ADVANTAGES AND DISADVANTAGES OF AFFILIATE MARKETING

As we all know, the world has become a digital environment and therefore most partners for businesses are operating online. These online partners, who are helping you generating money and selling your product, are called affiliates. An affiliate can also be defined as an online retailer who pays commission to an external website for traffic or sales generated from its referrals (for more information on affiliate marketing click HERE).

An advantage of affiliate marketing is that it is performance based. This means that the company only has to pay the affiliate if they convert a sale, which lowers the customer acquisition costs. This saves the company lots of advertisement costs in the form of (online) banners, which have lost their effectiveness anyway. It is highly likely that you use banner ads and you do not generate the expected sales with these banners. These sunk costs are lost and cannot be used for other purposes. Also, a performance based collaboration will stimulate the affiliate to actually convert a sale as this incentive will motivate him/her (Novak, 2000).

"An affiliate can boost your reputation, as they champion your products and will further solidify consumer confidence in your products or service." - Kyle Davis

Another advantage is that an affiliate can boost a company's reputation. When it is a well-known and highly respected and trusted company, collaborating with them can give your company a good reputation. For example, Amazon is a well-respected and trusted company, so them offering your products gives your company a positive outlook. This is really important for your company as customers are more likely to buy your products (Davis, 2019).

Next to advantages, there are disadvantages with regards to affiliate marketing as well. There is a chance that these affiliates are not treating your products with the respect and care they deserve, which could cloreate brand damage. So, where they can increase your brand reputation, they can diminish it as well. The disadvantage is that they are driven by money and would do everything to convert that sale, even if it requires a dodgy method.  They do not have any affection with the brand and therefore it is a huge risk to let them promote your products (Chaffey & Ellis-Chadwick, 2019).

Another drawback of affiliate marketing, is that you do not build any assets. You just make a sale once, but you are not connecting with the customer. A third party is not going to create and maintain a customer relationship. Customer relationship are becoming increasingly important as you can turn one-time customers into regular customers. Affiliates do not provide such services and are just focused on making a sale (Ngo, 2017).

In short, affiliates are definitely one thing to think about as a business. They are highly motivated to generate sales for you and it is a logical option for businesses money wise as affiliate marketing is a performance based tool. However, you have to keep in mind that affiliates can damage your brand as well, as they might use methods to generate sales which are not legal or not according to your moral values and beliefs.  

This blog is written by Bas Uittenbroek, if you wish to comment on this blogpost, please send an email to 0898211@hr.nl