Affiliate marketing is growing faster than the ice is spreading on the water out my back door…and it’s been cold here! While I look forward to getting out on the ice, that’s not what this article is about.
I want to talk on what I just learned about affiliate marketing when listening in on one of James Martell’s Coffee Talk podcasts. James, founder of www.theschoolofinternetmarketing.com, is an expert in many aspects of online business, and loves to share his wealth of information with others.
On this particular podcast, his guests Sarah Bundy and Carolyn Kmet, are equally as passionate about affiliate marketing and helping others get started. Sarah is currently CEO (and founder) of All Inclusive Marketing (AIM), with Carolyn as the VP of Performance Marketing at AIM. The two have great history in working for some of the most influential affiliate marketing industry giants such as ShareASale, Groupon, and starting a couple successful companies of their own.
I recently took my family on vacation and found some great deals on Expedia. I found an good hotel near all the popular destinations at a good rate. Expedia saved me hundreds on my vacation.
We put the ALL in all-inclusive! Up to $3000 resort credit! Only with Expedia! - Expires 12/23/13.
Their experience, combined with James, is over 3 decades worth of knowledge. So, I took notes…and thought I would share some of the highlights.
A Little History on Affiliate Marketing
To best sum up what affiliate marketing is all about, I will share a possible scenario…
‘Joe’ has a product (or could be a service) to sell. Let’s say it’s an online company for ordering bank cheques, registers, and other financial items. His website is the hub of his business, so he can easily do most of his work from home…with the exception of mailings and storing supplies.
‘Bob’ is interested in helping Joe out by hosting a link to the product on his site. Each time a consumer clicks on that link, it will direct them to Joe’s site, where they can make a purchase. And, if they do make a purchase after clicking that link, Joe will pay Bob a commission of that sale.
That is perhaps the easiest way to sum up what affiliate marketing is about…people indirectly working together to make money.
You might be familiar with Amazon. They are a mega example of affiliate marketing. If you have ever made a purchase on there, you probably noticed that they don’t always host the actual product, but direct you to others who do. They make millions by doing this. However, they are not the original affiliate marketer.
William J. Tobin launched the original affiliate marketing program in 1989, with PCFlowers.com in 1993 and was producing 6 million per year soon after. This was started during a dial-up system world. Can you imagine what he would have done in the beginning, with today’s technology?
The Various Roles People Play
Just as in the brick and mortar world, there are various key players working in an affiliate marketing program. In the traditional work setting, the departments include the CEO, marketing, distribution, and more. It’s very similar in the online affiliate marketing world.
There are 4 key roles that I learned about by listening to this particular episode of Coffee Talk. The first is the merchant…or, ‘Joe’ from the above scenario. The merchant is the one selling the product or service and will create the product, warehouse it, and ship it to the buyer.
The next is the affiliate, which was played by ‘Bob’ earlier. The affiliate is responsible for driving business to the merchant through his website and links. They can do this more effectively by utilizing a great …and relative website, filled with quality content and photos. They can also use Social Medias to attract traffic, such as Facebook, Twitter, and Pinterest.
Next we have the affiliate network, which is basically a 3rd party, responsible for tracking transactions. Some of the well-known affiliate networks include ShareASale, Commission Junction, and Google Affiliate Network.
And finally, there is an affiliate management agency. They are an outside company that has the role of managing the program as an outside company or service.
Know the Cost before You take the Leap
While the above information is important to know before making the decision to move forward, you also need to budget for this…just as you would with any other business. Take a look at some of the main expenses:
- Affiliate Manager – plan on spending between $30,000 and $90,000 per year for your affiliate manager. This is the person or company that will manage your business for you. Now, you can get away with the lower end of this by having an in-house manager. But, as they pointed out in the podcast, you will most likely lose out on a lot of experience and background that a company specializing in affiliate management can provide.
- Launch Fee – There will be a launch fee for the affiliate network, and the cost will depend on who you work with as well. Expect a fee of anywhere from $650, up to $5,000. It was recommended that a company like ShareASale is on the lower end and perfect for a new business.
- Commission – If you are the merchant, you will have to pay a commission percentage for each sale that is made through the affiliates. The average for that is 1-12%, and depends on the unit price of the product. The higher the cost, typically the lower the rate of commission.
You will have other minor costs, such as creating and maintaining a website, your office expenses, and staff if you have one.
Hopefully I have shared enough information to pique your interest in affiliate marketing. Do yourself a favor and do some more research. Take a listen to a few podcasts on Internet marketing, and search the Internet to learn what you can. Many people have been very successful, and there is room for more.
Benjamin Baker admits to being addicted to his freelance career, which consists of writing and research. His topics are typically inspired by information he finds during his research, or even when he is simply browsing the Internet. For example, his latest series of articles on personal finances stemmed from his visit to www.personalchecksplus.com. When he is not working, Benjamin spends his time camping, fishing, and strumming his guitar. He lives in Denver, Colorado with his wife and 3 teenage children.