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What Online Entrepreneurs Need to Know about Affiliate Marketing
16th March 2017 • The Digital Entrepreneur • Rainmaker Digital LLC
00:00:00 00:35:15

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Running an affiliate marketing program can be tricky, especially when selling digital goods. So is it worth it?

As online entrepreneurs, we are always on the lookout for ways to increase sales online. But what about affiliate marketing? Should it be in our marketing mix?

At Rainmaker Digital, affiliate marketing has been an important part of our online efforts. And we are lucky that we have the resources to devote to this important channel.

But what about you? Can it work for your needs or are you better off spending time elsewhere?

For this episode, we interview Brian Littleton – the founder and CEO of ShareASale – and ask him the important questions you need to know when considering affiliate marketing.

In this 35-minute episode, Sean Jackson and Jessica Frick debate and examine the benefits of affiliate marketing, including…

  • The common complaints about affiliate marketing
  • Why the costs of affiliate marketing may be worth it
  • Why performance marketing – and affiliate marketing in particular – is a growing trend
  • How to structure an affiliate program correctly
  • And of course, our question for the week – is Amazon an online business’s best friend, or worse enemy?

Listen to The Digital Entrepreneur below ...

The Show Notes

The Transcript

What Online Entrepreneurs Need to Know about Affiliate Marketing

Voiceover: Rainmaker FM.

You’re listening to The Digital Entrepreneur, the show for folks who want to discover smarter ways to create and sell profitable digital goods and services. This podcast is a production of Digital Commerce Institute, the place to be for digital entrepreneurs. For more information go to Rainmaker.FM/DigitalCommerce, that’s Rainmaker.FM/DigitalCommerce.

Sean Jackson: Welcome to The Digital Entrepreneur, everyone. My name is Sean Jackson. I’m joined, as always, by the intelligent Jessica Frick. Jessica, how the frick are you?

Jessica Frick: I am great. How the jackson are you?

Sean Jackson: As always, I am well. And what was our question for the week that we left everyone hanging with from the last episode?

Jessica Frick: Last episode, we asked whether you think affiliate marketing is worth it for digital entrepreneurs. And you said it’s too hard for too little return. And I’ve been thinking all week about how wrong you are. But, before I detail all the reasons why it’s totally worth it, I really want to hear you expand on this.

The Common Complaints about Affiliate Marketing

Sean Jackson: You know, I’m becoming a curmudgeon on the show. I’ve realized that now ’cause I’m always in the negative. I’m gonna have a positive affirmation at some point. Let me be the negative guy for a second, okay?

So, here is the dilemma, all right? I think there are three things that make affiliate marketing just hard as hell. Okay, number one: You’re going to get a lot of affiliates that don’t do anything. I think if there’s an absolute example of The Pareto Principle in practice, it is the fact that a tiny minority of affiliates will generate the majority of sales, and the rest won’t do anything. And yet, you’re going to spend all your time with this universe of people that aren’t doing anything. And so if you’ve got limited time, why futz with it?

That’s number one. Number two: Too expensive, okay? Let’s face it. To get on people’s radar, you’re going to have to give a pretty generous commission on top of any fees you’re paying to an affiliate network on top of that. That’s a lot of money going out the door. So why should I be spending all this much money if it’s just going to be less profitable than if I do something, let’s say, like a Facebook ad or Google ad?

And then the third reason: Scammers, right? You know, there’s so many people out there, living on the fringes of trying to get a piece here, trying to get a piece there. They sign up for every affiliate network. And so instead of trying to focus my time and attention on people that are performing, I’m going to have to spend all my time trying to get rid of the scammers out of my network, those discount coupon-esque things that, you know, just don’t really do anything.

Jessica Frick: Oh yeah.

Sean Jackson: So those are my top three reasons why it’s just not worth the effort. You’re better off doing something else than affiliate network. Tell me why I’m right.

Why the Costs of Affiliate Marketing May be Worth it

Jessica Frick: Okay. Well now I hear why you’re so misguided.

Sean Jackson: Oh, okay.

