With online advertising becoming expensive and an inconsistent means of driving customers, retailers are often faced with challenges related to customer acquisition & retention in this competitive environment. Here ‘Affiliate Marketing’ can be an amazing sales channel for an online retailer. Affiliate marketing can boost traffic to your ecommerce website, and you only pay for visits that result in sales. The advantage of affiliate marketing is that it works for both big and small retailers. Since it is a commission-based model, you’ll only have to pay when an actual sale happens on your website. There are various models of affiliate marketing today which include Product Discovery sites, Price Comparison, Coupon and Cashback sites. Larger sites like Amazon.in, Flipkart, Snapdeal, Paytm etc. and also smaller businesses use the affiliate channel to build brand awareness, showcase their products or services and facilitate customer acquisition.
Affiliate Marketing is a valuable channel for attracting new business and retaining existing customers. In a world where the cost of a buying customer is increasing every single day, the performance driven nature of Affiliate Marketing sets it apart. Here is why retailers are more than happy to pay commissions to an affiliate partner like CashKaro.com, because they are only paying if a sale is generated. If budgets need to be cut, affiliate marketing is the last channel to get affected because it is performance based and will help acquire sales at 25-30% of the cost one would incur on other channels.
Today, almost every top Indian e-commerce store has an affiliate program. In India this paradigm shift happened in the last 2-3 years, when advertisers started testing this channel and discovered that affiliates provide twice the returns in comparison to other digital marketing campaigns. Some e-commerce players run in-house affiliate campaigns like Flipkart, Amazon, Snapdeal while others like Paytm, Jabong prefer to run their campaigns through affiliate networks like Optimise, Payoom, Komli, iCubesWire and DGM. In developed markets like UK, USA merchants get 10-20% of their total revenue from affiliate channel.
Advantages of Using Affiliate Marketing
The advantages of using affiliate marketing for your online business are many, especially when you are a startup.
Pay Only for Performance
Affiliate Marketing is a cost-effective channel as it works on a cost-per-action basis, meaning that you only pay on seeing results. So, unlike advertising, you do not incur any costs until a sale is actually made. This eliminates the need to pay for traffic driven that does not result in sales. Your ROI is much better this way as compared to other channels of marketing.
Reduced CPA (Cost Per Acquisition)
The Cost of Customer Acquisition (or CoCA) is the most critical metric every marketing manager needs to determine to grow and maintain profitability. Your CoCA will vary from channel to channel. If we take an example of Indian market, in the lifestyle segment due to intense competition between multiple well-funded players, Cost of customer acquisition can go as high as Rs 1,000 however, for the same players CoCA through the affiliate channel it is only 25%-30% of other paid channels.
One of the main benefits of affiliate marketing is that it enables you to broaden your customer base outside your own web-marketing efforts. Your affiliates can promote your products/ services in several ways – emails, blog posts, reviews, YouTube videos etc. increasing your point of contact to the targeted audience.
Authored By: Rohan Bhargava, Co-Founder, CashKaro.com