How to generate sales and profits through affiliate marketing

Anyone who has ever been online has been exposed to affiliate marketing. But most small businesses still don’t understand how they can use it to drive sales or earn a passive income.

All business owners have a keen interest in maximising their sales and revenue. Yet only a fraction of them have embraced affiliate marketing, one of the easiest and most effective ways to fatten a bottom line.

David James is a Gen Y entrepreneur and online marketing specialist. Below he explains how even the most time-poor, technologically illiterate business person can harness banner ads and hyperlinks to their advantage.

How it works

Affiliate marketing is a high-tech way of hiring a bunch of salespeople who will work purely on commission. Here’s how it works: Business A has a good or service they would like to sell more of. Affiliates B, C, D, E and F attempt to sell that good or service online and pocket a commission if they are successful in doing so.

A small business can work one or both sides of the affiliate-marketing street.

Let’s say Sue owns a yoga studio in Sydney. She’s about to run a month-long ‘Introduction to Yoga’ course that costs $100. Her own promotional efforts haven’t yielded many enrolments. Through an affiliate network (see below), Sue offers affiliates – such as lithe Pinterest starlets or people who run yoga-advice websites – the opportunity to earn $30 every time they facilitate an enrolment in her course.

Alternatively, Sue may wish to create another revenue stream by becoming an affiliate. She could, for example, have an ad for a Bali yoga resort on her business’s website and earn $50 every time someone clicks on that ad then books a stay at the resort.

Sign up and cash in

While it’s possible for businesses and affiliates to have direct relationships, there is usually a middleman involved. That intermediary is called an affiliate network. Some of the larger and more reputable ones that James recommends to affiliate-marketing newbies are:

The big advantage of affiliate networks is that they take care of almost everything. The affiliate network will supply ‘tracking link’ software. This records when someone clicks through from an affiliate’s website/Facebook page/Pinterest or Instagram image/YouTube video and makes a purchase from a business (both the business and affiliate have access to a dashboard to keep tabs on these ‘conversions’).

The affiliate network also handles the money side of things, billing the business and making sure affiliates receive their payments in a timely fashion (like credit card companies, affiliates take a small cut whenever a transaction takes place).

All that is left for a business or affiliate to do is copy and paste some code. “Some basic HTML knowledge is required. But it’s not difficult or expensive to outsource this if you’re not the technical type,” James says.

If the relevant business involves financial services, by law you need to notify your customers that you will receive a commission. Even if another type of business, you should still notify your customers of the commission as good for your reputation (they will probably think you are receiving something for the recommendation, so why try and hide it?).

Also there are laws about misleading and deceptive conduct so the basis of your recommendation should be clear.

You get what you pay for

The more money you pour into affiliate marketing, the better the results are likely to be. The higher the commission, the greater the number of high-profile affiliates you’ll have pushing your product.

“Businesses need to offer affiliates the opportunity to make at least a $10 commission,” James says. “If they want to want the type of affiliates who can deliver a reasonable number of eyeballs, they need to offer commissions in the $30-$50 range.”

(If you want a plug from a celebrity, the sky is the limit. Kim Kardashian reportedly charges US$250,000 – $500,000 for a single ‘sponsored’ Instagram photo, Facebook post or tweet.)

Millionaire bloggers and well-known globe-trotting Instagrammers receive lots of media attention. But James points out most affiliates have modest revenue streams.

“As with any field, the top performers do well for themselves but for most it’s just pocket money,” he says. “To take the example of the yoga studio-owner, she might make $5,000 - $10,000 a year in commissions. It’s not enough to live on but it’s an attractive return on investment for putting an ad on her home page.”

“Most affiliates only recommend goods and services that they would buy themselves.”

Banish those brand-damage worries

Business owners are often wary of affiliate marketing out of concern it could result in their brand being trashed. Granted, there are periodic headlines about companies having their wares promoted on porn or neo-Nazi sites. But James argues it’s almost always a non-issue.

“To take the yoga course example, it doesn’t make any commercial sense to market that on a website featuring extreme views or content,” James says. “It’s going to be promoted in online spaces focused on health, fitness, relaxation and spirituality. Plus, when signing up with an affiliate network, it’s easy for businesses to specify what they don’t want their brand associated with. If a business owner doesn’t want their brand anywhere near, for example, alcohol or gambling they can specify that.”

James points out it’s the affiliates who need to be worried about brand damage.

“If I click through an ad on the yoga studio’s site and book a holiday at a yoga resort that turns out to be a disappointment, I’ll be left with a negative impression of the yoga studio. I definitely won’t be clicking on any other ads on that site,” James says. “There’s a kind of karma that operates on the Internet that promotes accountability. That’s why most affiliates only recommend goods and services that they would buy themselves.”

Affiliate marketing should be a low-risk activity, especially if carried out through a reputable affiliate network. Nonetheless, it’s still a good idea to make sure you have your professional indemnity, products liability and public liability insurance up to date before engaging in it. A Steadfast insurance broker can provide the advice you need.

Important note - the information provided here is general advice only and has been prepared without taking in account your objectives, financial situation or needs. Steadfast Group Ltd (ABN 98 073 659 677, AFSL 254928)

Anything can be an affiliate-marketing opportunity

You may be thinking affiliate marketing is fine for someone who owns a yoga studio, but your business just doesn’t lend itself to cross-promotional opportunities. James argues that kind of mindset means you’re most likely missing out on seizing an opportunity. He points to his own affiliate-marketing site – highjump.club – to make his case.

“In high school, I was Australia’s junior high jump champion,” he says. “High jump has a small following in Australia and around the world. There isn't really any money in the sport unless you compete at an elite international level.”

Nonetheless, James drew on his personal experience to write a handful of advice articles and then created an aesthetically pleasing website. As a result of that small investment of time and effort, he now has an ongoing, low-maintenance revenue stream. One derived from affiliate marketing high-jump books, coaches, equipment, shoes and training programs (ads for general products also appear on the site).

“At the start, I wrote a series of articles over the course of a month,” he explains. “I now write one every few months. Whether I choose to work on the site or not, that passive income stream is always coming in. Affiliate marketing can be the passive-income gift that keeps on giving. If you put in the hard yards upfront, it grows like a snowball."

Article brought to you by Steadfast. Learn more here.

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Important disclaimer - Steadfast Group Limited ABN 98 073 659 677, its subsidiaries and its associates.

The views expressed are those of the author only and do not necessarily reflect those of Steadfast.

This magazine provides information rather than financial product or other advice. The content of this magazine, including any information contained on it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.