Why is Affiliate Marketing Effective for Small Business Owners

(+ Step-by-Step Guide to Get Started)

Is affiliate marketing effective for small businesses? Can this channel help your business get more customers and earn more money? The short answer is yes. The long answer is thoroughly described below, with all the details and explanations you need to successfully jump into leveraging affiliate marketing for your brand or product.

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Let's start with the basics

To get started, let's briefly clarify what affiliate marketing is. It is a performance-based marketing that is based on the cooperation of multiple parties. One of them is a business that sells products or services (like yours), the other one is an affiliate who advertises the products or services and, thus, earns commissions based on her … you guessed it… performance. The third party can be the software that tracks this all and makes sure both business owners and affiliates get their earnings right.


Wiki puts it defines it more clearly: “Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate's own marketing efforts.”


If we want to visualise the process, it looks like this:

Affiliate program visualisation

Why should you care about other affiliates (advertisers) promoting your product if you can do it yourself, you may ask. There are, of course, more perspectives. The truth is that leveraging external resources can help you reach the audience that you haven't reached yet. Your resources – typically marketing budget – will also be limited and getting external help can help you boost your outreach. Besides that, affiliate marketing is based on performance. That means that you pay your affiliates AFTER they bring you a customer or get a visitor to your site.


Let's look at numbers first. Overall, affiliate marketing generates around 20% of all revenues for businesses like yours. That being said, this channel which you probably haven't discovered and fully leveraged yet, truly represents a potential to grow your revenue. 


Discover the payment models

We've briefly touched on the performance thing. Let's dig deeper into what performance means, as there can be many types. Most importantly, you probably want to reward your affiliates based on the sales they bring, right? 


In this case, you pay the affiliate's commission first when the purchase is completed. This model is called cost per sale (CPS). The good thing is that you can set this to a certain percentage of your order. This way you can motivate your affiliates to bring customers with a higher value. Sounds great, doesn't it?


When your goal is to generate leads, you also want to award affiliates for the leads they bring. Cost per lead (CPL) is the model you'd be using. In other words, every time your affiliate brings a website visitor who fills out a form or downloads an e-book, he gets rewarded according to your CPL model. 


Last but not least, if you want to reward affiliates for every single website visitor they bring, you can use the widely-used cost per click model (CPC).


And now the best thing is...that you can combine these models! In other words, the way you pay your affiliates depends solely on you and your business. 

Just keep in mind, affiliates are here to EARN. Make the offer juicy enough, I'll get to more on that later…


Let's look at what it would look like if you combined the CPC and CPS models:

CPC and CPS models



Once the user clicks the link and goes to your website, the affiliate gets rewarded. Once the user completes the order, your affiliate gets rewarded again. This way, you can motivate your affiliates and still base their rewards on performance that matters to you.


If you're unsure how to set your reward structure, think of an affiliate as another marketing source, that at the end of the day represents a marketing cost. Are you happy to pay 10% of the order value to acquire a customer? Cool! You have a number on which you can build your CPS model. Besides that, you can get inspired by the industry standards. Here are the top 20 categories based on the procentual rewards:

Graph of categories


To get started, have the right tool stack in place

To manage your affiliate program successfully, you need to have the right tool stack in place. 

As said at the beginning, you will need to have affiliate software in place that manages the affiliate onboarding, calculates all rewards, allows you to give any content you wish to your affiliates and offers tools for communication. 


Running an affiliate program is not as easy as it may seem. You really need to dedicate time to acquire motivated affiliates, constantly provide your best content, track the performance, communicate with them in case needed and pay their rewards every month (or for another period of time).


Let's get back to the right affiliate systems. Entrepreneur.com already did the job for us and picked the 10 top affiliate marketing tracking softwares. The one that we are excited about is Tapfiliate. Make sure to check that one too.


Some companies even outsource the workload that goes hand in hand with managing the affiliate program. They hire experienced affiliate managers that do the hard work for them. They leverage their networks to hire affiliates, manage the onboarding and communication and track their performance. To hire yours, use platforms like Upwork that allow you to hire staff on demand. If you're a small business owner, you may want to manage the work yourself, but keep this option in mind as you grow. It can save you time and help you get much more out of your affiliate program.

How to acquire affiliates

So you've decided to jump straight into setting up your affiliate program? That's great! You did the math and came up with a reward structure, chose the tools that will help you make your plan come true and are now thinking of getting your first affiliates… Let's speak about some ways to get motivated affiliates then!


