One of the biggest hurdles for companies is customer acquisition costs (CACs). It’s one of the main reasons most start-ups fail. While trying to acquire customers, the costs can outpace revenue and fail to generate enough returns to sustain your business.
Customers can be expensive to acquire, and your business needs to reduce CACs to create greater profitability. That’s why companies are increasingly turning to affiliate marketing as a way to reduce their CACs. In fact, the money spent on affiliate marketing programs is expected to reach $8.2 billion by 2022.
Affiliate marketing creates mutually beneficial relationships between companies and their affiliates and significantly reduces the cost of customer acquisition.
How to Reduce Customer Acquisition Costs with Affiliate Marketing Programs
Your business will be more profitable every time your CACs are reduced. Here are some of the ways affiliate marketing can help:
Only Pay for Performance
Imagine if you could get ten times on return of your ad spending? With affiliate marketing, you can.
When you start an affiliate marketing program, you pay when one of your affiliates creates a conversion. They’ll only get paid commission if they refer someone to you who converts. This action significantly reduces your risk. For example, if you’re selling a $100 product with a 10% commission ($10) payable upon sale, you get ten times on return of ad spend (ROAS) with no risks.
Extend Your Marketing Reach
It’s up to the affiliate to promote the product or service. Commissions on conversions will incentivize affiliates to feature and market your offers, extending your marketing reach and lowering acquisition costs.
Leverage Affiliate Audiences
Some affiliates get creative with their approach and leverage their customers and subscribers to help grow your sales. Influencers and industry experts may provide either a direct or an implied endorsement of your products or services. Consumers are more likely to trust your products when featured on websites or promoted by influencers the consumers follow.
Optimize Your Offers
Affiliate marketing gives you a real-life test lab to analyze landing pages, offers, price points, and copy points by segmenting referral traffic. A/B testing can help you refine your marketing efforts to improve your conversion rates further and optimize your customer acquisition costs.
You can also offer exclusive or different products/packages with affiliates, which provides you a low-cost way to test the market, helping you decide where to invest your marketing dollars for a better ROI.
Easily Scale Your Affiliate Marketing Program
Affiliate marketing programs are easy to scale. Once you have the infrastructure in place, adding new affiliates can create incremental revenue streams with minimal expense.
Generate Recurring Revenue
40% of retailers report that affiliate programs are their leading method of customer acquisition. Once you’ve established an affiliate marketing program, you can generate recurring revenue without additional advertising expenses except for commission. Your affiliate marketing program can generate new customers for years to come.
Create and Manage Effective Affiliate Marketing Programs
Managing an affiliate program does not have to be difficult if you use the proper affiliate management and tracking software. Contact LeadDyno for more information.
