Although affiliate marketing can be attractive, sometimes it's not the best option. Here are some of its drawbacks.
These are not necessarily disadvantages of running such a program. Rather, I'm showing you the common mistakes many businesses make. If you avoid these mistakes, you can run a very successful affiliate program.
After going through these mistake, you might decide that affiliate marketing is not right for you at this point. And that's fine. It means that you can invest your time, money, energy and effort elsewhere, which could be the right thing for you to do at the moment.
1. Unrealistic expectations
I personally feel that the biggest mistake most businesses make when starting any new venture - whether it's affiliate marketing, joint ventures, referral systems, or commission-only salespeople - is that they're too optimistic. They assume money is just going to come rolling in because now they have this huge fleet of salespeople working on commission, who will be referring people left, right and centre to their business.
In most cases that just isn't true. Many people start off with very optimistic views of how their affiliate program is going to work, but discover they have to downgrade their expectations very quickly. Most affiliate marketers on the Internet will tell you that a tiny, tiny percentage of their affiliates (perhaps 1 or 2 percent) generate 80 to 90 percent of their income for them. And most of their affiliates generate almost nothing.
You have to work hard to get your affiliates generating sales. If you don't, you'll only get a trickle of sales.
2. Poor sales conversion
If you don't get good sales conversion yourself, do you think your affiliates can do any better? If you haven't road tested your system before offering it to affiliates, they won't succeed either.
This is especially true of the Internet. I've heard people say to me, "How can I get access to affiliates with big databases - 100,000 people or more? Then they can promote my products and service to their list." Well, the first question I have is, "What's your conversion rate?" They usually say nothing because they don't know what that means - let alone what the rate actually is.
Briefly, your conversion rate is the percentage of site visitors who make a purchase. For example, if 100 people visit your Web site and 4 buy, your
conversion rate for that web page would be 4%. I will cover this more in detail under "Doing the Numbers."
In affiliate marketing, a big mistake is not being able to sell successfully first, before embarking on such a program. If you can't sell your product or service to your own network of people, you will never be able to prove to your affiliates that they could sell the service or product. So what incentive would there be for them to sign up and send your promotion to their valued database? Why would they be interested in doing that?
People with the huge databases have built up trust with their customers. They have a particular relationship with the people in their database. They won't have the confidence that they should advertise your product to them, nor that they could even profit at all from this venture. Sure, you'll pay them a commission, but if you can't prove your conversion rate, they won't know what opportunity exists for them.
This may be the deal breaker for you in launching an affiliate program. Consider the products you have for sale currently on your Web site. Are they selling well? Are you happy with your conversion rate? If your answer is no, or if you don't even know the answer to those questions, you have no right to try and convince other people to sell for you.
So test your sales techniques and other marketing methods - and know that you can sell yourself - before you start offering it to your affiliates.
3. Poor incentives for affiliates
The third mistake is that any business people don't offer enough of an incentive to their affiliates. For the affiliate it really comes down to what's in it for them. It's not so much about the percentage of commission; it's about how much money they're going to make; and how many sales they need to make in order to create a decent income.
Take again the example of the seminar that I promoted. They were offering 50% commission to their affiliates. Is 50% good? Well, sure! But 80% is better or how about 100%? I've seen some affiliate programs that offer 80 or 100 percent.
You have to also ask, "80% of what?"I've seen people who sell e-books for $29.00 and they offer 80% of that to an affiliate, or $23.20. That's good, but not nearly as attractive as 50% of a $1,600 seminar ticket and making $800 for every sale.
Some affiliate programs offer higher commissions; but again it's not the percentage, it's the actual amount of money the affiliate makes and whether they're going to continue making money from the customer if they make future sales.
We will go into more detail on the numbers and later. For now, be aware that you can make a mistake by not offering an attractive enough bonus to your sales force.
Don't be stingy with your incentives for your affiliates. They have the market; they have the database; they have that list which you don't have. That is as valuable to you as the product or service that you have to sell.
4. The wrong partners
The next most common mistake is to choose the wrong partners. Because it costs you and your affiliates nothing, it's tempting to offer your affiliate program to anybody on the planet who could be willing to promote you. But if you're just starting out and especially if you're just running this as one marketing method in your marketing mix, it's really important to pick the right partners.
I have an affiliate program on my Web site, but I don't promote it publicly. If someone I know and trust asks me about the program, I invite them to sign up. But I'm careful about who I choose. I only have a very few affiliates who bring me occasional business. But I won't open it up to everybody.
Even people with big databases might not be the right partner for you. If they aren't the right market for you, you'll spend most of your time answering queries, handling customer complaints, etc. In brief, you'll waste your time with the wrong sort of people. So it's not always a good thing to get more traffic to your Web site.
5. Too much, too soon
The fifth mistake is to get too sophisticated too soon. There are some very sophisticated affiliate marketing systems available, and some of them are excellent. However, most are geared towards those who want to run their business using affiliate marketing as the only marketing tool they use. I mentioned in the introduction that this book focuses on you as a small business owner looking to add affiliate marketing to your overall marketing mix.
Many of these sophisticated systems are beautifully automated. You can almost just sit back and let the money come rolling in. But these systems can be very expensive, they are hard to learn, and if you are just going to be using affiliate marketing in your mix to promote your products and services, these things can get in the way. They're fantastic systems but they also can be very complicated. It's a real pity if the intricate technology gets in your way of getting started.
Gihan Perera is the author of "The Seven Fatal Mistakes That Most Web Site Owners Make - And How To Avoid Them" and "Spin: Turn One Idea Into Hundreds of Information Products". Visit GihanPerera.comand get your complimentary copies now.
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