Direct contact. Yes, that's exactly what I have in mind. Searching for affiliates that are already active in your field, promote your competitors (but may be happier to promote your business), are influencers with a loyal audience that represent your potential customers or bloggers, and Youtubers that write or speak about products like yours – you know all the unboxing videos on Youtube, right? That's what I have in mind.


Events. Affiliates also don't want to miss the trend. Thus, they gather at conferences and events to get the latest tips, leverage the newest technologies and tactics and to share their experiences. This is your chance! Choose some of the events and get the most out of your networking skills. Here is the list for 2020. You're welcome!


Make your program visible. Use online channels like social media, paid search campaigns or video ads. You may want to make your program visible to a relevant audience (potential affiliates) so that they can join you. If you're a newbie to online campaigns, check out our tool that simplifies this process so that even your grandma can do it. No kidding.


Invite your best customers. Invite those who are most excited by your product or service. Obvious, right? Who else should help you spread the word around than your happy customers, especially if you reward them.


Note: This, needless to say, depends on the characteristics of your audience. If you serve wealthier clientele, they may not be interested in offers like these.


Affiliate networks – another platform you may want to use. As the name suggests, affiliate networks gather affiliates into a network. You, as a business owner, can leverage these networks and acquire some of the affiliates into your program. This way you can save time searching for affiliates directly and approach them in one place. Of course, this service is costly, so you may consider this option according to your budget options. To get a better idea on how affiliate networks work, check this complex answer on Quora.


Keep in mind, your key goal is to find those affiliates who are able to reach your potential customers. This is crucial. Having 10 affiliates that truly can reach your potential customers is way better than 1,000 who cannot.

Insider Tips & Tricks

Stay local. If you run your small business and focus on concrete location, choose affiliates that operate within the same region. Therefore, search for bloggers, influencers and affiliates who are close to your potential customers.


Always keep an eye on what content your affiliates use. This brings us to one of the cons affiliate marketing has. As you build your affiliate network, your brand is in the hands of other advertisers, not just yours. That represents a risk, as you may imagine. What if they don't use your logo, claim or other brand asset properly?! Keep an eye on that.


Make sure they do not compete with your other ads. Affiliates are here to reach MORE potential customers, not compete with your own ads. Imagine you run search ads on Google and target the U.S. and use the keyword “men's hiking shoes”. If your affiliates target the same keyword, the cost efficiency of your ad will decrease. Make sure you have that under your control.


Communicate with your affiliates. Your affiliates are your partners. They help you grow your business. Make sure to stay in touch with them, organize common events, send them birthday messages and Christmas (or other holiday) presents. 


Calculate your costs and profit margins properly. If you don't, your payment models can go sideways and you will, instead of earning more money, lose money.


At the same time, make your offer juicy enough for your (potential) affiliates. They are here to earn money. It is as simple as that. If your offer does not resonate, they won't join you.


Create great content that sells. Your affiliates provide you with their channels and audiences. But the content – probably the most important factor of your successful campaign – is on your side.


Thoroughly track the performance of your affiliates. Affiliates are people too. People tend to search for shortcuts, especially when it comes to ways to earn money. Make sure you check your data thoroughly and reward affiliates based on the real outcomes they bring you. You may want to see the performance in multiple tools like your affiliate system, Google Analytics, ecommerce solution like Shopify or WooCommerce and others.

Get started with our easy guide

To sum it up, we thought that giving you a complete guide to get started may help. Thus, see the infographics below that can help you with the very first steps.

Sum up in points


Are you gonna start with affiliate marketing now? 

Continue reading

How Digital Advertising and Ad Pricing Works

The world around us has become digital. More than half of the people living on Earth are connected to the internet. That's almost 4.5 billion people. The interesting thing is that this all happened in only 28 years. Yes, 1991 was the year, when the World Wide Web, today's internet, was publicly launched.

Digital Around The World (Hootsuite)

But the biggest internet usage increase came with the arrival of social media platforms. 80% of internet users (January 2019, Hootsuite) are also active social media users. The leading platform, with 32% market share is Facebook. Combined with ownership of Instagram and WhatsApp, it makes 66% market share. Globally. In any case, YouTube, with 27% market share can be considered the second largest platform.

Popular Social Media Platforms

Facebook's market capitalization was 632.43B USD as of January 16th, 2020. This number makes Facebook the 5th biggest company in the world by the market cap. Even bigger, is the Alphabet (Google). It took 3rd place with a 1000.7 USD market cap.

You might ask, why are these companies so big, when their products are mostly free to use? The answer is advertising. Google and Facebook are the world's biggest advertising platforms. Companies spent around 170 billion dollars on Facebook and Google Ads in 2019 alone, and this number is still growing.

