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Affiliate Programs ... A Not THAT Easy Start To Your Own Online Business (Part One)

Posted on July 7, 2000

by Elena Fawkner

Where is all the help I'm supposed to get. I have been buying ezine and classified ad builders and signing up for Echecks and Virtual credit cards. In the meantime I have no business and no ads set up. When does all this happen? Let's go here. I spent all day on this. I'm running out of time."




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I kid you not, this is the sum total of an actual email that hit my inbox this week. Not only did I not know this person from Adam, this was the first and only email I had ever received from her and to this day, I have no idea what she's talking about. Presumably, she signed up for one of the affiliate programs I promote from my site and was asking, in her own inimitable style, for my help. Although I am always ready and willing to help anyone I can, this is most definitely NOT the way to go about asking for it. Needless to say, I let her know what I thought of her approach in NO uncertain terms.

The attitude displayed in this person's email to me (and she is by no means an isolated example) exemplifies why so many people fail to make a success of their online businesses. Leaving aside the utter rudeness of the approach, notice the impatience, the expectation to be up and running in a day, the HURRY, the apparent belief that real world principles such as courtesy and good manners don't apply online (they do). Think this person is going to last the distance? What kinds of tactics do you think she is capable of resorting to in pursuit of the almighty dollar?

So, let's take a realistic look at affiliate programs, what they can and can't do for your business and how to maximize your chances of creating a successful, long-term business with them.

What is an Affiliate Program?

An affiliate program (also known as a reseller, associate, referral or partnership program) is essentially a revenue-sharing arrangement whereby you, the affiliate, receive payment from the owner of a product or service that you promote on their behalf. Affiliate programs are an excellent way for the new internet entrepreneur to start an online business.



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Types of Affiliate Programs

There are various types of affiliate programs.

The most simple involves you, the affiliate, placing a banner ad, graphic or text link at your site which is linked to the site of the business you are promoting. This link is coded with your unique affiliate ID so that the site visitor is recorded at the target site as having originated from your site, thereby allowing you to be credited with the sale.

Payment is generally a fixed percentage of the sale value (commission) or "pay per click", where the affiliate is paid a certain amount for every time a site visitor clicks on the link at the affiliate's site, whether or not a sale is made.

The more sophisticated affiliate programs are multi-tier and allow the affiliate to earn commissions not only on the traffic they directly refer to the target site but also a proportion of sales generated by their sub-affiliates.

Benefits of Affiliate Programs

The greatest benefit of affiliate programs is that when you are just starting out in your own online business you don't have to worry about creating your own product or service. You just promote someone else's and get a share of the revenue pie for your efforts.

You also don't have to concern yourself with warehousing, transport or logistics headaches. All of this is handled by the business whose products/services you are promoting. All you need concentrate on is driving traffic to that business's website. This means that a high proportion of your revenue is profit.

The owner of the product/service is also responsible for collecting payment, customer service and the myriad other details that come up on a day to day basis in running the business.

Disadvantages of Affiliate Programs

The main and obvious disadvantage of affiliate programs is that it is the owner of the product/service who earns the lion's share of the profit on the sale.

You're working on commission. You will NEVER earn by way of affiliate program commissions as much as you can earn by way of profits from producing and selling your own product/service.

As a result, affiliate programs represent a high opportunity cost when you consider what you could earn if you instead channeled the time and energy you spend on promoting affiliate programs into creating and promoting your own product/service.

For this reason, it does not make sound business sense to rely solely on affiliate program income for the longer term growth of your business.

Instead, think of them as a way of dipping your toe in the water when you're first getting started, and a nice little sideline once you've created your own product/service. Do NOT build your business around affiliate programs with the intention this will always be the backbone of your business. You'll be stunting your own growth if you do.

[More on Affiliate Programs in the next issue (Issue #146):
- Choosing the right affiliate programs for your business
- Making money from affiliate programs ]



Elena Fawkner is editor of the award-winning A Home-Based Business Online ... practical home business ideas, resources and strategies for the work-from-home entrepreneur. http://www.fawkner.com

 

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