It’s not new that affiliate or influencer marketing is a popular and effective way to increase sales. But how much does affiliate marketing cost if you take all aspects into account? In this blog post we discuss the costs of the following activities:
Investment in time
As a software company or webshop, there are many things you need to think about. How do I conduct my marketing? Is my webshop rating high for Google? Do I have enough stock? and much more.. The extra time you have available is therefore of value and an important element for everything you do. Depending on the approach, you will mainly invest in your time in the initial phase of affiliate marketing. It simply takes time and energy to set up an affiliate marketing strategy, to get in touch with affiliates and to agree terms and conditions. If you consciously reserve free time for this in advance, it will be easy to combine with the other things.
Depending on your industry and affiliate marketing strategy content will have to be prepared for promotion purposes. For example for promotions on social media channels. This content can consist of texts, images, videos or banners. If you have a marketing team, a large part of this will probably already be available. But in many cases required new specific content which needs to be prepared. The costs for preparing the content can of course differ a lot. Are you doing everything yourself or do you outsource the writing of texts and banner designs via for example Fiverr or Upwork? There are certainly ways to prepare the content without costs if you really want to or don’t have the financial resources.
If you, on the other side often work with satisfied customers of your product who can earn cashback or commission as an affiliate. Then no further content is needed since customers will usually promote your product or service through their direct network such as family, friends or acquaintances. A direct link from the affiliate to your website to initiate a quote request can be sufficient in that sense. The same also applies to blog articles since only a link from the blog article to your webshop or website is required.
Terms & conditions affiliates/influencers
The biggest part of your costs will (if you do it right) consist of paying your affiliates/influencers. Fortunately, this is not a problem since affiliate marketing is basically a “no cure, no pay” variant. This means that the affiliate earns money based on his or her performance. So without performance, no money is owed to the affiliate. If their performance is high and beyond expectations, then you will see this reflected in for example the number of completed contact forms or number of sales. In that case the payout from the affiliate comes without risks.
The ways to measure performance
- Pay Per Click (PPC)
The pay per click variant is often used in online marketing (for example Facebook) and basically means that you pay the affiliate based on the number of clicks that are realized via its unique URL. This form of commission however for affiliate marketing is in general unwanted as it may create costs without a guarantee on extra sales. Affiliates thereby may focus on creating many clicks without having valuable visitors.
- Pay Per Lead (PPL)
A variant that occurs more often is pay per lead. Here you link a specific event or trigger on your website as a lead. For example, if a visitor books a live demo or if he/she shares their contact details in return for a white paper. The affiliate has not yet made a purchase but has collected valuable information for you as he shows his interest in your product and you are able to directly contact him/her. This form can for example be applied at companies without standard prices but with a quotation phase.
- Pay per sale (PPS)
The last and most common commission rate for affiliate marketing is pay per sale. The affiliate link is recognized after the purchase of a product and the earned commission will be allocated to the specific affiliate. This method comes with basically zero risks as the earned money of your sold product is already received by you before you have to pay the affiliates commission. We also call this a no cure no pay variant.
Pay for a single post
There are also influencers who are not paid based on performance but charge a fixed amount for a single post. These are often influencers with a large reach and are therefore popular for large companies to boost brand awareness. The risk of these influencers is that you create expenses without guarantee of increased sales. On the other hand, the costs have already been paid. You therefore don’t owe the influencer any additional commissions if it turns out to be a great success.
Are you selling a product that is visually appealing and can be used by the influencers during a post? Then it can happen that the influencer needs a product at home to create content. You can of course decide for yourself whether you lend the product or whether the influencer is allowed to keep it, which often depends on the value of the product and collaboration level with the influencer. Alternatively, you can also invite the influencer to your office to prepare the content, this way you don’t have to give away products.
Affiliate Management tool
It is important to have a tool in place to manage your affiliates network performance as this will save a lot of time. It is important that the unique affiliate URL is created but also recognized during a purchase, otherwise the commission will be awarded to the affiliate.
Important components for management are:
- Integration with your webshop/website
- Smooth affiliate onboarding + URL
- Tracking Affiliate Performance (Conversion)
- Allocate Earned Commission
- Periodic payout to affiliates
- Automatic generation of credit invoice
In this way, the management of affiliate marketing becomes easy and allows you to spend time on the content and valuable collaborations. The monthly cost for the Sir Filiate platform fro example start at just €49.
The costs for affiliate marketing can be very low if you keep a lot in your own control or use blogs or existing customers as an affiliate, you do not need any additional investments besides the time you invest. The costs are mainly based on performance that the affiliates achieve for your product or service.
It is advised to use an affiliate management platform from the start as this small investment ensures that you do not have to do the administrative and time-intensive work such as creating URLs, tracking commission and payouts per affiliate by hand.