Many online marketers are strong proponents of using affiliate marketing as part of your own marketing strategy, which means paying a commission to have other people promote your products on their high-traffic websites. Given that a large number of e-commerce players have failed in affiliate marketing, there appear to be a few pitfalls, if not a dark underbelly to the marketing tactic that sometimes sounds too good to be true.
Several disadvantages exist when you try to set up affiliate marketing yourself or through other people, to bring fresh traffic to purchase your goods or services online. There are several types of issues you need to look out for if you plan to make this an effective and profit-enhancing way to market your business.
A Question of Loyalty
As you build out your affiliate marketing strategy, you may soon find that many affiliates are fair weather friends. When you're a new discovery in the affiliate space, there might be some initial curiosity, or even euphoria, about your product offering, which entices new affiliates to market your wares. But after the initial spike in sales, the next e-commerce business will come along and a large proportion of your affiliates will move away from you to promote the next big thing.
Affiliates tend to monitor their earnings reports quite closely, often multiple times a day. As a result, they get nervous if earnings slow down even for a short period. And you can be sure that your sales will occasionally slow down. The exodus of many of your affiliates, who will seek greener pastures, will exacerbate your business slowdown.
The Cost of Doing Business?
Affiliate commissions and network commissions will erode your bottom-line. In the best case, you will notice that you are able to increase sales with the help of affiliates, but that growth in top-line revenue will be at the cost of your bottom line. Affiliate commissions of 5 to 10 percent or more are common. In addition, there is the overhead of paying commissions to affiliate networks if you choose to join them.
Your profits will decrease as your usual sales get routed through affiliates. This is one serious disadvantage that is usually beyond the imagination of hapless e-commerce merchants. The following scenario illustrates this occurrence:
Say you have significant sales, but don't yet use affiliates. When you sign up your first set of affiliates, you are thrilled to notice that they are bringing in lots of sales. But when you look at your aggregate sales level, you hardly perceive a difference. So, what happened? It turns out that your affiliates successfully managed to get your customers to visit you after clicking a link that had their affiliate code. As a result, what should clearly have been a direct sale, cost you affiliate commissions with no actual sale coming in.
How would this happen, you ask? By using a wide array of methods, including SEO, SEM, the creation of fake coupon codes, offering fake promotions, and the like, an affiliate marketer could end up compelling your customer to visit your e-commerce website only by clicking their link.
Protecting Your Brand Equity
Affiliates may not treat your brand with the respect and care it deserves. You've invested resources in conceptualizing and developing your e-commerce brand, and then along comes an affiliate marketer with scant respect for your brand. You can experience a variety of headaches from affiliates doing minor things that distort your brand imagery to affiliates committing serious offenses such as misrepresenting your offering.
This does not imply that affiliate marketers as a class are unethical. But the short-term orientation of affiliates can cause some of them to use dodgy methods.
When e-commerce professionals learn the dark side of affiliate marketing, their first reaction is, "in light of all this, is affiliate marketing worth it?" When done effectively and conscientiously, affiliate marketing presents a great tool for e-commerce marketers. But, like in all other aspects of business, you do need to be aware and careful of the pitfalls.