Is Affiliate Marketing Good for E-Commerce Businesses?

As an e-commerce entrepreneur, increasing your brand’s visibility and sales is one of the top priorities. You must already be aware of the power of marketing. It’s often considered the key to an online business’s success. Among the numerous marketing techniques, affiliate marketing has emerged as one of the most effective and efficient.

Affiliate programs have had a major impact on e-commerce over the past years, and their influence has only gone uphill since its inception. But are affiliate marketing programs a good fit to expand your specific business’s reach and gain a good return on investment (ROI)? By understanding the intricacies of this marketing strategy, you’ll find all the answers you’re looking for.

So, without further ado, let’s dive right in!

What Is Affiliate Marketing?

A highly effective and scalable marketing strategy, affiliate marketing is used by e-commerce businesses that reward their affiliates for each customer or visitor that they bring to their online store through their own marketing efforts. At its core, affiliate programs utilise external sources to promote a brand’s products, which consequently leads to increased traffic and sales. One of the primary benefits of this marketing technique is that it has relatively low upfront costs.

According to the marketing firm Custora, both email marketing and affiliate marketing are responsible for 16% of e-commerce orders in the US—outperforming display advertising and social commerce and making affiliate marketing one of the four largest sources of order in the e-commerce landscape.

This marketing type typically involves three different parties:

• An Affiliate Network: An intermediary party that connects advertisers with affiliate partners.
• An Affiliate Partner: An individual or brand who promotes the advertiser’s services or products.
• An Advertiser: The brand whose services or products are being promoted through the affiliates.

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A Real-Life Success Story

According to research, in Q1 of 2023, Amazon was able to generate a revenue of a whopping $1.28 billion through its affiliate programs with approximately 58.5% of affiliate marketers using the Amazon Associates program—making it the most popular affiliate network.

In addition to this, stats reveal that affiliate marketers enjoy an average monthly website traffic of more than 56 thousand visitors. SEO is one of the primary sources of traffic for these marketers, with 79.3% using it to garner these results and 35.5% utilising organic social media.

Many e-commerce stores have reported that affiliate marketing helped almost double their online sales within just a few months. These brands have been able to reach a wider audience through influencers and bloggers whose recommendations the audience trusts.

Here’s an example of how affiliate marketing would work in the real world:

1. A blogger joins a company’s affiliate program.
2. The company or advertiser offers a unique referral link to the bloggers.
3. The advertiser offers a 30% commission on each referred customer’s purchases.
4. The affiliate partner promotes the company’s products in his blogs and adds referral links to them.
5. A blog reader clicks on the referral link and makes a purchase or a payment.
6. The blogger/affiliate partner receives a 30% commission for this purchase.

How To Get Started

Looking to begin your affiliate marketing journey to increase your e-commerce store’s traffic, sales, and revenue? The following steps will give you an idea of how to get started. 

Step 1: Understand Your CLV

As a vital e-commerce metric, customer lifetime value (CLV) tells business owners how much a customer is expected to spend on their products or services during their entire lifespan. This is especially beneficial in justifying the cost of acquiring customers through affiliate marketing.

Here’s the formula to calculate CLV:

CLV = Customer Value x Average Customer Lifespan

To calculate customer value, you can use the following formula:

CV = Average Purchase Value x Average Number of Purchases

Step 2: Choose a Performance Metric

You must choose a metric through which you’ll evaluate your affiliates’ performance. The metric you choose will depend on your service or product type. For example, all metrics related to customer acquisition are commonly used by software or services companies. In contrast, you can determine the number of referred purchases to evaluate your affiliates' performance if you’re in the business of selling tangible products.

Here are some common metrics used by e-commerce companies for affiliate marketing:

• Purchase-Based: Every time an affiliate partner refers a customer to make a purchase in your store, a commission fee is paid to them.
• Customer Acquisition-Based: Affiliates are rewarded for helping the business generate leads. It’s measured by the number of new accounts created, sign-ups of free trials, etc.
• Traffic-Based: You pay your affiliates based on the total number of visitors they bring to your e-commerce store.

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Step 3: Select a Commission Structure & Rate

The third step entails working out a commission structure that you will utilise to incentivise your affiliate programs without harming your business’s profitability in the long run. The following are some of the options you have:

• One-time payments for referrals
• Recurring payments till the referred user is utilising your software
• Percentage commission based on order value
• Flat rate commission for specific actions taken on your website (registration/subscription)
• Offering gifts, store credit, or cash rewards to affiliates

Step 4: Choosing Your Affiliates

It’s crucial that you only partner with companies and affiliates that have access to your target audience and that align with your brand’s values.