Jessica Frick: First, let’s go with the cost, okay? We’ll go for number two, and then we’ll go one, and then three. So for number two, you’re saying it’s too expensive, but it’s called performance marketing for a reason. You pay when they do something. So, when you’re paying out a commission, it’s because they made a sale. And, quite frankly, it’s probably worthwhile to give them money to market your product than to pay for it what other way you would be marketing your product. You can’t just throw a sign up on your window and have customers run through the door. You gotta do something to work for that business.

Basically, with an affiliate marketer, you are giving them the money to earn that business for you. But that would also bring you to the time thing. You’re saying that you’d spend all this time on people who don’t do anything, but my personal experience has been that people who don’t do anything don’t do anything. They don’t take up your time. And the people who do take up your time are probably trying. Very few people are gonna ask you a million questions if they don’t plan to do anything.

But, you know, you also have to make sure it’s a good fit. The way that we handle our affiliate programs here at Rainmaker Digital is we always offer the benefit of the doubt. Sometimes people will ask you questions, and you’re like, “Are they just wasting my time here?” That’s never how we think about it. We always think about it as an opportunity to educate somebody who just doesn’t know. And whether they use that for us, or whether they use that somewhere else, we know that we’ve established that relationship, and they now trust us. And, perhaps, even if they don’t promote our products, they’ll buy them and use them in the future because they like us.

Sean Jackson: Yeah, but hold on. Let’s go through that one for a second because we’ve seen this before, right? That a lot of people sign up for an affiliate program just so they can get the discount, right, because they buy your product, and-

Jessica Frick: Okay, that’s the scammer part.

Sean Jackson: Yeah. So why, again, open yourself to having to go dig through that and go back and cancel those sales or any of that stuff?

Jessica Frick: Well we have some programs that are big where we will welcome anybody who’s legit and has a legit above board way to promote us that they plan to use. But we also have some programs that are very small, they’re invitation only. You wouldn’t even know about them unless we invited you. The bigger programs, it’s because we have processes in place to watch for that. And, quite frankly, if somebody’s gonna jump through all the hoops to get a discount and pay you for your product, personally, for the most part, I say you let ’em.

Sean Jackson: Mmm. Wow.

Jessica Frick: They’re still givin’ ya money.

Sean Jackson: Wow. I guess I’m just cheap.

Jessica Frick: Well, you know what though? For the most part, people don’t do that. I think that people genuinely are good. And if you have it in your rules that you’re not allowed to do that, most people don’t do that. Some people might do it by accident. I can’t tell you how many people have written us and said, “Oh my gosh. I just noticed I got a commission on my own sale. It must have clicked my link and bought something. I’m sorry. Can you reverse it?”

Sean Jackson: Yeah.

Jessica Frick: Well, we probably saw it anyway, but you saying that kinda makes me wanna let you keep it. But, you know.

Sean Jackson: Well, folks, what do you think? Have you experimented with an affiliate program before? Have you tried it out for your products? Make sure you visit the comments section of the episode, and let us know what you’re doing with affiliate programs. What do you think? Are they worth the time and effort, like Jessica thinks they are? Or are they just too much for too little return? Let us know. And we’ll be right back after this short break.

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Sean Jackson: Welcome back from the break, everyone. And Jessica, let’s get into affiliate marketing with our very special guest.

Jessica Frick: Today we have Brian Littleton, who is president and CEO of ShareASale. Brian founded ShareASale in 2000, and since then his leadership and vision have helped shape the industry into what it is today. We are very excited to have Brian today, and not just because of his affiliate marketing skills and knowledge, but also because he is one of the best piano players I have ever heard after a show. So, Brian, we are super happy to have you.

Brian Littleton: Thank you very much. I’m happy to be here as well.

Sean Jackson: So, Brian, I would like you to kind of inform our audience a little about ShareASale. And, full disclaimer by the way, folks; at our company, we have used ShareASale since the founding of the company. So we’ve been obviously affiliate marketers, and we’ve used ShareASale, so wanted to fully disclose that. So, Brian, what is ShareASale for our audience so they know what you’re about?

