Why should your startup or small company investigate affiliate marketing for small businesses? Affiliate marketing is perfect for small startups or online retailers looking for a feasible marketing solution. It’s a form of word-of-mouth marketing where content creators generate buzz for your business by recommending your website, products, or services.
In affiliate marketing, content creators (usually influencers, popular bloggers, or ambassadors) promote a brand and include unique links to the brand’s website on their own channels.
And because customers trust peer recommendations over traditional company ads, affiliate marketing has proven to be a great digital marketing strategy for many small businesses. But it doesn’t work well for every small business.
In this article, we cover:
- What are affiliate marketing programs
- Whether affiliate programs are right for your small business
- The benefits of affiliate marketing for small businesses
- Why small businesses shouldn’t go through an affiliate network
- Why affiliate software is the best choice for small businesses
What are affiliate marketing programs?
In affiliate marketing programs, a business recruits content creators called ‘affiliates’ to promote their products or services. Affiliates can be influencers, bloggers or vloggers, or well-known personalities who have an established base of loyal, engaged followers.
Affiliates publish links to the business website on their own blogs, websites, social media pages, or other channels. In most cases, the affiliate also creates promotional content for the business, say a blog post or a video, and includes links for the reader or viewer to get further information or buy the product.
This not only drives sales for the business, but also traffic and access to a larger audience at a lower cost. The affiliate, in turn, gets commission every time someone makes a purchase through the affiliate link.
Affiliate programs for small businesses: Are they the right fit for you?
Even though affiliate programs are a great marketing tool for small online businesses, keep the following criteria in mind before you decide to launch your own affiliate marketing campaign:
- Do you know your financials? To see success in your affiliate program, you have to know your profit margins. This determines how much you can spend on affiliate commissions. At the end of the day, affiliates will only promote your products or services for the right incentive.
- Are you ready to pay commission on every affiliate-driven sale? If your business is relatively new, you may not be ready to pay affiliate commission for every sale. Or, you may not be able to offer a commission that’s attractive enough to the best affiliates. In these cases, it may be best to launch a referral program instead, where you can offer store credit, discounts, or other rewards to your best customers.
- Does your product have mass appeal? You won’t get much out of any form of marketing if you don’t have an appealing product. This is especially true in affiliate marketing, where affiliates promote your brand to a wide range of people. If your product doesn’t have a wide enough appeal to hook a large target audience, you may not get the full value of an affiliate program.
- Do you have access to good-fit affiliates? In other words, are there content creators who you can easily access and have audiences that match your own target audience? More popular creators may not be within reach of smaller business. Especially in your earlier stages, finding the right content creator to work with your brand may prove difficult.
Referral programs may be a better option for your small business
After looking through the above list, you may not feel quite ready for an affiliate marketing program. An alternative would be to launch a referral program for your small business instead (sometimes called an informal small business brand ambassador program.)
Referral marketing focuses on your existing customers, as opposed to external content creators such as influencers or marketers. A referral program invites customers to recommend your brand to people they know.
And since your customers have already tried and loved your brand, their recommendations are authentic and reliable. In this sense, your customers are the ideal ‘brand ambassadors’ to spread the word about your small business.
A referral program is a better fit for your small business than an affiliate program if:
- There’s no room in your budget to pay cash commissions on every sale
- You want to encourage customers to share your offerings with people they know (i.e., their friends, family, colleagues, community members)
- Your business may not be well-known enough to partner with the right content creators and affiliate partners
- Your product appeals to a very niche audience
Learn more about the differences between both types of programs in our in-depth guide comparing referral programs to affiliate programs.
Benefits of affiliate marketing for small businesses
If you decide your small business is a good fit for affiliate marketing, here are the many benefits you can expect from this type of program:
Affiliate programs harness the power of social proof
Social proof describes how people look to what others are doing as a basis for their actions – including what purchases to make.
Social proof marketing is more than a buzzword. This form of word-of-mouth sharing has a powerful influence on customer purchasing behaviors. Research shows 97% of consumers look for reviews and recommendations (one type of social proof) before buying online.
And affiliates have already established trust with their followers. So when they engage in social proof marketing by sharing reviews and recommendations for your business, followers are more likely to believe what they have to say.
Affiliate programs create brand awareness among a larger audience
As a content creator, each affiliate has their own audience of fans and followers eager to learn from and engage with them. There’s an established level of trust. When your affiliate puts your business in front of their audience, your reach multiplies and you can grow your base of new customers by leaps and bounds.
You get to deliver your products and services to new audiences, and increase the number of potential customers who buy from you.
When done right, affiliate marketing is cost-effective
Affiliate marketing is generally much more affordable in the long-run than advertising or hiring a marketing agency for your small business.