Step 5: Setting Clear Terms & Conditions

You must clearly define what constitutes a qualifying action and set commission rates accordingly. For example, a lead or a sale could be defined as a qualifying action in affiliate marketing.

Step 6: Managing Your Affiliates

Your last step revolves around selecting and utilising the tools to effectively manage all your affiliates, orders, and payouts.

Evaluating the 3 Different Types of Affiliate Marketing

If you think about it, essentially anyone with a considerable amount of social media, podcast, or blog followers can become your e-commerce business’s affiliate partner. However, there are different types of affiliate marketing that offer varying results in terms of gaining consumer trust effectively.

Let’s discuss the 3 primary types of affiliate marketing and their pros and cons to determine the best option for your e-commerce store.

1. Involved Affiliate Marketing

Involved affiliate marketing is when you partner with affiliates who not only have the relevant knowledge in your niche but have also used and tried the products. The greater trustworthiness and authenticity of this affiliate marketing type make it one of the most beneficial strategies.

However, a significant disadvantage to this is that you likely won’t have a lot of affiliate marketers to choose from. You likely won’t have affiliate partners reaching out to you. Instead, you’ll need to launch outreach programs and invite affiliates to promote your brand.

2. Related Affiliate Marketing

Related affiliate marketing is when you partner with affiliates with the relevant expertise or experience to promote your products or services. This type of affiliate marketing is typically done through social media, podcasts or blogs.

Given the affiliate partner or brand’s influence and knowledge in the relevant niche, this type of affiliate marketing offers a trusted source of promotion for your brand. However, a significant disadvantage here is that the pool of individuals or brands that you can collaborate with is relatively smaller.

3. Unattached Affiliate Marketing

Unattached affiliate marketing gives affiliate partners no authority in the advertised product’s niche. They simply source and join numerous affiliate marketing programs and promote their services or products without trying them out for themselves. 

Moreover, unlike social media influencers, most unattached affiliate marketers don’t work on developing a meaningful and trustworthy relationship with their audiences. Unattached affiliates instead earn commission fees through clicks on their referral links, which are put in display ads, banners, or pay-per-click (PPC) ads. 

One of the biggest advantages of this specific type of affiliate marketing is that it’s easier for business owners to find and partner with affiliates because of the low degree of commitment. These affiliates are not required to build a large following or even set up a social media channel, a podcast, or a blog. 

However, it’s vital to note that your marketing campaigns can easily grow askew due to the lack of experience of affiliates with your products or services. Moreover, you’ll need to offer affiliates adequate information to help them understand your products or services.

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14 Advantages of Affiliate Marketing for E-Commerce Businesses

The primary benefit of integrating affiliate marketing into your business strategies is that it’s performance-based—which means you’ll receive a potential high ROI with less risk involved. Other benefits revolve around this tactic’s scalability and reach.

However, don’t forget that all good things come with their own sets of cons. Dependency on third parties, high competition, and management overhead are some of the primary disadvantages of affiliate marketing for e-commerce businesses. Curious to learn more? Keep reading to find all the advantages and disadvantages pertaining to this marketing strategy.

1. Increases Customer Lifetime Value

Affiliate marketing will increase the chances of creating a loyal customer base of satisfied individuals who will be more likely to make repeat purchases and even recommend your products to others. As a result, affiliate marketing can help e-commerce businesses in increasing customer lifetime value.

2. Enhances Brand Awareness & Recognition

Affiliate marketing has also helped numerous companies in improving their brand awareness and recognition. This marketing type exposes numerous audiences to your brand, which creates a lasting impact. Consequently, you’ll have plenty of consumers who will likely remember your products and even recommend them to others.

3. Improves Web Traffic & Broadens Your Audience

Your affiliate partners will likely come from diverse niches and backgrounds with well-defined, relevant target audiences that align with the services or products that they are promoting. You can partner with affiliates to tap into these various niche markets and reach customers who are yet to discover your brand through other marketing channels. 

Your brand’s own channels or ad campaigns can only reach a limited number of people. You can tap into vast networks of audiences with ease through your affiliate partners. Consequently, you’ll enjoy increased website traffic.

4. Boosts SEO Rankings

Affiliate marketing may indirectly enhance your e-commerce website’s SEO because when your affiliate partners link to your site, they help generate valuable backlinks. Consequently, these backlinks can help improve your search engine rankings and potentially increase your site’s visibility on search engine result pages (SERPs) and organic traffic.

5. Increases Revenue and Sales

As we have already established, affiliates earn commissions for driving desired actions, such as leads or sales, making it a performance-based model. As a result, affiliate marketing offers a measurable and direct impact on revenue and sales. You can then track the performance of each of your affiliate partnerships and optimise them accordingly.