Brian Littleton: So, ShareASale is an affiliate network, which means it’s a platform for both a online retailer and an online publisher, such as the blogger, to meet and interact and basically have publishers earning commissions from various retailers for referring traffic. So, we’re one of the largest here in the United States, and we were recently acquired by Affiliate Window out of the U.K. to become really what is the largest global affiliate network that there is.

Sean Jackson: Gotcha. And you have about how many active publishers and advertisers?

Brian Littleton: Active publishers, a little over 100,000. Advertisers is somewhere around 4,500 or so, depending on some of the decisions, whether you’re counting private programs or not, but it’s a very large network having been built over the last 17 years.

Sean Jackson: And basically if I have a product that I’m selling … it could be a digital good, right? I could sell a t-shirt or I could be selling an ebook, right? I would go to someone like ShareASale and say, “Here is my product. I’d like to pay a commission for people who refer traffic to me. And that could be for clicks, sales, et cetera.” Fairly flexible, right? But it’s essentially a transaction between someone who has something to sell and someone who’s referring traffic to you. Is that essentially correct?

Brian Littleton: Yes, I would say the important distinction there is that it’s based off performance. We very rarely get into a per-click model. I would call that more of a pure advertising model, but it’s really based on performance. So it’s the sale of products, whether that’s digital goods or retail goods like fashion or what not. It’s all about the performance, which makes it a kind of a win-win arrangement for the publisher and the retailer.

Sean Jackson: Got it.

Why Performance Marketing and Affiliate Marketing in Particular is a Growing Trend

Jessica Frick: Now, Brian, you are also heavily involved in The Performance Marketing Association. For those who are listening, that’s Brian, can you tell us a little bit about why you believe it’s important not only to run your business, but to be so heavily involved with this association in particular?

Brian Littleton: Sure. Yeah, the performance marketing industry in general is just so unique; we’re different than other advertising models, we have different concerns, and it really wasn’t being represented by some of the larger groups that were in existence, such as maybe even the IAB or what not. But, that’s not a critique on them. It just wasn’t represented to the way that we felt it needed to be. So, it’s the only way that we’re really represented.

So we formed it. As one of the founding members, this was several years ago, I’m not even sure how many years at this point, but I became more heavily involved several years after I became the president of that organization, on the board of directors, and really tried to drive that forward. I’m still a member. I’m not the president any longer, as Rachel Honoway, the CEO of FMTC, has taken over that role. But it’s a very important thing for the industry to have.

Sean Jackson: And let me go through that, because performance marketing, for clarification sake, is very different than traditional online advertising, which tends to be display networks, right? Would you consider the barometer of performance marketing is the fact that, if you’re doing this type of marketing, you should be seeing a revenue gain? Is that essentially … that there should be something that you can track back to that says, This is revenue that we’re generating, versus more of your traditional display or even content marketing for that matter?

Brian Littleton: Well, it’s in it s most simple form, one of the ways I describe it is … so a traditional advertising campaign would have a budget. You’d say, “Okay. I want to spend $10,000 here. That’s my budget on display advertising. That’s it.” And then the publisher would kind of decide what the rates are, and you’d figure out how many impressions or clicks or whatever that added up to, and as soon as you got to 10,000, then it would end.

In a performance marketing relationship, you really don’t have a budget. The idea is that every time you are paying out a commission, you’re also receiving revenue from the sale of a product. So, if you’re selling a digital good and it costs $100 and your commission is $10 out to a publisher, you don’t really have a budget to spend because every time this happens, you’re actually winning. So it becomes a very different relationship for both of those parties and, quite frankly, can be much more lucrative in the right situation when the publisher matches the retailer.

Jessica Frick: And I think that that’s a really awesome point to bring us to the next question that I have for you, Brian. We are seeing performance marketing grow in a lot of areas that it previously didn’t apply to. I think people previously considered affiliate marketing kind of a dirty word, but now more merchants and digital entrepreneurs are using performance marketing to help grow their business. Who would you say would be ideal for an affiliate program, and who would not be ideal?