In most industries today, small
business owners will find that e-commerce is the only true route to success. If
you’ve already built your online business and are now struggling to turn a
small but devoted customer base into a large and vocal fandom, maybe it’s time
to recruit your customers to sell your product for you. If you’ve already come
this far, maybe it’s time to look into affiliate marketing.
Affiliate marketing is often confused
with multi-level marketing (MLM). In light of the recent Herbalife settlement,
people are once again thinking of MLM as a bad word – just Google “MLM” and
you’ll see that one of the first results is “Is multi-level marketing a pyramid
scheme?” But that’s missing the point of the settlement, which we believe is
actually a good thing for the industry.
In 2012 Bill Ackman, founder of
Pershing Square Capital, a hedge fund, began a campaign against Herbalife,
accusing the 35-year-old dieting supplement company of being a pyramid scheme.
After a lengthy investigation, the company agreed to establish a $200M fund to
reimburse distributors for lost wages and the Federal Trade Commission (FTC)
found that Herbalife was operating legally.
This settlement is meaningful
because, despite the fine, it reinforces that MLM is a fair and legitimate
business model. In the words of Herbalife CEO Michael Johnson: “The settlements
are an acknowledgement that our business model is sound and underscores our
confidence in our ability to more forward successfully.”
While it shares superficial similarities
with MLM, affiliate marketing is itself a distinct business model from both
multi-level marketers and illegal pyramid schemes:
Pyramid schemes require that people pay to participate in the
scheme and only profit when they recruit others to participate. The “product”
is only redistribution of money pumped into the scheme: the business is built
on recruitment. It’s a closed system and the money flows overwhelmingly toward
the top. With no incentive to actually sell a product, those at the bottom of
the pyramid eventually run out of new recruits and the pyramid collapses.
Multi-level marketing companies rely on the sale of real products
for their cash flow. New recruits are brought on board and the company
incentivises recruiters, but the profits at all levels still come from actual
sales. Rather than profiting off fees charged to recruits, the company rewards
recruiters with a percentage of profits based on sales. In other words, the
product is everything.
Affiliate marketing is a single-tier system which rewards
affiliates for each visitor or customer the affiliate directs to the business.
The affiliate is not selling the product but is instead marketing the business
and directing traffic to the company’s website.
Affiliate marketing is often
overlooked by digital marketers. Though the methods are more or less identical
– SEO, SEM, PPC, email campaigns, etc. – instead of coming from the business
directly, the content is actually being promoted by a third-party “publisher”
(the affiliate). This is a powerful tool for building trust in a brand; when
somebody else speaks up for your product, it makes a greater impression on
consumers than hearing it directly from the merchant.
The product is still everything,
however. Some people get into affiliate marketing or MLMs because they seem
like a solid, profitable business model, and then figure out what the “product”
is later. But the medium is not the message. There is no product that is a poor
fit for affiliate marketing as long as you’re doing it for the right reasons.
Get your product right first – the best time to introduce affiliate marketing
to your business is once you have a small but growing customer base, a group of
potential brand ambassadors who can prove to you and others that you have a
great product.
Affiliate marketing is not a
“get-rich-quick scheme” and it’s certainly not a scam. It’s good business. If
you know you have a great product and a great online business, affiliate
marketing is right for you.
From the start, our mission has
always been to provide freelancers, self-employed professionals, entrepreneurs
and small business owners with convenient and affordable tools for growing
their business. We believe in small business and want to do what we can to help
improve the lives of your customers – check back often with the Payza
blog for the latest tips and tricks on growing your online
business, and be sure to follow us on: Facebook and Twitter