The only real cost is the commissions you give your affiliates every time they make a sale. But since you set the commission rates, your risk is minimal compared to other forms of marketing. Since affiliate marketing is a type of performance marketing, you don’t pay anything to affiliates unless you generate a sale. In other words, you’re only paying when you see results.
An affiliate’s expertise helps expand your marketing
For small businesses that are unable to hire a full-time marketers or consultants, an affiliate can bring much of the same value. Having run their own brand and business, affiliates have years of on-the-ground experience of converting prospects to sales.
As a small business, affiliate programs enable you to compete with bigger companies (and their bigger budgets) without breaking the bank.
Your small business still maintains control
Another great reason to start your own affiliate program is that you get to decide how you want to manage your affiliate marketing relationships and resources. While the actual legwork still gets done by the affiliate marketers, you are still very much in charge of the digital assets your affiliates will ultimately use.
So whether it’s the specific messaging or look of your campaign, you have full control over how your business is presented in the market.
10 small business affiliate program best practices
To make sure your small business is getting the most out of its affiliate program, here are some best practices to use:
1. Build a strong brand
Your brand is what will attract the right affiliates to your business, no matter what its size. Tell the story of why you founded your business, the uniqueness of your product, and how it meets a need in the market.
All of these aspects come together to create a strong brand that affiliates will not only want to be a part of, but love to share with their own audience.
2. Set realistic program goals
As a small business, it’s key to set a realistic goal for your affiliate program. One that you can achieve within the planned deadline.
Start with small goals and work your way up. Goals don’t always have to be in the form of ‘number of sales’ (although monitoring your conversion rate is certainly a best practice). You can also set goals for the amount of traffic affiliates direct to your website, or how much revenue you want to achieve every month.
Decide how you will measure your performance and track metrics regularly so you know where you’re lagging and what you need to improve.
The SMART goal-setting strategy is a great way to guide your program goals. It reminds you to set your sights on something specific, measurable, attainable, relevant, and time-based.
3. Build your program with affiliate software
The easiest and most efficient way to create your own small business affiliate program is to use affiliate marketing software. A ready-to-use tool will automate all the tasks involved in running a program, including enrolling new affiliates, keeping track of affiliate sales, or managing payouts.
You will also have complete control over your data, which can inform what affiliate relationships are the most valuable and generating the most sales. (This is an advantage of affiliate software over third-party affiliate networks, which hold on to your data and control all affiliate communication.)
The best affiliate software programs also come with dedicated customer support and educational resources, giving you all the help you need to set up your program correctly.
4. Figure out how you’ll find affiliates
There are a couple of different methods you can use to find affiliates for your small business. If your budget allows for it, use an affiliate recruitment agency to source affiliates for you. (Affiliate networks also have a library of ready affiliates, but don’t give you complete access to any of the relationships or program data.)
One of the more affordable and practical solutions for a small business is to find high-quality content creators, such as online influencers or bloggers, to partner with.
But how do you find potential affiliates? You can manually search for specific keywords in your niche on social media channels. Also try online forums and Facebook groups, where you can easily see popular and trending influencers.
At this early stage of business, you’ll find it’s easier to connect with new or niche content creators with relatively small followings.
But if their tight-knit community consists of engaged and committed followers, these micro-influencers can be extremely effective. And if you can find someone who’s familiar with your brand (or have even promoted you before), that’s even better!
5. Choose affiliates who will resonate with your target audience
Choose affiliates based on whether they will click with your target audience. Do they share the same needs and concerns? Do they create content in a voice that’s similar to your customers?
The best affiliates should also align with your core brand values and be willing to work together in a long-term relationship with your business.
6. Determine other criteria you’ll use to select affiliates
Affiliates are an extension of your marketing team. It’s important to do your research before accepting them into your program.
- Look through their social media profiles and website to get a feel for their personality, tone, and style.
- Look for consistent activity, a large and increasing fan following, and solid engagement from followers.
- Comb through their public accounts for any potential red flags, such as spammy links or signs of unethical behavior.
- If possible, ask them about any previous experience and proven results in affiliate marketing. Metrics such as website visitors, total followers or subscribers, or even generated sales will give an idea of what you can expect in terms of ROI.
- Ask potential affiliates for a concrete plan of how they intend to promote your brand and deliver mutually agreed results.
7. Create an affiliate agreement
Another important step that businesses of all sizes often overlook is to draw up an affiliate marketing agreement. Getting everything down on paper guarantees that both sides are clear on expectations and how the relationship will work going forward. Affiliate agreements should typically cover:
- Definition of terms and their relationship to each other
- Start and end dates of the agreement
- Details of how affiliates will promote your business on their website and social media channel
- Branding guidelines
- Any marketing or promotional restrictions
- The program’s commission rates and structure (how and when the payouts will be sent)
- Reasons for the premature termination of the contract, and the necessary actions to put the process in place
- Other specific terms and conditions
Our previous article covers everything you need to write an affiliate agreement. We’ve even created a downloadable affiliate agreement template for you to use as a starting point.
