Affiliate Marketing in 2000: A Decision Framework
Before setting up an affiliate program, weigh what it costs, who it fits and where it quietly goes wrong. A decision framework for owners weighing it in 2000.
We get one version of the same question from business owners fairly often this year: should we set up an affiliate program? The honest answer is that it depends on a few things about your business that have nothing to do with how popular affiliate marketing currently is.
It only pays out when you’re already selling
Affiliate marketing is performance-based by design, you pay a commission only on a completed sale or lead, which sounds risk-free and mostly is. But that structure only works in your favor if your site already converts visitors reasonably well. Send affiliate traffic to a site that converts poorly, and you’re paying commissions on top of an underlying problem you haven’t fixed, which is a slower and more expensive way to discover the same issue.
Check your current conversion rate before launching a program. If it’s low, that’s worth fixing first, because affiliates will notice their traffic isn’t converting and stop sending it, regardless of your commission rate.
The real cost isn’t the commission
New program owners budget for commissions and forget the rest: network fees if you’re using one, the time spent recruiting and vetting affiliates, tracking software or integration and ongoing management, answering affiliate questions, chasing inactive ones, catching the occasional attempt to game the tracking. None of this is prohibitive, but none of it is free either, and a program run without attention tends to attract low-quality affiliates while your best ones drift away for lack of support.
Who it fits well
Businesses with a clear, easily explained product and healthy margins do best. Affiliates need something simple enough to recommend in a sentence and margin enough that the commission doesn’t eat the whole profit. Digital products and subscription services tend to fit especially well, since margins run high and there’s no fulfillment cost per sale.
Who it fits poorly
If your product needs a lot of explanation or a sales conversation to close, an affiliate’s audience usually isn’t primed to buy on a simple link and a banner. And if your margins are already thin, a 10% commission might be the difference between a profitable sale and a break-even one, in which case the program is competing with your own bottom line rather than adding to it.
What tends to go wrong
The most common failure isn’t fraud or bad affiliates, it’s neglect. A program gets set up, a handful of affiliates join and then nobody checks in again. Good affiliates need fresh creative, updated product information and occasional communication about what’s converting. Left alone, they lose interest and move their site space to a program that’s actively managed.
The decision, simplified
If your product is easy to explain, your margins support a real commission and you’re prepared to spend a few hours a month managing relationships rather than setting it up once and walking away, affiliate marketing is worth testing with a small, well-chosen group of affiliates before opening it up broadly. If any of those three aren’t true yet, fix that first.
More on Paid Advertising, or browse everything from 2000.
