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Affiliate Marketing offers huge potential
According to emarketer.com statistics, the retail ecommerce sales in the UK reached £81.55 billion in 2017, accounting for 19.1% of total retail sales. By 2021, it is predicted that online sales will rise to 25.2% of total UK retail sales, breaking through the £100 billion ceiling.
Affiliate marketing already accounts for nearly 20% of all these ecommerce sales which is worth 16 billion sales now – growing to over 20 billion over the next 3 years. That makes affiliate marketing is one of the fastest growing digital marketing disciplines and this trend is expected to continue over the next five years.
An IAB study shows that for retailers, last year affiliate marketing was estimated to have driven returns of £16 per £1 spent in commission. This shows the power of the Cost Per Acquisition (CPA) model, where retailers only pay affiliates when a sale is made.
So the potential is great and the industry is in good health.
Why is affiliate marketing so successful?
The behavioural science behind “retail therapy” is based on the psychology that consumers buy items when advertising and marketing manager to make them feel a certain way. A 2017 survey from Hawk Incentives of 2,000 consumers found that the desire to save money made the customer feel smart. In that survey nearly all (97 percent) respondents answered yes when asked if they were looking for deals when shopping and 92 percent said they are always looking.
Affiliate marketers tap into that deal seeking behaviour through smart phones. Given that shoppers are developing an emotional and habitual propensity to save money, smart phones and tablets give them instant access to deals via a simple thumb swipe or mouse click. This has the impact of perpetuating that deal-seeking behaviour for all types of purchase. Retailers have also recognised this by offering a range of different ways to help consumers save money – cashback, coupons, discounts etc.
Deal seeking behaviour is a primary weapon retailers use when they are looking to attract new customers. Giving people a discounted offer is the premise behind price comparison websites which are frequently being used when consumers come to the end period of any subscription based service. This is true for mobile phone contracts, broadband contracts and many annual based financial service products. It’s now estimated that more than 11 million people in the UK use price comparison sites each year and this has fuelled the development of more niche sectors offering price comparison services. There is now a host of other types of cover that can be searched for including private healthcare, estate agencies and small business services.
In simple terms affiliate marketing is the practice of recommending a product or service from your website. A customer visits your site and then clicks on a product link to visit a retail merchant site where they purchase that product. The retailer knows that you are the affiliate that has directed the customer to their site via a cookie left on the buyer's PC. Once a sale is made then you as the affiliate earns a commission on that sale.
Why users visit affiliate marketing websites prior to making online sales?
The different niches that affiliate marketing websites offer give the user great choice, access to discounts, plus the ability to search and compare products or services from multiple suppliers. Some of the most common affiliate websites in the UK now available are as follows.
- Cashback website offers users the ability to earn cashback on all their online purchases such as quidco.com or topcashback.com
- Discount vouchers websites provide discount vouchers and limited offers to users that are only provided to discount led affiliates such as myvouchercodes.co.uk or vouchercodes.co.uk
- Mobile comparison websites provide the ability for users to browse and compare the mobile from multiple retailers before they make a purchase such as mobilephonecomparison.co.uk
- Daily deals or short term discount websites provide valuable discounts that may be running out of season or retailers wish to clear their shelves with old stock such as groupon.co.uk or hotukdeals.com
- Broadband comparison is also great way to compare broadband prices and switch over to another provider easily such as broadbandchoices.co.uk
- Product feeds websites provide a huge data bank of products for users to compare and find the best offers available such as comparepanda.co.uk
Similarly there are financial comparison websites, travel, hotel, insurance and many other niches successfully running in the affiliate business.
RevGlue has pre-built templates that can showcase each of these different niches, meaning that it is entirely possible for an entrepreneur to run their own niche affiliate site.
Why should I setup an affiliate business?
As well as the magnet of affiliate marketing being such a growing market, there are three core reasons for entrepreneurs to setup affiliate websites as a money making venture.
