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? 

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“Internet access has become vital for communication, obtaining information, job-searching, and participation in an ever-changing world economy. The United States, the fourth largest country (by land mass) in the world, is no exception. With over 312 million internet users as of 2018, it is one of the largest online markets worldwide” says Statista.com


It's obvious you are supposed to boost your business online, as well! So how do you find the best online channel for your business? 



Find out:

1) Who is your target audience? Do you know who you should have in mind as your ideal buyer? What are their needs, what do they desire, how and when they like to consume content, and through which channels? To answer these questions, it's extremely helpful to create buyer personas. The personas are developed based on a combination of customer behavior and your understanding of their motivations and challenges. In the process of creating these personas, you’ll gain valuable knowledge about your audience. You will discover the communication style that works for them, and the ways in which they like to consume content. Also, you can find out the ideal price they are most likely to pay for your product. Learn how to create your buyer persona.


2) What are your social media strategy objectives? Being able to link your social media channels to your strategy’s high level objectives is essential. If you can’t explain why or how a particular channel will help you achieve your goals, then it’s more than likely you shouldn’t use it. It would be a waste of time. Always remember that the purpose of your chosen social media channels is to support the achievement of your strategic goals.

3) What channels are the people from your target audience using? After you’ve set social media strategy objectives, you need to consider where your audience is interacting online. For instance, it could be deemed wasted effort if your largest customer segment is composed of retired people and you chose Tik Tok as your prime channel.  


Similarly, it may not be very effective to establish your brand on Facebook if you’re only targeting teenagers. The most effective social media strategies are informed by social media demographics. 


Use data-driven insights to ensure that your strategy, and the channels you choose, facilitate the most relevant, targeted approach possible. This will help increase the chance for conversions. 


To sum it up, when choosing your social media channels, always base your decisions on demographic data, don't just go with the flow of trends. 


Define: What kind of content do you want to create? This is a relevant question as there are a bunch of different content formats you can use – some of which will complement your business goals and brand identity, and some that won’t. Certain content formats will be more suited to particular social channels than others. 


At the end of the day, personas tell you where buyers prefer to get their information. Are they bookworms? Do they like to sink their teeth into 100-page guides, or do they prefer short, concise texts and easy graphics? This information will help you set the way you create your content for each persona and how your buyers will discover it. The same goes for your creatives. Some of the people won't watch a video, some will only respond to a colorful picture and some only to a call to action post. Create content that will engage your buyers more effectively. 


Don't stick to one channel!

As social media has become more integrated into daily life, people are starting to use more than just one network. According to Pew Research Center, more than one-half of adults have their profiles on various social platforms. Most of the brands also administer more than one channel.


If you haven’t yet chosen any channels, or you’d like to expand into other platforms, the Pew Research Center have conducted an analysis that outlines the key demographics for a number of social media platforms. 


Let's talk about the most common channels, so you have some ideas when picking the right ones for your business.


Demography 

Facebook -  very common! 72% of adult internet users and 62% of the entire adult population. 70% of Facebook users visit the platform daily.

Pinterest - It's growing! It's mostly used by women. 31% of adult internet users and 26% of the entire adult population. 27% of Pinterest users use the site daily. 

Instagram - online women are more likely to use Instagram than online men (31% vs. 24%) and 28% of internet users. 59% of users visit the platform daily.

Linkedin - 25% of adult internet users. And 41% of LinkedIn users earn a salary over $75,000! LinkedIn is the only major social media platform for which usage rates are higher among 30- to 49-year-olds than among 18- to 29-year-olds. 22% of daily users. 

Twitter - 23% of all internet users. Internet users living in urban areas are more likely than their suburban or rural counterparts to use Twitter. Twitter is more popular among younger adults — 30% of online adults under 50 use Twitter, compared with 11% of online adults ages 50 and older. 38% of those on Twitter use the site daily.


Are you interested in more information about the demographic of the channels? Check this analysis.


Ask yourself: What is my product/ service? Who is the ideal buyer? Where are they? What content do they like?


Once you know who you are targeting, it's easy to find out which channel or channels to use. 


Also, you can adjust your content to that channel as well as to the audience you are talking to. Once you know who you are talking to, focus on your target audience’s needs and preferences. Your created personas will help you understand your audience’s concerns, preferences, and goals. When you know these, you are able to create content your buyers will find engaging, relevant, entertaining and valuable. Personas help you determine that very sort of content you will need.


Remember:

Because you already know who you are talking to, set the tone, style, and delivery strategies for your content according to your personas. For example, some buyers respond best to a friendly, conversational voice, with some jokes and questions, while others trust a more formal tone and serious negotiation. By creating your personas, you’ll determine the best tone and style for your content. You can even target the topics you should be writing about for each persona. 


Don't try to manage every single channel out there. It will be exhausting, chaotic, time consuming and, most likely, your audience is probably not active on every channel. Pick two to three of them, that are most suitable for your buyer, aka marketing persona, and stick to them. Manage them continuously, engage with people! Plan your posts, represent your brand identity, and track important metrics! When you're ready to manage your growing community, check out this article.

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