Affiliate Marketing for Small Businesses

The largest organizations dominate the world of affiliate marketing in much the same way that giant firms dominate the overall economy. But in neither case are small businesses locked out. In fact, small office and small home businesses are thriving in both worlds, often setting the pace and earning larger margins than their Goliath counterparts.

But that doesn’t mean putting in an affiliate marketing program is an automatic winner for your small business. To have a good chance of success as a merchant working through marketing affiliates, your business should meet certain basic criteria:

  • Offer a variety of products and services to meet a broad range of needs
  • Be capable of collecting information about online customers, and have a vision of what to do with this information
  • Have plenty of gross margin available in your price structure so you can offer your affiliates very attractive commissions
  • Enjoy a good reputation and some brand recognition that can translate into easier, faster, larger online sales.

It’s even better if your product or service involves recurring sales -- like soap or razor blades -- so your customers provide a continuing stream of revenue for you to share with your affiliates.

If you feel your company has the potential to do well with an affiliate marketing program, here are some guidelines on how to make it happen:

Sign up with an affiliate network

These companies make life much easier for merchants because they handle all the tedious and time-consuming chores required to maintain a network of affiliates. In addition, their credibility gives top affiliates extra confidence that they will receive the commissions they earn. You can find a suitable network with low or no up-front charges, which allows a large part of your affiliate marketing expenses to be paid from affiliate-generated sales.

Develop an attractive commission structure

It’s tempting to start off paying five or even 10 percent commission to your affiliates, just to see how well the program flies. But such low commission rates are not going to attract the hardest working, most successful affiliates. These top earners will generate 80 to 90 percent of all your affiliate marketing business, so it’s penny-wise and pound-foolish to be stingy with commissions.

Instead, consider the revenue from your affiliate marketing program to be found money. Recognize that it’s more profitable to receive 60 to 70 percent of a substantial cash flow than 80 to 90 percent of a trickle.

You should also consider paying a second tier of commissions, paid on the sales of affiliates that other affiliates sign up. In other words, if I am your affiliate, and I get my brother-in-law to be your affiliate as well, then I should receive a small percentage of all the sales my brother-in-law brings to you. Top affiliates know they cannot generate a significant income just by signing up other affiliates. But a second tier of commissions is an important sweetener that motivates them to help you build your affiliate network.

Be selective

Most newcomers to affiliate marketing are willing to sign up almost anyone. But this creates an unwieldy organization of low-grade affiliates. It’s more productive to be selective. To build your program, make an effort to find people who have strong, natural relationships with your top prospects. Generally, these will be people who have developed popular Web sites in particular niches. But they may also be subject-matter experts and consultants who have become opinion leaders in their particular field. Among these, select only the few who are motivated to succeed as affiliates and capable of following your lead within your program.

Teach your affiliates to market

Most affiliate programs offer off-the-shelf Web sites, banners, buttons, links and other sales technology. Sadly, these “me too” approaches rarely produce maximum results. That’s why small business affiliate programs do a lot better when they coach their affiliates to develop more personalized methods of referring prospects.

One important technique is to replace standard advertising with individualized testimonials. When your affiliates tell their visitors about the benefits of your product or service, clickthroughs and sales climb significantly higher.

It’s also important for your affiliates to build their own audiences. Such loyal groups are more easily convinced to give your product or service a try than visitors seeing your affiliate’s Web site for the very first time.

Take care of your affiliates

Success as an affiliate is a marathon, not a sprint. So it’s important that you provide your marketing affiliates the resources and support they need to make a sustained effort on your behalf.

Instead of treating your affiliates like cattle or a commodity, develop programs to make them part of your business family. Communicate regularly and individually with them. Welcome each one with a personal message, and keep a file on each one so you know their history within your program. It’s helpful to produce a regular newsletter and offer an easy feedback channel so your affiliates feel they are in the loop and can get their questions answered quickly. It’s also useful to provide an affiliates-only Web site offering information, suggestions, marketing resources, useful links and two-way communications capabilities so your affiliates can steadily improve the job they are doing for you.

In addition, it’s helpful to have a dedicated affiliate marketing program manager. This should be someone with a gift for building an online community and a strong sense of how to motivate and manage affiliates.

In general, think in terms of finding out what your affiliates want and need, and seeing how much of this you can provide. Remember that affiliate marketing is a two-way street, and the more you give back to your affiliates, the more sales they will deliver to you.

Robert Moskowitz is a consultant and author who speaks and writes frequently in the U.S. and abroad on such topics as white collar productivity, knowledge management, practical use of the Internet, telecommuting, caring for aging parents, and business applications of information technologies. He has authored several books, including "How To Organize Your Work and Your Life," and "Parenting Your Aging Parents," and teaches several online courses.