The Most Cost-Effective Traffic Generation Tactic

There're a myriad of tactics that online business owners can employ to drive targeted traffic to their websites, but the most cost-effective one is undeniably that of "building an army of affiliates".

This can be achieved by implementing what's called an affiliate program. An affiliate program is undoubtedly the best way to increase website exposure, sales and profits.

For business owners, if you sell products that have a medium-to-high profit margin via the internet, you'll be much more profitable and successful if you start implementing an in-house, two-tier affiliate program for reasons which I'll delineate in a moment.

Affiliate Program Defined

What's an affiliate program?

An affiliate program is a marketing initiative, a sort of performance-based advertising, whereby the affiliate promotes the merchant's products/services, and in return and depending on the type of program, the affiliate receives a commission from, or shares revenue with the merchant for delivering sales, leads or traffic to the merchant's websites. The affiliate can be paid a flat fee or a percentage of the transaction.

It's a mutually beneficial business relationship, and is also commonly termed as associate, reseller, referral, or partner program. A case in point is Amazon.com which is amongst the first to launch an affiliate program on the internet.

How Does An Affiliate Program Work?

In a typical affiliate program, affiliates normally promote the merchant's products/services by placing graphic links, text links and/or banners from their websites. They also advertise in ezines, send endorsement letters to their list of opt-in subscribers and customers via emails and/or autoresponders to drive traffic to the merchant's websites.

The merchant leads the referred visitors through the selling process, closes the sale, processes the payment, fulfills the order and handles all customer service issues. The merchant also tracks the affiliates who send him the traffic via an affiliate software. If a sale is closed, the merchant calculates and pays the commission to the affiliates as agreed.

Types of Affiliate Program

Affiliate programs can be broadly categorized into various types as delineated below, and they can be either single-tier or two-tiers.

You can also either implement and manage the affiliate program yourself or outsource it to third party managers such as Commission Junction, LinkShare, etc. My suggestion is that you run your own affiliate program in-house as it is more cost-effective and profitable to you in the long run. By running your affiliate program in-house, you'll do away with the start-up costs and percentage of revenue to be paid to third party affiliate program managers.

1. Pay-Per-Impression

Pay-Per-Impression is a type of affiliate program where the affiliate is paid by impressions. Everytime a banner or link is displayed to a visitor at the affiliate's website, it is counted as an impression. The affiliate is normally paid a few cents per visitor, and the commission is calculated based on per 1000 impressions or CPM.

2. Pay-Per-Click

In this type of affiliate program, the affiliate is paid everytime a visitor clicks on the links or banners displayed at the affiliate's website through to the merchant's website. The compensation to the affiliate normally ranges from a few cents to a few dollars per click.

3. Pay-Per-Lead

As the name implies, the affiliate is compensated by every lead it generates for the merchant such as a visitor filling-up a form at the affiliate's website.

4. Pay-Per-Sale

For this type of affiliate program, the affiliate is only paid when a sale is closed. This is the most cost-effective and profitable type of affiliate program and is the one that I recommend for reasons as delineated below.

Benefits of Affiliate Program

1. Increased Brand Awareness

An affiliate program will increase your brand awareness. Building your brand requires mass exposure, and as such, an affiliate program is ideal because of your network of affiliates. As your name, logo, and products are being promoted by your affiliates all over the internet, it inevitably increases your mindshare and brand awareness.

Amazon.com is a good example. It builds its brand identity initially via its affiliate program. Amazon.com is able to do so because of its vast network of affiliates. Its ten of thousands of affiliates is more than willing to promote its products because it benefits them as well in terms of the perceived credibility by associating with and promoting Amazon.com's products.

2. Higher Search Engine Ranking

Search engines place great importance on the quality as well as the number of websites that link to you in determining your website ranking. A well designed affiliate program will dramatically increase your search engine link popularity because of the number of affiliates who link to you. This in turn will boost your ranking resulting in more traffic to your website.

In addition, with greater visibility in the search engines, both organic and paid listings, your brand identity will be further enhanced.

3. Extremely Low Advertising Costs and Risk

Your advertising costs is limited to what you pay to your affiliates when a sale is closed. Your affiliates literally do all the marketing and bear all the costs of advertising. Even when they spend money on advertising promoting your products and not making any sale, it doesn't costs you a dime because they're only paid on performance, that is, only when a sale is closed.

Therefore, it naturally follows that your risk is also extremely low. Your risks is only limited to the cost of your affiliate software and your time.

4. Increased Leads and Sales

An afffiliate program can literally grow your leads and sales exponentially. This is especially so with a 2-tier affiliate program when affiliates begin to recruit sub-affiliates. The increase in the volume of visitors to your website will give your website conversions a further boost. That means sales, with next to no effort on your part. Sales you might never have made without your affiliates referring them to you.

Furthermore, you can profit from these customers by selling to them over and over again with back-end sales. You've indeed gained additional customers for life, not forgetting that your affiliates themselves are also your potential customers.

As you can see, an in-house managed, two-tier affiliate program is undeniably one of the most cost-effective and profitable traffic generation tactic for both big and small businesses.

Think about this...

... You simply can't lose because you don't invest much money up front except for your time and the cost of the affiliate software which in most cases is rather low, and which you can easily make it back within a very short period of time.

Instituting an affiliate program is definitely one of the most powerful ways of marketing online, and is undoubtedly also a win-win relationship for the merchant and its affiliates.

About the Author

Copyright 2005 by Larry Lim, MarketingSphere.com

Larry Lim, a Singaporean, is the Founder of MarketingSphere.

A marketing strategist, Larry dishes out highly effective marketing strategies, tactics and tips that will enable you to start and grow your business on the Internet.

To read more of Larry Lim's articles, visit his Internet Marketing Strategy and Article Search Engine Directory websites.