Affiliate Marketing Starts Here – What You Need to Know

Affiliate marketing is a basic concept, but if you don’t think the business model through you’re really wasting your time. Here’s what you need to know.

So you’re keen on the idea of affiliate marketing. Of course, you are who wouldn’t be. You’ve got all these great benefits:

• You don’t have to worry about stock
• There are no operations involved
• Nobody will contact you for customer support
• You’re not directly legally responsible for the product or service

Affiliate Marketing

Isn’t this a no-brainer?

Well, it is a no-brainer if it makes financial sense. However, if you haven’t thought that aspect of it though, it’s likely it doesn’t make financial sense.

If for example you are selling through the Amazon affiliate program and let’s say you’re selling a fantastic book such as The 4-Hour Work Week. You would be forgiven for thinking that’s a good idea. It’s a great book. You’re passionate about the topic. You feel confident you can push it.

So what’s the problem?

Well with Amazon affiliates the maximum commission you will make will be 10%. That is the best-case scenario. For the sake of keeping this simple, let’s say this book costs $10 USD and you make the maximum amount of commission. That means you will make $1 USD.

Let’s say you’re goal is to make $200 USD in affiliate sales. Well, a quick calculation will tell you, you need to sell 200 books through your link.

Now let’s say your conversion rate on your website is a magnificent 10%. That’s unlikely but let’s just say it is. That means you need traffic of 2000 unique visitors to your website.

But before they get to your website you need to convert them. This means you need a much bigger audience to potentially convert. So let us once again say you have an amazing 10% conversion rate.

This means you need your link exposed to 20,000 people. This cannot be a random 20,000 people this needs to be 20,000 prospects. To some degree, they need to be targeted. So you need to nurture an audience of 20,000 people form somewhere.

Again because you are such an extraordinary marketer, let’s say your conversation rate in this regard is also 10%. A quick calculation will tell you that you need to cast your marketing net on an audience of 200,000 people.

Best Case Scenario

Now remember this is the best-case scenario, I’m not even making life slightly difficult for you with the above figures. This is like a dream scenario.

In order to find that 200,000 strong audience you’re going to need either a tremendous amount of time and skill or money or a combination of various amounts of each one.

You Need Help!

Now if you think this results in you making some sort of profit, or if you think in any way that this is worth your while. You need help.

I am speaking from a place of experience. The above outline is a business model I pursued for several years. I can admit it, I needed help.

Now you can see how a bit of planning ahead is essential for an affiliate marketing business to work.

What you’re searching for is a product whereby each customer has a calculated average value on them of let’s say $200 to $800 USD in affiliate commissions.

This will guide your product selection.

What is so magic about this figure range?

Well if you can get a 2 to 1 ratio on your input in terms of what you invest, then you know you can reinvest 50% of your revenue and make a profit. This doesn’t just allow you to make a profit, it allows you to systematically scale up your marketing efforts.

If for every $100 USD you spend on getting a customer, you get in return $200 USD, then you have a business model that is profitable and worth your while scaling up.

Why Not Just Focus on Organic Traffic?

This is a great question. Organic traffic technically costs you nothing. Therefore any customer you gain is all profit for you.

The problem is you can’t scale it up and therefore it does not contribute to a clear business model. Organic leads should only be considered as a means of getting somewhere else. To take you to a point whereby you can reinvest the profits to a paid model. Otherwise you never really know what is working and you are simply hoping for the best.

This is dangerous as it prevents you from being in control of your business’s ability to churn out revenue. If you do not control the means of how you get customers, you really don’t have any control over your business.

Word of mouth is a beautiful thing, some say the best form of marketing. However, with that said, it’s certainly not something you want to have to rely on as while you can influence it, you cannot control it. It can work against you, as much as it can for you.

Back to The Figures

Now, of course, these values can change. Your return on investment can change as well, perhaps it’s not 2 to 1, perhaps a little less or a little more even. Now you have the basic model for evaluating your affiliate marketing business.

Once evaluated you will have efforts that are more empowered because you understand what you can achieve. As opposed to simply hoping that somehow you will sell a million copies of someone elses book.

If you’d like to learn more about this topic, check out the free video series. It will give you insights into affiliate marketing that I can’t teach you in this article.