7 Reasons Why Affiliate Marketing Works

Why affiliate marketing works

If statistics are anything to go by, affiliate marketing is a trend that just won’t quit. Year after year, companies are spending more and more on their affiliate marketing budget, to the expected tune of $8.2 billion by 2022. This begs the question, “why?” 

Skeptics may wonder, “is affiliate marketing legit?” If you’re new to the concept, you may have heard that it’s prone to yielding inconsistent results. You may also have fears that an affiliate marketing strategy will be costly to start and ripe for fraud. 

These concerns, while sometimes valid, fail to take into consideration the overwhelming advantages that make selling through affiliates worth the investment. This article will explore why this promotional channel is so effective and lay out some of the pros of affiliate marketing to consider when comparing it to other marketing methodologies.

What is affiliate marketing?

Before exploring its advantages, a brief summary of how affiliate marketing works might be helpful. There are six steps to remember:

1. Your business has a product or service that you want to promote.

2. You set up an affiliate program that will compensate partners for marketing your product/service and bringing in sales.

3. Affiliates learn of your program and decide to join.

4. Affiliates promote your product/service as agreed, using their own online platform and affiliate links.

5. Customers learn about your product/service through the affiliate’s efforts, become intrigued by what you have to offer, and then make a purchase.

6. You enjoy the revenue and share a percentage with your affiliate partners.

The process isn’t complicated, but the unique role of affiliate partners is what provides this type of marketing with its obvious pros. Next, let’s examine some of the ways in which affiliate marketing works in favor of your business.

How affiliate marketing brings you value

It’s simple and straightforward: affiliate marketing presents a win-win scenario for both you and your affiliate partners. Here’s why this strategy is so effective and appealing.

1. Start-up costs are low

You don’t need to hire a whole advertising team to get started with an affiliate marketing program. You won’t even have to contract third-party professionals if you set up a program that you can run in-house. 

In fact, getting started with affiliate marketing often only requires simple affiliate marketing software and identifying the goals of your campaign.

There’s a minimal barrier to entry when it comes to affiliate marketing. This is one of several pros that should help you make a decision if you’re still unsure of how it might work for you. In addition to being low-risk to set up, affiliate marketing also helps you keep ongoing costs as low as possible.

2. You only have to pay for results

Through advertising your products and services, affiliates stand to be well compensated. Your business enjoys increased revenue from affiliates who are successful, but you don’t lose money compensating those who are not.

There are multiple affiliate marketing compensation schemes — pay per click, pay per lead, pay per sale, etc. Regardless of which you choose to employ, you’ll only have to pay a commission once the desired conversion action occurs.

Compare that to something like Facebook Ads, where you’ll have to pay a set amount for a campaign, and there’s less certainty about whether your ad spend will yield the types of conversions you’re looking for.

This is an amazing benefit in and of itself, but the pros of affiliate marketing’s commission models don’t end there. For example, paying only for success provides a powerful motivator to your affiliates, given that they won’t be compensated unless they effectively promote your brand. 

Affiliates know that they’ll need to strive for accuracy in scoring the types of conversions you’re looking for. Without conversions, there’s no money in it for them. This keeps the risk to your business low and the potential for reward high.

This benefit is further enhanced by the fact that subsequent sales made to a lead brought to you by an affiliate won’t cost you a commission. In other words, you can extend your return on investment further without having to spend much at all.

3. It opens you up to a broader audience

When you’re handling marketing duties on your own, one of the most significant challenges you’ll face is trying to expand your reach and connect with new customers. After all, building a community outside of your brand, even if it’s an adjacent audience, is difficult without an “in” — affiliate programs can serve as a bridge to reach across that divide.

Affiliates exist in every niche imaginable. By partnering with uncharted areas that have some overlap with your own audience, you can promote yourself to a new segment of potential customers who might be interested in what you have to offer. 

4. It can boost your reputation and increase loyalty

Tapping into an affiliate’s audience is a chance to improve your brand’s reputation and boost customer loyalty. This works on two levels. 

First, if you select your affiliates carefully, you can find those who have taken the time to form a tight bond with their audience. These are your trusted bloggers, reputable websites, well-known influencers, and the like.

An endorsement of your brand by this audience, therefore, comes with an increased level of credibility. When considering your offerings, an affiliate partner’s audience will be more likely to trust their positive claims than they would any marketing material that you produced internally.  

Second, by treating your affiliates well and compensating them fairly, you can increase their trust and loyalty in your brand. They’ll be that much more willing to offer a heartfelt pitch of your products and services to their own audience, further strengthening your brand’s reputation and confidence in your business.

5. It scales to your business

When you’re first starting, you may only have a few affiliates and receive modest returns on your investment. It takes patience and persistence to grow an affiliate marketing program into a revenue powerhouse. Once you get that ball rolling, however, you can rest easy knowing that affiliate marketing campaigns can scale to your brand’s needs.

Allocating a larger budget to your affiliate program, for example, is a simple way to expand reach and build upon techniques that are already working. 

Pouring more money into your program isn’t the only tool you have at your disposal to help scale. By utilizing additional methods like traffic source transition and networking, you can continue to optimize your conversion opportunities as your affiliate marketing program expands in scope.

6. It can help your SEO

Boosting off-page SEO efforts is not the primary purpose of your affiliate marketing program, but there’s a chance that it could help. Affiliates linking to your website in an organic manner generate traffic that counts as a positive within search engine ranking algorithms.

Additionally, affiliates can help you rank higher for highly-searched keywords that you may be ignorant of or unable to utilize. By pairing with affiliates who rank highly for these keywords and link back to your site, you can help build your brand’s authority for a topic and start attracting high-quality SEO traffic for yourself.

7. It’s a great way to harvest data for insights

One of the definite pros of affiliate marketing is that it is a channel ripe for customer data collection. Through your affiliates, you can learn a lot about the howwhere, and why behind-paying customers. You can then harness this information to create actionable strategies to outmaneuver your competition.

Data analysis, for example, allows you to:

  • Hone in on underutilized markets 
  • Improve conversions 
  • Identify better recruitment strategies for affiliate partners 
  • Devise new methods of motivating affiliates 
  • Test marketing content for efficacy 
  • And more

These sorts of insights might not come right away. Once you’ve effectively structured your affiliate program and you’ve established a routine for collecting and analyzing your data, you’ll find all sorts of ways to steadily improve your program.

Points to remember

Selling through affiliates is a low-risk, high-reward method of generating increased revenues for your business, provided you’re willing to put in the time to grow your program. 

The unique nature of this form of marketing, a result of its reliance on third-parties to help promote your products and services, brings with it a host of advantages:

1. Low barrier to entry

2. Minimal continuing costs

3. Brand awareness with new audiences

4. Increased reputation and customer loyalty

5. Programs scale as you grow

6. Can potentially aid SEO efforts

7. Provides a new avenue for data analysis and insights

To take full advantage of these benefits, you’ll need to set your affiliate program up the right way and streamline operations so that you can easily manage every facet of the program as it and your brand grow. 

Affiliate software like LeadDyno is an excellent choice in that regard, putting everything you need to launch and grow an affiliate program into one easy-to-use set of tools. Explore what this platform has to offer today, and use it to effectively and efficiently plan, launch, and manage your new affiliate marketing scheme.

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