6. Offers a Strong ROI

Since affiliate partners don’t have to invest anything to come into a partnership with you, they don’t charge you for creating, negotiating, and signing a deal. You will only have to pay your affiliates after a desired action has been taken by their audience member. 

Such payment models are not only extremely attractive for e-commerce but also typically offer a high return on investment (ROI)—depending on the customer's lifetime value (CLV). Working with affiliate partners is similar to the pay-as-you-go payment option. Instead of paying a fixed sum, you’ll only pay for the purchases, leads, or traffic that they bring to your website.

7. Creates Social Proof

Consumers nowadays crave authenticity in the digital realm. Given the fact that approximately 92% of online consumers trust influencers more than advertisements or traditional celebrity endorsements, affiliate marketing has now become key to creating social proof. 

8. Diversifies Your Marketing Channels & Strategies

Affiliates utilise various marketing tactics to promote services or products. They can use paid advertising, email marketing, social media promotion, and content marketing for promotion–opening up endless avenues for you to diversify your marketing channels. This wide array of strategies can prove beneficial to your e-commerce business because they will expose it to various marketing channels and consumer touchpoints.

9. It’s Highly Scalable & Flexible

The affiliate marketing industry is rooted in flexibility not only for affiliate marketers but also for e-commerce businesses. You can practically begin, pause, and resume your partnership with an affiliate at any given point in time. Moreover, you can create your own terms for partnerships, payments, and conditions. 

Moreover, this flexibility of partnerships and promotional strategies, coupled with access to key data and the performance-based model, make affiliate marketing highly scalable. You can partner with unlimited affiliates and leverage data to experiment with numerous messaging, promotional tactics, commission structures, and partnerships to find out what works for your brand.

10. Offers Data Insights & Analytics

A wealth of data and insights are made available to businesses through affiliate marketing. You, as an e-commerce business owner, can access data on things like traffic sources, customer demographics, conversion rates, and more. This data offers invaluable insights that can help you make data-driven decisions, optimise your product offerings, and refine your marketing strategies.

11. Develops Brand Trust & Credibility

Depending on which type of affiliate marketing you opt for, your affiliate partners will likely already have strong credibility and trust established with their audiences as content creators, influencers, or bloggers. When these trusted individuals endorse your services or products, their audience will likely see their recommendations as trustworthy and authentic. This can help you build brand trust and majorly influence your customers’ purchasing decisions.

Struggling with brand credibility and trust? Here are some e-commerce trends to help you.

12. Relationships and Partnerships

Affiliate marketing helps foster meaningful, long-term relationships between affiliates and businesses. Your partnership with your team of affiliates can extend beyond affiliate promotions. It can include collaborations, co-marketing, and longer business relationships that can benefit both the affiliates and your business.

13. Innovation & Competition

Affiliate marketing is a highly competitive landscape—so much so that it can drive you to innovate and gain a competitive edge. Businesses may need to offer attractive commission structures, better affiliate incentives, and unique products to attract high-quality affiliates and stand out among competitors. As a result, they can be compelled to create improved services and products for their customers.

14. Cost-Efficient Marketing

Its cost-effectiveness is one of the most attractive attributes of affiliate marketing for e-commerce businesses. Traditional advertising requires businesses to pay for their ad placements regardless of their effectiveness. On the other hand, affiliate marketing’s expenses are directly linked to outcomes. You will only have to pay commissions to your affiliates when a desired action is completed by the audience—which makes this a highly efficient strategy.

The 3 Main Cons of Affiliate Marketing

With the pros of affiliate marketing out of the way, it’s time we discuss some of its most common disadvantages. Let’s jump right in:

1. It’s a Huge Bargain

Since numerous companies have jumped on the bandwagon of affiliate marketing, many of them are offering outrageously attractive offers to their affiliate partners to ensure they stay onboard. Due to the numerous attractive options available, companies have little to no bargaining power. You may sometimes have to settle for higher rates of commission for the sake of better visibility and reach.

2. There’s a Bit of a Learning Curve

If this is your first time launching an affiliate marketing program, you may first need to learn the ins and outs of this business. This may take some time and resources off your hands as you’ll need to conduct due diligence and thorough research to find the right partners. If you don’t find relevant partners, things may not turn out as well as you had hoped.

3. The Competition Is Tough

As mentioned earlier, countless companies are looking to partner with affiliates from all around the world. This high competition is changing the affiliate landscape drastically each day. Numerous companies are pushing the same type of content through numerous affiliate partners, making it quite difficult for e-commerce businesses to stand out through their strategic promotions and partnerships.

