What are some disadvantages of affiliate marketing
How you can use affiliate marketing: advantages and disadvantages of the marketing tool
Affiliate marketing doesn't have the best reputation. Nevertheless, in 2021 it still represents a working business model that can be used to make good money. Here, expert Thomas Dirnhöfer from xpose360 presents the advantages and disadvantages of affiliate marketing in a guest article.
Affiliate Marketing and Its Headlines
An industry that is constantly struggling against data protection and browser updates in order to continue to exist with the simple and ingenious basic concept. In addition, it is precisely this concept, in fact THE actual idea of affiliate marketing, that is tainted with negative experience values by so many online marketers. Examples of this are points such as “this is very fraud-prone” or “almost only voucher portals” and unfortunately a few more.
The article is intended to clean up (again) and to discuss the actual advantages and disadvantages of affiliate marketing. A classic pros and cons actually - the important thing is that I will not list any advantages or disadvantages compared to channel XY. Since a wide variety of verticals can be served in the affiliate channel, any comparison would lag well here.
One more note, before we jump into the arguments: Of course, many advantages can only be assessed in this way if you do "it" correctly. If you know the advantages of TV advertising, but the spot, airtime, etc. are bad, success is of course not to be expected. Therefore I would like to go into the best possible way how an advantage can be used to the maximum and how disadvantages can be minimized as much as possible. Let's go!
Advantage of commission-based remuneration in affiliate marketing
Let's start again with the keyword “basic concept” and what is probably the most popular advantage of affiliate marketing - remuneration on a commission basis - for the advertiser the Cost Per Order (CPO) or Cost Per Action (CPA). Visibility and traffic completely without risk, because only if the user buys or closes is paid! We can leave this advantage as simple as it is, but actually only 100 percent on the merchant side.
If you look at the publisher side, you bear the full risk of making your advertising platform available. Of course, he can align the application in the best possible way with the sale at the end (but this is only possible in very different ways depending on the vertical); however, the decisive factors on the way to conversion then lie entirely with the merchant. And that's a lot, such as B. the usability of the shop, framework conditions such as shipping costs and right of return, Trustpilot ratings, availability, prices, product quality, customer service, etc.
As a rule, the affiliate can and will check a lot, or rather some, accordingly before starting an application. At this point, the first tip for advertisers is to communicate with potential and existing partners on these points via as many channels as possible - from the program description to regular discussions or exchanges with existing partners. AFFILIATE MARKETING IS PARTNER MARKETING.
Even in competition, this advantage is no longer so strong. Startups, young shops or brands in particular naturally find the idea of CPO remuneration to be perfect for getting started. However, an affiliate is more likely to choose the competitor who can already offer more unique users and / or a better-known product - even if they offer a higher CPO.
The advertising surcharge and bonus payments have also become common. An affiliate calls this if he is of the opinion that the value of his advertising service cannot be achieved through pure performance commission. In order to use this advantage in this way, it is necessary to spend time talking to the partners; If necessary, work out individual special commissions, negotiate trade-in units and, of course, offer a competitive basic commission. It goes without saying that nothing should stand in the way of a sale in the “shop” - but this should also be in the interests of an advertiser without affiliate marketing.
Is the standard attribution in affiliate marketing fair?
Now let's jump straight to the disadvantage from the area of remuneration / monetization in affiliate marketing. The still absolute standard in practice is “Last Cookie Wins” - i. H. As a rule, only the last of all affiliates that a user has “encountered” in the customer journey is paid. All other partners simply get nothing. So for a large part of the partners it is not exactly a fair practice; there is a high risk for publishers not to generate any sales despite the advertising service.
For the advertiser, that doesn't sound like a clear disadvantage at first - for him it is even convenient and he doesn't have to worry about a fair distribution. However, this is one reason why it is so difficult or tedious to enter into an affiliate cooperation (purely on a CPO basis) with the so popular content partners. There are few programs with a large share - that is, a quantity of mid- or long-tail content partners - with a high quality that delivers a significant number of sales. Not because they don't exist, but because the attribution model is not so exciting to act as an affiliate.
For voucher partners or, above all, Loyalty Partners, last cookie reimbursement is essential for their current processes. The topic of customer journey tracking and / or remuneration has been discussed continuously for a decade. There are solutions and innovations such as Awin-Assist etc. - but currently it is still to be mentioned as a disadvantage, or let's say a challenge.
The “all in one place” advantage
Now to an advantage that is weighted equally for publishers and merchants: the connection to a network. It doesn't matter whether you choose a private or public network - the network takes on the role of the neutral third partner or service provider who takes on a lot of the "work" of a successful "advertising partnership" and wants to please both sides as much as possible .
There may be setup fees, monthly fees depending on the service level, etc.; A network also usually earns its bread with its share of the brokered partner commission. The network is the technical interface that ensures functioning and legally compliant tracking out of great self-interest. The financial interface and processing via a network alone is an enormous simplification compared to the individual billing and booking of dozens of direct collaborations.
And as the name suggests - you join a network! Quickly finding and quickly accessing potential advertising partners from a wide variety of verticals and industries - "practically all of them in one place" - is a great advantage!
Neglect is a no go in affiliate marketing
Linked to this is the disadvantage, or more appropriately the challenge, that a successful and broad-based affiliate program requires a lot of support and is not a sure-fire success. Waiting for one publisher after the other to register for the program, place the links and then come in sales unfortunately does not lead to success and usually leads to anger and misunderstanding regarding affiliate marketing.
Proper action planning - that is, coordination of actions with end customer benefit portals; the proactive scouting of content partners and the subsequent flow of information up to the standing campaign; the open eye for new innovative publisher models; the evaluation of campaigns and actions etc. are only the tip of the iceberg. A sales comparison process that is as smart as possible is also recommended in order to take advantage of the fact that you only pay for valid sales commission. But the most important thing is to make enough resources available for communication with the affiliates.
Grandma said "trying is better than studying"
Last but not least, the advantage that affiliate marketing allows you to try and test a lot. Dropouts, new customers, initial purchases, customer loyalty, cross-selling, shopping cart increase, etc .; In Affiliate Marketing you will find a partner and a strategy for your focus, or you have the opportunity to create your perfect mix. On the way to your goal, you can test a lot in a relatively uncomplicated way and, if necessary, end the partnership (preferably by mutual agreement) or further optimize it.
As an example, I would like to mention CSS, which many advertisers are already handling either in addition or completely via an affiliate partner. In order to use this advantage, you should have a certain openness for a wide variety of verticals and test runs. Specifically, perhaps not because of the key word “take-away effect” to exclude all voucher publishers in principle, but rather to find voucher campaigns or deals through strategy, evaluation and optimization that add real added value, such as B. bring new customers or increased shopping carts.
Conclusion - so for some; for the other like that
Of course, there are plenty of other points and arguments in affiliate marketing, some of which are weighted differently in a pro or con. However, the article has also shown that the same fact can also have very different advantages or disadvantages for the parties involved. Ultimately, as with everything - you start affiliate marketing best with know-how and competence - whether in-house or agency, everyone is of course free.
Thomas Dirnhöfer, Senior Affiliate Manager / xpose360 GmbH
Thomas Dirnhöfer has been working in affiliate marketing since the end of 2012. After five years of self-employment, he initially worked directly for an affiliate network. Today the Affiliate Manager looks after customers of xpose360 GmbH from various sectors and manages the organization of the affiliate industry events. In addition, Thomas can be heard every 2 weeks in the industry podcast "Affiliate Talkxx" with his colleague Tobi and always exciting guests.
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