How You Can Utilize Affiliate Marketing: Pros and Cons of the Marketing Tool

Affiliate Marketing does not have the best reputation. Nevertheless, it still represents a working business model in 2021, with which good money can be earned. Here, expert Thomas Dirnhöfer from xpose360 presents the advantages and disadvantages of affiliate marketing in a guest post.

Affiliate Marketing and its headlines

An industry that is in constant struggle against data protectors and browser updates, in order to continue to exist with the so simple and ingenious basic concept. In addition to this, this concept, or THE actual idea of affiliate marketing, is already burdened with negative experience values for some online marketers. Examples of this are points such as "this is very susceptible to fraud" or "almost only voucher portals" and unfortunately some more.

This article is intended to clean up (again) and discuss the actual advantages and disadvantages of affiliate marketing. A classic pro and con, actually - the important thing is that I will not present any advantages and disadvantages compared to channel XY. Since various verticals can be served in the affiliate channel, any comparison here would be quite flawed.

Another note before we dive into the arguments: Many advantages can of course only be evaluated in this way if you "do it" correctly. If you know the advantages of TV advertising, but the spot, broadcast time etc. are crap, you cannot expect success. Therefore, I naturally want to address as best I can how to maximize an advantage and minimize disadvantages as much as possible. Let's Go!

Advantage Commission-based compensation in affiliate marketing

Let's start again with the keyword "basic concept" and probably the most popular advantage of affiliate marketing - commission-based remuneration - for the advertiser, therefore, the Cost Per Order (CPO) or also Cost Per Action (CPA). Visibility and traffic without any risk, because only when the user buys or concludes, is paid! We can leave this advantage as simple as it is, but 100 percent actually only on the merchant side.

Looking at the publisher side, he carries full risk by providing his advertising platform. Of course, he can align the promotion as best as possible with the final sale (but this is only possible in very different ways depending on the vertical); however, the decisive factors on the way to the conversion are entirely with the merchant. And there are a lot of those, such as the usability of the shop, general conditions such as shipping costs and return policy, Trustpilot reviews, availability, prices, product quality, customer service etc.

Much or rather some things can and are usually checked by the affiliate before starting a promotion. So the first tip for advertisers is to communicate with potential and existing partners about these points as much as possible - so from the program description to regular talks or exchange with existing partners. AFFILIATE MARKETING IS PARTNER MARKETING.

In the competition, this advantage is no longer so strong. Startups, young stores or brands find the idea of CPO compensation naturally perfect for the start. However, an affiliate will probably rather choose the competitor who can offer more unique users and/or a better-known product - even if you offer a higher CPO.

Advertising cost subsidies (WKZ) and bonus compensations are also common nowadays. An affiliate claims this when he believes that the value of his advertising performance cannot be achieved through pure performance commission. To make use of this advantage, it is also necessary to talk to the partners; if necessary to work out individual special commissions, negotiate WKZs and of course to offer a competitive basic commission. Naturally, it should be clear that in the "shop" a sale should encounter no obstacles - but this should also be in the advertiser's interest without affiliate marketing.

Is the standard attribution in affiliate marketing fair?

We now jump directly to the disadvantage from the remuneration/monetization category in affiliate marketing. The absolute standard in practice is still "Last Cookie Wins" - i.e., only the last of all affiliates a user has "encountered" in the Costumer Journey is compensated. All other partners simply come away empty-handed. For a large part of the partners, this is not exactly a fair practice; there is a high risk for publishers to generate no revenue despite advertising performance.

For the advertiser, this does not sound like a clear disadvantage at first - for him, it is even convenient and he does not have to worry about a fair distribution. However, this is a reason why it is so hard or laborious to enter into an affiliate cooperation (purely on a CPO basis) with the so popular content partners. There are few programs with a large share - i.e., quantity of mid- or long-tail content partners - which also have a high quality that delivers a significant number of sales. Not because they do not exist, but because the attribution model is not exciting enough to act as an affiliate.

For voucher partners or above all loyalty partners, the last cookie compensation is essential for their current processes. The topic of customer journey tracking and/or compensation has been continuously discussed for a decade. There are approaches to solutions and innovations like the Awin-Assist etc. - currently, it is still to be mentioned as a disadvantage, or let's say challenge.

The "All in one heap" advantage

Now let's move on to an advantage that is equally weighted for both publishers and merchants: joining a network. It doesn't matter whether you choose a private or public network - the network takes on the role of the neutral third partner or service provider, who takes on much of the "work" of a successful "advertising partnership" and wants to make it as right as possible for both sides.

There may be setup fees, monthly fees depending on the service level etc.; a network also earns its bread, as a rule, with its share of the mediated partner commission. The network is the technical interface, which ensures a functioning and legally compliant tracking system out of its own interest. The financial interface and processing through a network alone is a massive simplification compared to the individual invoicing and booking of lots of direct cooperations.

And as the name already says - you join a network! The quick finding and quick access to potential advertising partners from various verticals and industries - "practically all in one heap" - is a great advantage!

Popular Affiliate Networks & Platforms

ADCELL

Webgains

Awin

Ingenious Technologies

impact.com

Admitad

MyLead

Rakuten Affiliate Network

100partnerprogramme.de

Neglect is a No Go in affiliate marketing

Linked to this is the disadvantage, or again more fitting the challenge, that a successful and wide-ranging affiliate program is very in need of care and is not self-running. Waiting for one publisher after another to sign up to the program, place the links and then sales come in, unfortunately does not lead to success and usually rather to annoyance and misunderstanding about affiliate marketing.

A proper action planning - i.e., a coordination of the actions with end customer benefit portals; proactive scouting of content partners and the subsequent flow of information up to the standalone campaign; the open eye for new innovative publisher models; evaluating campaigns and actions etc. are just the tip of the iceberg. A possible smart process of sales reconciliation is also recommended, to maximize the advantage of paying commission only for valid sales. The be-all and end-all is to provide enough resources for communication with the affiliates.

Grandma always said "Trying is better than studying"

Last but not least, the advantage that affiliate marketing allows you to try and test many things. Purchase drop-out, new customers, initial purchases, customer loyalty, cross-selling, shopping cart increase, etc.; in affiliate marketing you will find a partner and a strategy for your focus, or have the opportunity to create your perfect mix. On the way to your goal, you can test a lot of things relatively uncomplicatedly, and maybe terminate the partnership (preferably amicably) or continue optimizing.

As an example, I would like to mention CSS, which many advertisers already handle supplementarily or completely via an affiliate partner. To make use of this advantage, one should therefore bring along a certain openness to various verticals and test runs. Specifically, maybe at this point, not on the basis of the keyword "free-rider effect" to basically exclude all voucher publishers, but through strategy, evaluation, and optimization to find voucher promotions or even deals that bring real added value such as new customers or increased shopping carts.

Conclusion - for one so; for the other so

Of course, there are still a lot of other points and arguments in affiliate marketing, which are to be classified at different weights in a pro or contra. But the article has also shown that the same fact can be very different for the parties involved in terms of advantage or disadvantage. In the end, it applies to everything - you should start affiliate marketing with knowledge and competence - whether in-house or agency is of course up to everyone.