I received the following advice in an email from AddMe.com and I thought I should share it more widely.
It addresses why merchants should use affiliate programs as part of their online sales drive and well thought through.
Have you ever heard of using affiliate programs to get a boost in targeted visitors to your web site? This can be an excellent web site traffic promotion to put visitors in touch with the products or services you have available on your site.
Let’s say you have a product you have created and are selling on your website for $97 (In this example the product will be an e-Book).
Visitors arriving on your site, pay $97, and can then download the e-Book. Your profit is $97 less any payment processing fees (credit card, etc).
With an affiliate program, you pay a commission for every sale of your product or service that is made by a referral of your affiliate. You pay for results only, no sales means no payment.
This means you are getting someone else to market and promote your web site for free!
What does this mean? More targeted visitors of course as more visitors are sent to you by the affiliate.
It's highly likely that a large portion of the visitors may never have found your web site, so in many ways these sales could be thought of as bonus sales, above and beyond those you would ordinarily have made.
The downside is you need to share a percentage of the sale with the affiliate but you should also remember that it is quite possible the customer will buy more from you in the future.
This is the power of affiliate programs and affiliate marketing in general. Not having an affiliate program is an area where lots of marketers fall down.
Assuming you have an opt-in in place, then not only have you made a sale, but you now have a customer you can promote more products to in the future! One of Marketing 101’s golden rule is that it’s far, far easier to sell to an existing customer than to a brand new one. After all they loved your product enough to buy it, right? You have established a relationship with them at this point, and provided that your product has great relevant content they will be hooked!
The other thing to keep in mind is that it’s likely that you will have a higher percentage of sales from your affiliates visitors because (hopefully) the affiliate has already pre-sold his customers on your fantastic product. More than likely the affiliate has built up a solid reputation with his customers (who more than likely have purchased from him in the past) and because he has recommended your product, they come to your website already pre-sold that your product is a decent and worthy one, and at this point you have a visitor who already trusts and believes in your product because of the relationship they have with the affiliate recommending your products.
You need to think beyond the commission you are paying the affiliate and look instead at the long term relationship you have the potential to build with your new customer.
Make sure you look at using affiliate programs to maximize web site traffic. Payment is only required if the visitor purchases an item, so you have no upfront costs.