Major Global Digital Ad Sellers (eMarketer)

The fundamental difference between traditional and digital media is given by data that these platforms are generating. They capture every interaction of its users, so they know every user in detail. It allows targeting ads with many options, such as gender, age, location, relationship, income, home, interests, connections, generation, life events, ethnic affinity and much more.

Online Behaviors

You and your business can take advantage of it and use this platform to advertise your services or products to a very specific audience for a reasonable price. Usually a lower price (compared with traditional “offline” ads media) brings digital advertising closer to small businesses and freelancers.

Unlike traditional media, advertisers only pay for interactions. There are many cost structures digital advertising platforms are using and these are based on marketing objectives and overall campaign goals. 

CPC

Cost Per Click is the most common cost model used by almost all digital advertising platforms. It charges you, as an advertiser, for every single click completed by a user. It means that your ad contains an external link that redirects users to your website. The average CPC on Facebook is 1.72USD, but it varies across industries.

CPV

Cost Per View is a model built for video ads. You, as an advertiser, are charged every time a Facebook user sees your video. Keep in mind that Facebook considers a video as “viewed” after only 3 seconds.

The average CPV price is relatively low, somewhere between 1c to 15c, but it varies across industries. Price per view should always be compared with other metrics, like CTR, to see if it is effective.


CPM

Cost Per Mille is a pricing model, where you are charged per 1,000 impressions. An impression is when an ad is delivered to a user’s feed. If you are looking for an increase in brand awareness, this is how you will be charged.

CPA

Cost Per Action (Acquisition) is similar to CPC. You are not charged per single click, but for a specific action a user completes on your website. It can be form filling, an app install, event registration or for scheduling a meeting.

The average cost per acquisition on Facebook is 18.68 USD.

CPL

Cost Per Like is a cost model used for gaining business page likes. It is good for building brand awareness. It is usually low cost, so this could be a cheap way to promote your business page. Keep in mind, that this is effective only when your page is active and publishing content consistently.


At first glance, it might look complicated and confusing. But at the end of the day, this is what you and your business needs. It is a groundbreaking feature, because you can focus on reaching your target audience and through that, you can make your campaigns more cost-effective.

How is ad cost determined?

I mentioned several times that ad cost varies across industries and platforms. There is no fixed price per click/action, it is the subject of many conditions. Now, I will explain to you how it works, so you can create better and cheaper ads.

Google

Google's advertising platform, Google Ads, is a keyword-based PPC platform. It shows ads in a search based on the keyword the user is searching. It means, that if a user is searching “family car”, Google will show ads related to this keyword. If you're selling family cars, your ad shows up right in front of the user’s eyes. 

Unfortunately, it's not that simple, because you are probably far from being the only one who is selling family cars and advertising it. Google needs to decide whose ad to show. This process is called Ad Ranking. It takes your maximum CPC bid and multiplies it with the quality score.

Ad Rank = CPC bid * Quality Score

CPC bid

A maximum price you are willing to pay per a single click. This setting is completely in your hands.

Quality Score

Google's rating of the quality and relevance of both your keywords and PPC ads. It depends on multiple factors…

  • Click Through Rate – if your ad has a lot of views, but only a few clicks, it is a sign that your ad might be irrelevant
  • Landing Page Quality – if you are advertising “family cars,” but your landing page is focused on a sports car, Google will decrease your Quality Score
  • Relevance of your ad text
  • Relevance of keywords
  • Historical Google Ads performance

The higher the Quality Score is, the better price per click you will get. 

CPC = (Ad Rank of ad below you / Quality Score) + 0.01USD

CPC Calculation

Facebook

Facebook and Instagram ads, unlike Google's Search ads, aren't based on keywords, as these social media platforms work on slightly different principles.

Factors, that influence the cost of Facebook Ads are:

  • Ad objective
  • Bidding 
  • Audience
  • Ad quality
  • Industry

Ad objective

An ad objective is a clear and specific aim of an ad. It determines who Facebook shows your ad to. This can have an extreme affect on its cost. There are 3 main objective types that are divided into specific actions.

Awareness

Ads with the Awareness objective lead to increasing brand and local awareness, as well as gaining a higher reach and interest in your product or service.

Consideration

If your goal is to get people thinking about your product, drive more traffic to your web or generate leads, you should focus on this category.

Conversions

If your goal is to convert Facebook users to customers, then these types of objectives are for you.


Campaign Objectives

Bidding

The next factor that influences ad price is the maximum amount of money you are willing to pay. It's called bidding. You set a maximum price manually (or automatically, where Facebook calculates the best price for you) and then it competes with other advertisers in an auction. Take note that a higher price doesn't guarantee that your ad shows up. Facebook considers ad quality and user experience.

