Many people have a misconception about affiliate marketing and ask questions like is it a scam, is it worth it, and can you grow a business with it?
It’s not a scam, it is worth it, and you can absolutely grow your business through affiliate marketing. In 2019, it’s estimated that affiliate marketing spend will hit $6.4 billion and $8.2 billion by 2022.
It’s no longer a question of whether or not you can use it effectively. That’s been proven.
It’s now a matter of strategies and tactics.
In this article, I’ll focus on instant affiliate commissions and whether or not you should use them to attract and retain affiliate partners.
Why use affiliate marketing at all
I touched on this a bit already but it’s worth looking at in more detail because affiliate marketing has evolved a lot over the years.
In the past, it was a subset of marketing that few understood and even fewer practiced. There were a few bad apples (and there still are) that promoted dubious affiliate partnerships and products.
Normal people new to the internet were taught a harsh lesson and the label of scam was applied to affiliate marketing.
Fast forward a few years and affiliate networks started to spring up. These are huge marketplaces with thousands of vendors and affiliates. The network handles tracking, payments, and everything else so the affiliates and vendors can focus on increasing their respective revenue.
When this happened, organizations started to accept affiliate marketing again. Today, over 80% of publishers use affiliate marketing and it was responsible for 16% of Ecommerce transactions.
Why should you use it?
Because it’s a proven method to generate revenue for your business.
With that being said, it’s important to understand what’s involved.
Affiliate networks, though they offer an essential service, charge a lot for it. Take ShareASale as an example. To get started, you’ll pay a $550 set up fee and $100 minimum deposit. It also takes 20% of all your affiliate payouts with a minimum fee of $35 a month.
That means if you pay $100 in affiliate commissions, ShareASale will take $35 (minimum monthly fee). If you pay $1,000 in affiliate commissions, ShareASale will take $200. The more you make the more it takes from you.
PayKickstart offers a more robust platform and doesn’t charge a tax for your success. If you process $100,000 in affiliate payouts or $100 in affiliate payouts you’re still paying the same monthly fee.
Another thing to consider is how quickly you’re paying your affiliates. Should you use instant affiliate commissions or should you hold the payout for a mandatory period? Though PayKickstart does both, there are pros and cons of instant affiliate commissions I want to look at.
Pros of instant affiliate commissions
If you were an affiliate, wouldn’t you want to be paid instantly? There are distinct advantages for using instant affiliate commissions to promote your program.
Attract more affiliates
Some companies have archaic rules when it comes to paying affiliate commissions. At times, you have to wait more than 60 days. If you were the owner of your business, you’d never allow your payment processor to hold your funds for 60 days.
How would you meet payroll and invest in growth?
The same considerations apply to affiliate marketers who promote your products and services. They spend time and money to secure the sale so an instant commission to offset those expenses is attractive.
Room to lower the affiliate payout
It’s standard to hold affiliate commission payouts for a specified amount of time. Anyone who allows their affiliates to collect payments instantly has an advantage.
You give them their cash now but there’s room to trade. Since they get their cash so quickly, you can lower the commission to account for any issues you may face with the order.
Faster business growth
More affiliates mean more people see your messages. When more people see your message, you have more opportunities to tweak and refine it.
What may have taken months and considerable investment capital can be cut down to a fraction of the time.
In essence, instant affiliate commissions incentivize your affiliates to work harder which in turn benefits you.
Cons of instant affiliate commissions
It’s not all roses. There are a few cons with instant affiliate commissions you should be aware of.
Open yourself for fraud
Not all affiliates that sign up to promote your products will be honest. Some of them want to make money for nothing.
There are a few ways affiliate fraud can go but the end result is the same – you pay a commission for a product that wasn’t really “sold.”
In fact, you have to pay twice. The first time is when you pay a commission to the affiliate. The second time is when you have to refund the money for the product or pay for chargebacks.
You’re on the hook for refunds
There are times when a legitimate transaction comes through via an affiliate but the customer isn’t happy for some reason and requests a refund. Of course, you’ll give it to them if it’s in line with your refund policy.
The only problem is that you’ve already paid your affiliate and, more than likely, they won’t be giving you back your cash.
You’re still obligated to issue the refund so you’re out the affiliate commission and the initial sale.
Cash flow crunch
Most payment processors have a mandatory security hold on your funds which range from 2 days all the way up to 14 days.
It’s a part of doing business. Even though the transaction has cleared, you don’t have access to those funds. With instant affiliate commissions, you’ll have to pay your affiliates from the money you have on hand.
If an affiliate is crushing it then you may have to pay out more money than is available and have a cash flow issue.
Though not common, it has happened in the past and will likely happen in the future.
You can offset this by stipulating a limit for instant affiliate commissions and set up a hold period for any commissions over the limit.
Instant affiliate commissions are a great way to attract affiliate marketers and get your business off the ground (or take it to the next level).
Like all strategies, it has its own distinct pros & cons which we’ve discussed in this article.
Do your due diligence and if you feel the pros outweigh the cons then go ahead and sign up for PayKickstart and set up your affiliate program.
Mark Thompson is the co-founder of PayKickstart.com – a SaaS that is reinventing the modern-day shopping cart and affiliate management, helping thousands of businesses and Entrepreneurs sell more, maximize customer lifetime value and automate subscription commerce.
Mark has spent over a decade in the world of marketing and software, selling over $20+ million of his flagship training programs and software.