A successful affiliate marketing program can add significant value to a business, offering a variety of both short-term and long-term benefits.
Working to increase profitability, while decreasing expenditures, a continuously fine-tuned affiliate program is easily sustainable. With the right plan and resources in place, businesses can enjoy a strong return on investment (ROI) with this cost-effective marketing strategy.
Return on Ad Spend (ROAS)
To guarantee a certain amount of revenue, a measure called Return on Ad Spend (ROAS) is used to calculate how much should be spent on an advertising campaign. ROAS is an important baseline when building or altering an affiliate marketing program. Crafting a budget, deciding where to invest and choosing the right strategies to increase exposure are all helped by an accurately calculated ROAS.
Often tied directly to the budget of an affiliate program, ROAS helps a business maintain a cost-effective affiliate marketing strategy.
ROAS is the best measure to judge whether an affiliate program is valuable, and is easily calculated by dividing revenue generated by amount spent. If the value of a ROAS is negative, the corresponding affiliate program is not generating a profit. Inherently self-funding, affiliate programs can be an attractive marketing option when executed correctly. This is because unlike other marketing tactics, such as buying advertising upfront,
This is because unlike other marketing tactics, such as buying advertising upfront, commission is only paid when a sale occurs. A reasonable ROAS indicates that an ad campaign is both effective and generating a profit.
Benefits of a Well-Organised Affiliate Program
Since affiliate programs are self-funding, they are a more cost-effective option than traditional advertising strategies. Delivering a boost in website traffic, successful affiliate programs also deliver a variety of potential customers who click on advertisements to learn more about a business’s products or services.
A few specific benefits of well-organised affiliate marketing programs include:
- Reporting, payments, link generation, automated tracking and scalable infrastructure, which allow businesses to attract additional sales without a significant amount of extra work.
- Third-party endorsements from independent sources, which serve to influence consumers without directly selling specific items or services to them (affiliate networks are generally adept marketers and know how to efficiently leverage their efforts).
- The ability to display a variety of advertising and paid searches, diversifying revenue sources and distributing risk across a wide range of websites.
- A high ROI – the second highest of any marketing channel (affiliate marketing is second only to email marketing).
A potentially effective marketing opportunity, affiliate programs do have some drawbacks. These are some common pitfalls that businesses choosing to run with an affiliate program should be aware of:
- The sea of numbers and data provided by an affiliate program can be intimidating, and even cause a business to focus on the wrong metrics. Conversion rates, sales and the cost to acquire sales are the three most important metrics to monitor.
- Too many networks can impede an affiliate program. Always start with a single affiliate network, and expand slowly to build a sustainable program.
- Forgetting to establish thorough policies and procedures can confuse affiliates. Without guidelines, affiliates may choose to promote discounts or offers that weren’t meant to be given to consumers. Promotion methods, brand guidelines, and policies for paid searches all need to be outlined clearly.
- A lack of resources can prevent an affiliate program from growing. Active input and maintenance is needed for success.
- A set budget can unnecessarily restrict an affiliate marketing program. Marketers may slow down a program or cut commissions under a set budget. It’s best to operate with a more fluid budget, providing some leeway for growth.
Optimising an Affiliate Marketing Program
There are several strategies that can be used to improve an affiliate marketing program and lead to higher returns, exposure and attention.
Follow these simple strategies when building or altering an affiliate program:
- Encourage better program uptake by offering higher starting commissions.
- Offer a multi-faceted program with multiple commission rate levels. For example, offer higher rates for top-performing networks and marketers. However, avoid constantly changing commission rates. Constantly fluctuating rates can negatively impact relationships with affiliates.
- Research competitor rates and benefits, altering rates as needed to stay competitive.
- Regularly communicate and maintain relationships with affiliate marketers.
- Only approve affiliates that can add value to a program. Affiliates must be willing to work to properly represent any products or services.
- Provide awards to affiliates when customers make additional purchases. Incentives make an affiliate program more appealing.
Overall, affiliate marketing programs can be very effective when used correctly. An effective tool for measuring the success and sustainability of an affiliate program is ROAS, which can help determine the most valuable campaigns. Being aware of some of the common pitfalls associated with affiliate programs can also ensure that the biggest challenges with this type of marketing are avoided.
Lastly, ensuring the program is regularly maintained and properly allocated resources will lead to a greater chance of success and maximum ROI.