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Pros and Cons of Affiliate Marketing

Courtesy of Nicholas

Affiliate marketing can create a substantial amount of passive income when utilized on a highly trafficked website. There are no products to sell and no inventory to keep. Affiliates provide consumers with links to relevant products or services and earn a commission from any purchases made.

How Affiliate Marketing Works

In most cases affiliate marketing involves four major players:

1. Merchants

2. Affiliate Network

3. Affiliates

4. Consumers

The affiliate model has evolved into an extremely large industry and now has several tiers and sub tiers. However, affiliate networks aren’t always involved in the process. In some cases affiliates and merchants for direct partnerships, effectively eliminating the middleman. This method is ideal and provides the affiliate with some level of control over offers provided to customers.

Advantages of Affiliate Marketing

Affiliate marketing has numerous advantages. Affiliates can benefit from the following factors:

Passive Income Generation – Affiliates can set up a website and watch the money roll in. It’s possible to work from home and it requires minimal effort.

Turn-Key Operation- It’s not hard to become an affiliate. Affiliates need only to choose a product or service to become affiliated with and sign up to participate in the affiliate program. In most cases affiliates paste a few lines of code into the website and the rest is taken care of by the affiliate network involved.

Minimal Marketing Skills Needed- Affiliates don’t need a degree in marketing and they don’t have to be good at selling. Being good at SEO (search engine optimization) is helpful for affiliates, but legal issues, marketing, and maintaining records can be handled by merchants and affiliate networks.

No Investment Necessary- Affiliates aren’t required to pay money in order to sign up for an affiliate program. Additionally, if the program isn’t successful, an affiliate can choose to discontinue the program with no loss involved.

Multiple Streams of Income- Affiliates who become familiar with the process can branch out to other areas. Affiliates can be involved in multiple programs in order to have multiple income sources.

Disadvantages of Affiliate Marketing

Affiliate marketing can have a few drawbacks. A few of the primary disadvantages of affiliate marketing are:

Lack of Control – Affiliates can’t exercise control over programs offered by merchants. If visitors would respond better to a different type of offer or if a price adjustments are necessary, affiliates can’t do anything but wait for the merchant to change the offer. Affiliates have access to the same offers and programs that other affiliates have. With similar offers available to everyone, it’s difficult for smaller affiliates to stand out from the crowd.

Competition-Affiliate marketing is easy to participate in, but this can be a negative factor as well. There are thousands of affiliates participating in the same program and all these affiliates are competing for a limited amount of traffic.

Pay on Performance- Merchants enjoy the benefit of having large amounts of traffic driven to their site. In most cases affiliates are paid when a sale is made, not for generated traffic. Numerous things can happen between the time a visitor clicks a link and the sale is made. Bad offers or dead links can easily lead to a huge loss in profits for affiliates.

Affiliate Networks- Affiliate networks link merchants to affiliates and provide reporting and tracking tools. In return, affiliates must share revenues with these organizations for their services.

Creating a Win-Win Situation with Direct Partnerships

Affiliates can avoid most of the disadvantages involved in direct marketing by forming a direct partnership with merchants. Direct partnerships are created when affiliates contact merchants directly, effectively cutting out the middlemen. This allows the affiliate to retain more profit. Merchants can benefit from direct partnerships by discovering what visitors want or need, making it much easier to tailor offers and promotions around those factors.

How to Initiate a Direct Partnership

Affiliates who are just starting out can benefit from engaging in direct partnerships with smaller merchants. Affiliates will be able to provide smaller or newer merchants with traffic in return for exclusive offers available solely for their visitors. Most merchants will be willing to engage in a trial run with an affiliate to ascertain if the arrangement could be mutually beneficial. If the merchant isn’t game, the same offer could easily be made to the merchant’s competition.

Affiliate marketing can provide a substantial amount of income, if implemented properly. Most of the drawbacks can be mitigated through direct partnerships or by utilizing multiple programs. Additionally, participating in highly relevant affiliate programs can also increase the odds for success. Affiliate marketing does require a degree of patience. It can take time to build an effective affiliate program.

 
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