8. Choose the right commission structure
Your affiliate commission rates should be attractive and worthwhile for your affiliates, but also be reasonable for your business. Start by analyzing how much of the profit you make (the difference between your production cost and sales price) can be allocated towards a commission.
Research your competitor’s affiliate programs to get a sense of the average commission rate in your industry.
You can also attract more affiliates with added incentives. Aside from a set commission rate, you can also create performance tiers, where the higher performing affiliates get bigger rewards with larger commissions or bonuses.
Whatever structure you choose, as a small business, it’s advisable to pay commissions only after a sale has been made.
9. Communicate well with affiliates
Manage affiliates the same way you would manage any business partner. It’s a long-term relationship that needs to be nurtured for best results.
Create a system where you send your affiliate partners the latest updates and promotional announcements. Hold a monthly live webinar or catch-up meeting to connect with your affiliates. Provide channels where affiliates can reach you for support, whether it’s an email, a phone number, or an online form.
And remember to highlight good performers in your affiliate communications to keep motivation levels high.
10. Track affiliate sales
Tracking affiliate sales is necessary to know whether you’re reaching your goals and what areas may be slowing you down. Of course, not every small business will have the spare time and manpower to track an affiliate program.
In this case, we recommend using affiliate marketing software to make things easier and automate the process end-to-end. Most software will also offer a customizable dashboard with full visibility on all the metrics relevant to performance.
Why small businesses shouldn’t use an affiliate network
Going through a third-party affiliate network to jumpstart your program seems easy – at first. But if you want to run a successful affiliate program in the long run, your small business should stay away from an affiliate network.
Here are some reasons why:
With an affiliate network, your small business doesn’t control the affiliate relationship
When you go through an affiliate network, you don’t have ownership over any of the key assets, such as the program data and affiliate contacts. Your affiliates belong to the network, which functions chiefly as a middleman.
You won’t have much visibility and not being able to form meaningful relationships removes a lot of the real value an affiliate program brings to your business.
You’re forced to compete with other businesses in the affiliate network
When you put your products or services on affiliate networks, you often end up competing with more established businesses and more attractive offers.
For one, these businesses benefit from an established reputation and credibility. They also offer higher commissions or other added rewards, which can attract the best affiliates and leave your small business out in the cold.
Affiliate networks can charge extra for commission and other services
Affiliate networks are known to charge up to 30% commissions on your sales. Furthermore, there can be many other fees associated with affiliate networks that you need to be aware of. Depending on the network, you may also be billed with setup fees and monthly maintenance fees.
For instance, the Commission Junction (CJ Affiliate) network charges a $3,000 fee for the initial setup. The ShareASale network has a one-time $550 network access fee, plus a $100 minimum deposit fee. (These are in addition to other charges from the networks.)
Small businesses with limited resources can find this challenging and oftentimes, not worth the added expense.
Affiliates on networks aren’t as authentic
An affiliate network is a marketplace that connects businesses with promoters who earn commission from the sales they generate. The engagements are usually transactional in nature.
For small businesses who have yet to establish themselves in the market, it can be a challenge to attract affiliates.
If you want to build a business based on authentic engagements with people who genuinely love your brand, this may not deliver the kind of results you’re looking for.
You’re better off reaching out directly to influencers, bloggers, or marketers who are sold on your business and enthusiastic about promoting your products.
Why not leverage what makes you unique as a small business, rather than getting pushed out by bigger brands in crowded marketplaces?
Affiliate software is a better choice for small businesses
When it comes to running a successful program, the right affiliate management software can offer many more benefits over affiliate networks.
Affiliate software tools are usually out-of-the-box solutions, which means that they’re easy to set up and run. But they also give you complete control over how you run your program, and often come with customer support in case you run into challenges during the setup, running, or maintenance phases.
A great advantage of affiliate marketing software is marketing automation. These specialized tools automate a lot of the backend processes required to maintain a profitable affiliate program. You will have real-time access to all performance reports and communication tools so you easily manage your program.
You don’t have to compete with other businesses in an affiliate network, or pay any unnecessary fees that eat away a lot of your profit. Plus, you get to build authentic and meaningful relationships with your affiliates.
If you want to see what affiliate software can offer to help you run your program, our Referral Rock affiliate software can help. We’ve built our tool to offer easy setup (no developer skills needed!) and plug-and-play integrations.
Grow your small business with an affiliate program
Affiliate marketing is a great resource for small business owners who want to get the biggest bang from their buck, without compromising results. It generates wider business promotions, increased sales, and long-term relationships with individuals who believe in your brand.
If you’re ready to create your own small business affiliate program that can take you to the next level of growth, consider using affiliate marketing software that gives you full control and fits your unique needs.