Not everybody is sold on the idea of affiliate marketing. To many the idea of selling other peoples products and services for a relatively small commission appears to be a lot of work for a relatively small return. To others the opportunity offers the chance to enter many markets and concentrate solely on marketing; no face to face contact, no tough pre-sales questions, no servicing queries and certainly no stock. So which opportunity suits you?
I have always been a more active affiliate marketer than “true” business entrepreneur. I appreciate the anonymity that affiliate marketing provides me. If a customer does not like the service or product sold through one of my affiliate websites, they do not complain to me! Instead they direct their complaint to the company providing the “true” service or product.
But on the other hand as an affiliate you are very reliant on your merchants, you also forego that extra potential profit that you could make distributing your own products or providing your own service. In short although I have always concentrated on affiliate marketing I believe offering your own service is not only a more stable business model but also allows easier exponential growth.
The three levels of online business.
There are a number of online business levels that can be considered; by this I mean you can freely choose your participation level in your business. Each have their advantages but for the most part these advantages have a “yang” negative.
Affiliate
By trading as an affiliate you are in effect marketing another companies product or service in return for a predetermined commission on a per lead, per sale or percentage basis.
Advantages
- Core business is marketing.
- Easy & cost effective market testing (can change market focus quickly & without substantial investment).
- Little if any investment in technology (payment processors, stock control systems, etc)
- No Investment in stock, labour, or premises required.
- No customer contact required.
- No servicing requirements.
- The ability to sell services or products from already recognised corporate brands, rather than an offer from an unknown entity (often helps make the sale)
Disadvantages
- A reduced profit margin from what would usually be expected if you were providing the service or product directly.
- A much reduced opportunity for repeat business (if at all).
- Increased difficulty in obtaining acceptance from the Google search engine to take part in PPC advertising.
- Difficult to create a brand when not marketing your own product or service.
Outsourcing
The term outsourcing is perhaps misleading, although probably factually correct. What I refer to is those businesses that either outsource the service that they claim to provide for profit or alternatively dropship goods. This term would probably also fit well with many white label solutions. These businesses all “mark up” the product or service that they in reality purchase from someone else as part of an ongoing agreement.
Advantages
- Core business is marketing & Customer service.
- Easy & Cost effective market testing (can change market focus quickly & without substantial investment).
- No Investment in stock, labour, or premises required.
- The ability to build a brand & benefit from repeat customers.
- The ability to easily get acceptance from Google to run a PPC campaign.
- You choose your own “mark up” & profit margins.
Disadvantages
- A reduced profit margin from what would usually be expected if you were providing the service or product directly.
- Inability to control product or service quality, and risk potential loss of custom as a result.
- Time spent dealing with pre-sales questions, and support
- Inability to compete on price level due to the increased outsourcing costs (when compared to providing the service yourself).
- The need for a business address & contact telephone number (that must be covered during business hours).
Full Service
This service is as close to a brick and mortar business as any online business can be. In many cases this set-up will require an office and the necessary skills to provide the service offered. The profit margins will be highest, and should be large enough to enable the company to offer an affiliate program of their own, or have dedicated resellers.
Advantages
- Core business is marketing, customer service & service delivery.
- The ability to have complete control over your brand, and service quality.
- The ability to setup and run an affiliate program for your service.
- The ability to recruit resellers.
- Benefits of repeat customers.
- The ability to build a brand & benefit from repeat customers.
- The ability to easily get acceptance from Google to run a PPC campaign.
- You choose your own “mark up” & profit margins.
- The ability to compete with well established companies & brands.
Disadvantages
- Time spent dealing with pre-sales questions and support
- Time spent processing orders & maintaining your service.
- The need for a business address & contact telephone number (that must be covered during business hours).
- Possible required staffing costs.
- High advertising costs to maintain business & cover higher expenses (Premises & Staff).
- The need to ensure that your offering is both competitive and full-filled by skilled diligent staff.
The above guide is by no means complete and is only meant to provide some food for thought, and help you decide what form your new online venture should take. Remember that just because you start as an affiliate, reseller, or full service business does mean that this is how you will have to continue for the longer term. Although it is probably much easier starting as an affiliate and working your way up than the other way round.
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