9 Good Practices To Follow

Want to know how you can create an affiliate marketing program highly likely to garner the desired results? The following are some common practices to keep in mind when outlining the strategy for your partnerships:

1. Offer Clear Promotion Instructions

No affiliate will be willing to partner up with your brand and participate in your affiliate marketing program if they don’t know how. That is why it’s crucial that you offer clear instructions on how affiliate partners can promote your products effectively. You can include things like tips on email marketing, social media marketing, and more.

2. Offer Incentives

You may consider offering incentives, such as free shipping, coupons, or discounts, to encourage people to sign up for your affiliate program. Doing so will offer people an incentive to promote your products and participate in your affiliate marketing programs.

3. Launch Good Products

The most important task is ensuring you have good products that people actually want to buy. Do you want your affiliate marketing program to garner effective results and increase your overall sales? You must make sure you’re selling high-quality products that people are willing to pay for. It’s important to conduct thorough research and carefully pick in-demand products to appeal to your target audience.

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4. Provide Affiliate Support

You must offer your affiliates unmatched support to make sure they’re happy and satisfied with the partnership. This includes offering them useful resources for successful campaigns and responding to their inquiries in a timely manner.

5. Introduce Attractive Commissions

To encourage people to participate in your affiliate program, you must offer attractive commissions. The standard commission rate stands between 5% and 20%. However, you can offer higher commissions for high-performing affiliates.

6. Select the Right Affiliates

Not all affiliates will perform equally. Make sure you’re partnering with affiliates who have a good reputation and align with your brand. You’ll want to ensure you’re choosing affiliates who will effectively promote your products, resulting in higher sales levels. Therefore, it’s crucial that you select affiliates based on your target market and their audience size.

7. Create Materials Yourself

Creating high-quality materials for your affiliates is one of the most vital things you can do to ensure your affiliate program’s success. The materials can include product images, text links, banners, and more. As a result, the affiliates will be able to effectively promote your products and encourage their audience to click on the affiliate links.

8. Choose the Right Budget & Platform

While affiliate marketing is cost-efficient, it doesn’t mean you don’t have to budget for some overheads like affiliate management. It’s better to determine and allocate a specific budget for affiliate marketing—especially in the early stages of implementing this strategy.

Furthermore, you’ll find numerous affiliates who are better at garnering results on some specific platforms. You must pick affiliates based on the platforms where you’ve already seen some success with promotional efforts. 

9. Optimise Your Content for Different Platforms

Your affiliates will likely use various different platforms with different analytical metrics. Some of the most common metrics to keep an eye on include most- & least-liked content, link redirection percentage, click rate, engagement, and reach. If you’re responsible for creating the content for your affiliates, pay attention to these insights as they will help ensure better content creation. Consequently, this will increase your affiliates’ following and your revenues.

Moreover, your content should also stand out from the competition to make it worth your audience’s time and money. Whether your affiliates are using blogs, articles, images, or videos, they should contain interesting and clear information regarding your brand, products, or services.

Is Affiliate Marketing Good for You?

Affiliate marketing has significantly influenced e-commerce by offering valuable data insights, expanded reach, cost-effective marketing, and increased sales. However, you must adhere to the relevant regulations, pay attention to quality control, and conduct careful management to ensure its successful implementation.

When and if effectively executed, affiliated marketing can prove advantageous for both parties involved and can help grow your e-commerce business at a relatively faster pace. The short answer to “Is affiliate marketing worth your time?” is a resounding YES!

As the old African proverb says, “If you want to go fast, go alone. If you want to go far, go together.” We recommend partnering with TooMrkt’s team of e-commerce experts to find the perfect blend of affiliate marketing strategies and partnerships for guaranteed long-term success and growth.

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Frequently Asked Questions

Which platforms should I use for Affiliate Marketing?

You can use platforms such as Discord, Reddit, Quora, Telegram, WhatsApp, YouTube, Facebook, and Instagram to find affiliate partners for your e-commerce store. Moreover, there are many platforms that provide access to affiliate offers and networks.

How can I choose the right affiliate marketer for my e-commerce business?

You can look for content creators and influencers in your specific niche who have a sufficient following on the platforms you want to use to promote your products. Furthermore, you can come into partnerships with these individuals following a specific affiliate partnership and payment type. In contrast, you can use platforms and online marketplaces that bring affiliates and advertisers together. 

Is affiliate marketing worth it for e-commerce businesses?

Affiliate marketing is an excellent choice for e-commerce businesses that want to increase their traffic and sales and generate a plethora of long-term, loyal customers. A significant advantage is that affiliate programs are quite easy to set up and you won’t have to invest a lot of time and resources into your campaigns because your affiliates will be responsible for bringing in leads and paying customers.

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