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How Affiliate Marketing Can Create a New Sales Channel

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At the Startup Toolkit I look for tools that help you, the startup team, manage, sell, promote or market more effectively. This week, I attended the Affiliate Summit East 09, with the intent of learning more about Affiliate Marketing (also called Performance Marketing), and how it might help your business. The industry is made up of over 200k affiliate partners and more than 5000 advertisers.

Affiliate Marketing has been around for many years on the net. Inc covered it in 2001, Affiliate Advertising: Friend to the Bottom Line and 2004's Start a Sales-Based Affiliate Program.

But of course, things have changed a lot in the last few years. "Think of Affiliate as another sales channel" says Jim Kukral of TheBizWebCoach.com. "It is a way to obtain leads or sales, and monetize those referrals in a way that uses tracking technology to give people credit for the sales they sent you, and to make sure those referrals get paid." There are opportunities for affiliates to send direct sales to a site, or to pass leads. Many people have seen,the Amazon.com affiliate program. People put a link to a book on their website, with some special code that Amazon provides, and if someone buys the book via that site, the owner get a small percentage. Why leave it to Amazon? You can have people selling your goods on their site too.

Lead passing is different. Think of a widget on a car enthusiast site that passes a potential car buyer's name and address to a lead aggregator. A car dealer might want to purchase that lead, and the lead generator gets a percentage.

Who should create an affiliate program? Wade Tonkin of GTO Management, a company that is an "outsourced program manager" which creates an affiliate program on your behalf and manages it for you, notes "Retail is an obvious fit. The affiliate gets a percentage of the sale they've sent to the site. As a merchant, you define what you pay for — a lead, or an actual closed sale in your shopping cart."

Brook Schaaf of Schaaf Consulting and a member of board of the industry's first not-for-profit trade association, the Performance Marketing Alliance suggests that companies must be of a certain size to really benefit from creating an affiliate program. "If you're selling a million dollars of goods a year, and affiliate sales generate an additional 10% of sales, there are going to be fees for the affiliate network, and time spent creating the program and integrating it into your own e-commerce site. It may or may not be worth the additional $100k." Schaaf's group tends to work with companies that already sell $5M or more a year.

But networks such as ShareASale.com let a small merchant do self-service creation of an affiliate program, track the referrals, and pay the affiliates for helping you sell. This business is huge — over 3000 attendees visited the Affiliate Summit this week, and there were 2 floors of booths promoting networks and programs.

Before you start an affiliate program, know that there have been a lot of problems with fraudulent leads and link inflation in the past. "Quality is important," notes Schaaf, "so you should work with services that guarantee to vet your leads and sales for quality."

There's a famous quote about half the money spent on advertising being wasted — if only you knew which half. Affiliate is a way to track and manage that spending so it is clear how payments relate to sales or tangible leads. Kukral and Tonkin suggest any new business considering creating a program do substantial research. A few good blogs to read are "ABestWeb.com" and "AffiliateTip.com". The Affiliate Summit West is in January in Las Vegas if you want to immerse yourself in learning and potential partners.

Last updated: Aug 12, 2009




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