1 – Owning a business – It offers sense of purpose when you run your own business and being part of a billion dollar industry with a proven business model is a good motivational factor to any entrepreneur to jump in. Also there have been several high profile affiliate marketing businesses that have been sold in the last five years in the UK, turning their owners into millionaires.
2 – Freedom – Having an affiliate business offers career flexibility and financial freedom. The benefit is that you as an affiliate are not the final seller of the product or service so you don’t have to own the inventory. As a result the business can be managed from virtually anywhere giving you full freedom and flexibility.
3 – Passive income – the ability to not have to go to work every day is also a major plus point, where you don’t have to be accountable to anyone. And the bills get paid without having to leave your homes as well as the business value growing that you could cash in on in the future.
How much can I earn through affiliate marketing business?
This is the most common question we normally see new affiliates asking on the forums and at exhibitions and the answer lies somewhere along a spectrum. At one end there is no limit to what you can earn in affiliate marketing, but at the other end you could earn nothing.
Let me explain why. There are three main factors that you need to understand before estimating the commission you could generate.
1 – How many users you refer to ecommerce stores and the intent and quality of those users? Where a user has a true deal seeking behaviour through the offers that you have provided, then the retailer will get higher conversions. The more users like this that you can generate and redirect to the ecommerce stores then the higher the total commission that you will earn.
2 – The commission rate earned varies as not all niches offer the same commission on a sale, for example:
• Beauty products may offer 10% commission on each sale but the order value could be low such as between £20 - £50 that generates between £2 - £5 for average sale.
• Travel, financial institutions such as applying for a credit card, booking an airline ticket or buying a mobile phone contract may offer you a higher value of commission that could be anything between £50 - £500. But these are difficult niches with more sector knowledge and upfront investments in data and tech required.
• Electronics and computer retailers will offer lower commissions due to the tight profit margins they have because of the high competition. So these stores may only offer 1-3% commission on each sale and even nothing on accessories and sale items.
• CPL programs such as requesting an engineer for home fixing, personal services, dental, online education and other similar niches may offer higher commissions but the competition is tough and you need to have specialised knowledge of that sector.
3 – Driving traffic volumes to your own cashback website, discount coupons, or product feeds site when there are hundreds of other domains on the internet offering the same service. So you need to devise a marketing strategy to bring in traffic to your website. Too many affiliates start their affiliate website promotion with a poor SEO strategy and they end up having no sales for months. Like every business, you will need to promote your website to relevant potential audiences on other channels through PPC, display, social, email or even offline channels and then measure the quality of those users who are converting for you as mentioned in the first point above.
How can I start my affiliate business?
Many entrepreneurs considering affiliate marketing struggle with technology, the only choices for those who lack technical skills being to either hire a development team in-house or outsource affiliate website design and development work to specialists. Also the understanding of the data structures and the constant updates required to their affiliate websites through admin panels to keep the data fresh is something affiliates struggle with before they can see regular commissions coming through their affiliate network relationships.
These aspiring entrepreneurs are therefore put off entering the affiliate marketing industry when they realise an experienced affiliate tech partner who can manage all aspects of their technical support will cost them several thousands of pounds each and every year.
A more cost effective and tech friendly service is required to overcome this barrier and the good news is that RevGlue is now offering all in one affiliate packages for new and aspiring affiliates who wish to setup their affiliate business. Working with RevGlue, affiliates can own a complete professional looking fully populated cashback, coupon or price comparison website that is ready to market and monetize. It gets better, depending on the support option chosen, affiliates get to keep up to 100% commissions.
This is attractive to entrepreneurs who want to focus all their attention on business, marketing and making money starting on day one. To do that we will take care of all the technology support needs including setup, datafeeds, hosting, customisation, education, support, customer service, maintenance and more.
We recommend you join our next webinar to learn about this package and how RevGlue can help you get your affiliate business up and running for under five hundred pounds.