Audience

An audience, or target audience, is a group of people you aim your ad at. There are over 350 audience attributes to choose from, so you can be very specific.

Ad quality

Facebook is a visual platform and is considered to be a personal space for its users, where they are looking for creative and interesting content. So your ads should be, of course, creative and interesting. They should also be visually appealing, able to evoke emotions and they should match users' interests. This is what Facebook considers when scoring your ad.

Industry

As I mentioned at the beginning of this article, ad pricing varies across industries. Here is a table that you can use as a benchmark and with which you can compare your results.

The Cost of a Click

How can you lower your Facebook price?

Optimizing an ad price isn't an easy process. There are thousands and thousands of combinations and it can take years to find the right formula. You basically have 3 options to optimize your costs.

Become an online advertising specialist

That's perfect advice, right? I know, this is probably not the best way to go for most people, because it takes a lot of time and energy to become a specialist. Being a social media specialist is a regular full time job, so if you are not ready to quit your current job, then this is probably not the way you want to go. 

Hire someone, who is already an advertising specialist

Hiring a freelance specialist or agency can be a way to effectively advertise. This option is usually more expensive, especially if you are a one-man-show and your marketing budget is tight.

Use marketing automation tools that make it easy for you!

There are dozens of marketing automation tools on the market. These tools simplify the whole campaign creation process for people, who have no time to learn everything necessary and don't have a sufficient budget. That's why we created  app. It helps small businesses run their campaigns without extra knowledge needed. Try it here, it's free!

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Why Having a Website Will Help Your Business Grow

If you are running your own small business, it is only right to have a website. With everyone being on the internet it is almost impossible not to take advantage of it. Unless you do not want your business to grow and succeed it is essential to build up your online presence and having a website is one of the ways to do it. Thanks to the evolution of technology and free website builders like Webflow, building your own personal website has never been easier. You do not need to be a computer engineer or know computer programing. Free website builders enable you to build a personal website to your liking. There are so many positives to having your own business website.

 

So, here are the benefits and advantages of having your own website:

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Beginner's Guide to Facebook Advertising

Facebook gathers more than 2,4 billion monthly active users. That being said, it is obvious that the possibility to reach your potential customers is high. On the other hand, getting to know the platform takes time or costs tons of money (for agency fees). For small business owners who decide to leverage this platform, time and money are the core assets.

So how can you get the most out of the biggest social network? First of all, know the basics. Facebook (and any other advertising platform) can be overwhelming, which makes it easy to get lost. Don’t try to understand everything. Choose to learn what matters to your business the most!

We have prepared content that will help you get to know the very basic idea behind advertising on Facebook. We call it the Beginner’s Guide to Facebook Advertising and within it we cover the following topics:

  • Setting up the right strategy.
  • Get to know the Facebook interface.
  • What is Facebook optimisation and how does it work?
  • How can you effectively target your audience?
  • Where does Facebook show your ads?
  • How do you pay for your ads?
  • What are the types of ads you can run?
  • Petr’s case study- a story of a man who successfully sold his company after a few months by growing his business on Facebook.

Dig into the Facebook advertising by downloading the e-book below and let us know how it helped you boost your business!

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All You Need to Know About Facebook Asset Formats

Have you been wondering which format is the best to use for promoting your business news on Facebook? This article will briefly explain the difference between the main Facebook formats and what to use each of them for. You will find out how to create them, as well as, handy info to stay relevant and entertaining for your customers.

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One Channel Dependency Might Kill My Business!?

Is all your revenue coming from one source? That's a huge risk! Using a single sales and/ or marketing channel to market your business might be a fatal mistake for you. Single-source dependency means over-reliance on one thing and that could ruin your business. It's like having no backup. As much as you diversify your effort into various marketing channels and revenue sources, it’s unavoidable that you find a disparity in results. But that’s not to say you should stop doing it. You never know when a small revenue driver can become your main income and vice versa. 


Some businesses are dependent on one revenue source so they make themselves unduly exposed to forces outside their control. What if that source is over?


For lots of businesses this source is Google, when sales are primarily driven through Google Ads. And they take huge hits when a new competitor outbids them. 


Read >>

Why is Affiliate Marketing Effective for Small Business Owners

Is affiliate marketing effective for small businesses? Can this channel help your business get more customers and earn more money? The short answer is yes. The long answer is thoroughly described below, with all the details and explanations you need to successfully jump into leveraging affiliate marketing for your brand or product.

Read >>