Affiliate marketing has a lot going for it. Rather than try and expand your existing operation by employing additional sales staff, undertaking new marketing initiatives or increasing your media spend, why not allocate a certain proportion of your revenues to incentivize external organizations to sell your products and services for you?

As we have come to learn conclusively during this current economic downturn, money spent on advertising must be well spent. It can be so difficult to justify the cost of advertising and as the marketing arena is in a constant state of flux, it can be difficult to decide where you should spend those marketing dollars, as well.

Affiliate marketing essentially utilizes the power of leverage and is becoming an increasingly more relevant style of marketing in our modern era. You only pay your affiliates when the sale is actually made and therefore, the affiliate assumes the responsibility of advertising and marketing on their end, as it relates to the sales that they produce. This form of performance marketing can also be called CPA or cost per action and there are a variety of different approaches.

Fundamentally, most organizations with something to sell – most often a tangible product, but also sometimes a service such as Internet service – seek out an affiliate network. The network will in turn have an army of affiliates on board, who are actively looking for products or services to sell in return for a commission. There may be some quite complex “back and forth” between the company and the affiliate network to decide whether this is the right fit, but once established you will essentially have an army of external sales consultants, whom you pay only on performance.

There are a large number of affiliate networks and many specialize in certain areas. Research is required, so that you interact with the network appropriate to your niche. Generally speaking, the affiliate network earns their “cut” when a sale is made, as their revenue is linked to the revenue devoted to the affiliates.

To be most successful it is necessary to set aside realistic commissions. This does not mean that you have to “give away the farm,” but you must adequately incentivize the affiliate to sell for you. Keep an eye on the affiliates that sign up for your program, as you will need to set parameters and rules, so that they do not misinterpret your message or act in a counterproductive way to your overall goals.

Ideally, you will have a mix of affiliates with good reach. This can be either through highly trafficked websites or blogs, via large and fruitful e-mail contact lists or a combination. If your offer is particularly good, the affiliate could work wonders for you and help you to grow your business exponentially.

Make sure that your operation is geared to accept additional business before you launch your affiliate marketing campaign. You might also want to set aside a reserve, allowing you to give additional incentives to productive affiliates and don’t be afraid to directly communicate with them to help establish an even more fruitful association.

Have you used affiliate marketing? Was it successful for you?

Matthew Toren