Why Use Affiliate Marketing? - Benefits & Advantages

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

Read this lesson to learn why many companies of all sizes want to use affiliate marketing to help them grow. Learn how affiliates can help increase the sales force of a company tremendously.

Affiliate Marketing

Many companies today use affiliate marketing as an additional sales channel. For example, Petsmart and Walmart both have an affiliate marketing program for which affiliates can sign up. This affiliate marketing program actually helps the company grow and get recognized and seen in a lot of places. Just what is affiliate marketing? Affiliate marketing is a form of advertising where people can sign up to help promote the company in exchange for a percentage of the sales that each person brings to the company. This is usually done through a website. For example, Suzie is an affiliate for Petsmart. She gets 4 percent commission on sales of cat food that she brings to the company from her cat blog. If she brings inm an order of $50 for cat food then that means she makes $50 * 0.04 = $2. This doesn't seem like much for Suzie, but if she manages to bring a lot of cat food orders to Petsmart, then Suzie can potentially make a lot of money. This commission and the possibility of making a lot of money is great incentive for Suzie to keep bringing more and more business to Petsmart.

Why Companies Want Affiliates

Now imagine Petsmart having thousands of affiliates. Can you imagine just how much the company can grow in sales? If each of its affiliates brings just one sale a month to the company, that's thousands of additional sales a month, and a lot of additional profit, even with the loss connected with the payment of affiliate commissions. Take a look at these possible numbers. Say Petsmart has 2,000 affiliates. And let's say that each affiliate was able to bring in 1 sale averaging $45 for the past month. That means Petsmart received 2,000 orders worth $45 in the past month from its affiliates. This is all in addition to orders that the company normally receives without its affiliates. Now, let's do the math.

  • 2,000 * $45 = $90,000
  • Minus affiliate commissions of 4 percent ($90,000 * 0.04 = $3,600)
  • $90,000 - $3,600 = $86,400

Even with the payment of affiliate commissions, in our example, Petsmart would make an additional $86,400 in one month from affiliate marketing. You can see just how valuable companies like Petsmart can find affiliate marketing programs to be.

This is the biggest reason that companies will start an affiliate marketing program. By using the aggregate power of a large number of affiliates, a company can grow by leaps and bounds over time. Of course, this does require a committed affiliate marketing program manager who is dedicated to communicating with the company's affiliates so that affiliates know what kind of message to use for the company. Companies have to watch out for unethical affiliates who will give the company a bad name. It is these affiliates that a company needs to weed out so that its affiliate marketing program will be a success.

Benefits and Advantages

It's not only the extra sales that make having an affiliate marketing program worth it. There are additional benefits and advantages. Here's a few:

  • Social acceptance. When people hear many other people talking about your company and using your products, they will feel more comfortable purchasing from you. The more affiliates you have, the more people you have talking about your product.
  • More ads. The more affiliates you have, the more people you have that are willing to post an ad for your company. The more ads you have posted, the more exposure your company will receive. The more often people see your ad, the more chances your company has of making an additional sale.
  • More skilled employees. Sometimes, your affiliates are better at marketing than even your in-house marketing team. This benefits your company not only with increased sales, but also better advertising exposure and a better reputation from well-written advertising.
  • Pay only for results. With affiliate marketing, your company pays its affiliates only when the affiliate brings in a sale. If affiliates don't bring in any sales, then the company doesn't have to pay anything. It's rare for a company to lose money by having an affiliate marketing program.

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