£2.16bn Is The Magic Number - But there's more to it!

E-consultancy has commented that afiliates last year generated £2.16bn of sales for UK-based merchants.

I'd be interested to see if that included Amazon.co.uk because they're actually based in Luxembourg now - but that's an aside.

So lets look at their reasons to affiliate:

• Cost-effective Customer Acquisition
  There is no payment to affiliates unless they refer a visitor who subsequently becomes a customer. As such, there is no wasted budget in affiliate marketing.
  Ofcourse they have to simplify the subject, but there is still wasted budget in affiliate marketing - for two reasons. There's the fraud aspect. If you don't manage your campaign properly you can easily pay for fraudulent transactions. An example of a merchant that does monitor fraudulent transactions is CDWOW. My bank card was cloned and today I got a load of CDWow transactions through. It looks like they spotted that they appeared to be fraudulent and started rejecting them - well done.
  
  A second reason that affiliate budget can be wasted is from incentivised traffic. I know it's big business but I don't like it. There are affiliates that will pay consumers in low cost items to complete loan requests etc. Certain demographics are elligble to take out loans, but certain affiliates don't care, they still encourage it. Ho hum!
  
  
• Fixed Costs
  The bounty paid to affiliates is cost of sale. You set the bounty, and you pay when sales are made. There aren’t any variables beyond that (unless you choose to pay different levels of commission as sales increase). Merchants need to pay network fees, which differ (see our Affiliate Marketing Buyer’s Guide for more details), but otherwise affiliate marketing fees are a steady cost of sale.
  
  There's no argument with this. However, I'm sure that many merchants pay what their competitors are rather than what they can afford. As business costs change they really need to check that they can still afford to pay the same rate.
  
  In economics and accounts they aren't actually fixed costs, they're very "variable". Fixed costs are the same regarding how much business you do - like rent etc. So this is a bit missleading - but unimportant in the greater scheme of things.
  
  
• Brand Visibility
  Affiliates can secure high search engine listings and / or display your ads on their website. This is all free brand exposure and a nice side benefit of affiliate marketing.
  
  Ooh I really don't like this! Why don't you drink my Mount Gay and sleep with my girlfriend at the same time? Next time I order from a merchant that has this view, could you please send me some extra free products too? It's just the same. Paying naff commission or rejecting legitimate leads in the hope of getting free branding won't serve merchants well in the long run.
  
  
• Customer Acquisition - Targeted Prospects
  Affiliates choose the ads they wish to place on their websites. They know their audience and will pick the campaigns most suited to their demographic. As such, the ads are targeted by humans. It is in the affiliate’s interests to pick the ads that their audience is likely to respond to.
  
  Completely true. However, many merchants think that they can simply launch a programme and they'll get prominant positions on high-trafficked niche sites. It takes time to build relationships and and offer creatives that are effective.
  
  
• Outsourced marketing team/s
  Many affiliates are experts in search engine marketing, providing you with a way of potentially getting to the top of Google without needing to spend a fortune on SEO or PPC.
  
  Now this is something I think is totally correct. But merchants need to realise they can either embrase their affiliates or work against them. The latter normally happens when agencies get in the way. Many of them spend their time letting affiliates find the opportunities at the affiliate's expense and then expliot themselves and cut that route off from them. And before any agencies get on their high-horse about it - it happens!
  
  
• Find-ability
  With the above point in mind, if a consumer visits Google and multiple listings ultimately link to you, then you’re going to have a much better chance of being found than competitors with only one or two (or no) links on the first page.
  
  But don't let us affiliates take those risks for you to mess up the conversion. Many affiliates are expert at spotting leakages in the buying process. Listen to us and seek our views - we'll be cheaper than most agencies. Also reward affiliates that create their own content or promote you in imaginative ways.
  
  
• Transparency
  A key appeal for merchants is the transparency of return on investment, through the ability to track the origin of sales. You can see exactly where and when sales are made.
  
  But you've still gotta be hot on spotting those that try and exploit your rules. They key is to clearly define the rules and if you want to change them give affiliates plenty of notice.
  

There's plenty of scope for both parties to make buckets full. Treat each other with respect and work together. If you don't play by the rules then expect it all to be taken away from you - and don't complain if it happens.

On a brighter note, there aren't many other industries which offers such great returns in such an interesting manner.