in terms of sales and revenue. It can also be attributed to poor customer service or check-out experience.
Affiliate marketing is the perfect antidote to this problem, helping you drive traffic and conversion. To increase affiliate conversion, e-commerce brands can create attractive email and social media marketing campaigns.
When Affiliate Marketing may not be a good fit?
It is important that you monitor and learn from the affiliate programs being run by your competitors. It may give you crucial insights into some of the pitfalls of running an affiliate network. Here are some scenarios where affiliate marketing might not work as expected.
1. If you are too busy to run it yourself
It is important to think long term before starting an affiliate marketing program. This is because affiliate marketing requires a lot of work. From tracking sales and commissions, approving affiliate applications to retention, there are multiple tasks that need to be performed on a daily basis. Issues might also crop up on the back-end which will need time and patience to resolve.
If you are new to e-commerce, you may have other priorities to take care of. If you cannot spare the time to manage your affiliate network personally or do not have anyone to delegate it to, it is probably best to wait until you can.
2. If your budget does not allow it
Competing with other merchants for affiliates may not be sustainable over the long term. As you might expect, established e-commerce brands like Amazon offer highly competitive commissions that are hard for smaller businesses to match. Thus the money you have available will also determine how quickly you can scale it. While you may want affiliates that are not already a part of other networks, they come at a significantly higher price.
3. If you have a referral program that is working well
Referral and affiliate programs are two sides of the same coin. Though both leverage external partners- existing customers and influencers respectively – to bring in new customers, they drive the same outcome. Referral programs are cheaper to run compared to affiliate programs. This is because, in the case of referral programs, brands can offer free subscriptions or discounts instead of cash.
If your goal is to boost customer loyalty, referral programs work better than affiliate networks. Therefore, if you already have a successful referral program, adding an affiliate marketing program can be a waste of resources.
Partnering with the right affiliates can help your e-commerce brand develop top-of-mind brand recall. Similarly, customers tend to associate brands with the level of customer service they provide. Good customer service can help you earn referrals and customer loyalty, boosting organic growth. However, most small businesses do not have the resources to spare for building a 24X7 customer support team. This is where partnering with a customer support provider like Helplama can help make a difference to your bottom line. Our team of trained native English-speaking customer support agents helps you build genuine rapport with your customers while modeling your brand voice and tone. Our service can be adapted to the needs of any industry or vertical with minimal deployment time. What’s more, you are covered by our Zero-Risk Guarantee in case your expectations are not met. Contact us today to know more!