Why affiliate marketing programs are good for small businesses

Don’t have a lot of capital to spend on marketing? That’s a common problem for many small businesses. It’s also a catch-22 because while you don’t have a lot of money in your marketing budget, getting your name out there is crucial to the success of your business. 

That is why many small business owners turn to affiliate marketing programs to drum up business while keeping costs low.

Related: How to start an online business

What is an affiliate marketing program?

Affiliate marketing is a strategy in which the vendor or product owner works with third-party marketers to advertise their products through various channels. However, the vendor only pays when the marketer delivers them a sale or lead. In marketing, this is known as cost per acquisition, or CPA. 

Related: 6 Local marketing tips for small businesses

So, how does it work? Affiliate marketers may work independently or in some cases they work for an affiliate marketing business. When you contract with them to deliver you leads or sales, they do this in a number of ways:

1. Through blogs or review sites about your products to encourage people to buy
2. Social media posts advertising your products
3. Pay Per Click ads on Google
4. SEO practices to help content written about your products rank favorably on Google.

When the affiliate marketer gets you that lead or sale, only then do you pay them a commission. 
Typically, you will also provide an offer, such as a coupon or discount code on your product, that the marketer can use to entice potential customers.

How to recruit affiliate marketers

The best place to start is with an affiliate marketing network. They will help you set commission payments based on your margins and help connect you with affiliate marketers ready to find you leads or sales. Some networks to look into are:

• CJ Affiliate
• ClickBank
• Pepperjam
• JVZoo
• Rakuten Marketing
• Awin

Another way to recruit affiliate markers is by posting about it on social media. This lets marketers know that you’re creating an affiliate program and looking to partner with them. Lead them to a page on your website that provides an overview of your product so marketers can get a sense for your company and the industry you’re in.

Structuring commission payouts 

Although an affiliate network can help you structure your  commission,  you may want to consider basing it on the lifetime value (LTV) of a customer. If they buy from you once, are they likely to buy from you again over the years? If so, think about structuring your payout to marketers based on the overall lifetime value you place on each new customer. 

Another good way to check if you’re offering an appropriate commission to affiliate marketers is to see what your competitors are offering. If you offer better commission rates, you will be more likely to get affiliate marketers to work with you.

3 Reasons affiliate marketing is good for small businesses

Big and small businesses use affiliate marketing programs -- Amazon has one of the largest. However, there are some key reasons why affiliate marketing is particularly valuable if you are a new or small business. 

1.  Helps build your brand

When you have a group of marketers pushing your products through video, blogging, and social media, it helps spread the word about your brand. With more content about your business out on the web, you will start to build name recognition, which is great for sales.

2.  Cost-effective

Affiliate marketing is extremely cost-effective because you only pay when you get a lead or sale. You could spend money running ad campaigns to test different markets, but with affiliate marketing, you’re looking at a much better ROI, which is essential for small businesses that don’t have much capital.

3.  Easy to set up

You could hire a marketing team from the ground up, but not only is this expensive, hiring and training takes a long time and who knows when you will start to reap the benefits by seeing more sales. Affiliate marketing programs are pretty easy to set up and require little maintenance once they get going.

What to look out for

Affiliate marketing isn’t a magic bullet, and there are risks. To get the most out of an affiliate marketing programs, watch out for these two things. 

1.  Make sure you have a way to catch fraudulent sales or leads. Bad actors may try to collect on non-existent sales, so be sure you have a way to confirm that you’re only paying for actual sales (or leads, if that’s what you’re looking for.)

2.  Don’t recruit sites that already link to you naturally. Affiliate links aren’t valuable for SEO, so don’t give up a natural link for an affiliate one. 

Bonus: Make sure your website is optimized for sales

A good way to support your affiliate marketing program and help ensure its success is to make sure your website is always up-to-date and has a good user experience. If a marketer sends a lead to your website, your site should be able to convert them.

Related: How to start an online business

For tips and advice to make your business a success, check out our Grow Your Business page.