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Wednesday, January 05, 2011

Affiliates Make You Money

One of the biggest comments I hear from people is that they are worried about running an affiliate program because they perceive the money they are paying out to the affiliates as being "lost money".

In fact, quite the opposite is true - the money you get from the affiliates is free money!

"Huh?" you say, "How can me paying out money to someone be free money for me?"

Let me explain this to you.

An affiliate is someone who promotes your products on your behalf with no payment unless a sale is made - the ultimate in pay for performance. However, the sales that affiliates bring you are sales that you would never have had before. They are bringing you in money that, without them, you would never have had. Yeah sure you would have made some sales yourself, but would you have made as many?

I want to make an analogy here to the offline world in order to help you really understand this.

Imagine that you're running a pizza parlour in your home town. You are bringing in a good income from it and would like to expand your business and your income. Sadly though, your town is small and there's not enough customers for you to open a second pizza parlour.

So, your only real option is to expand into another town. However, you can't be in both places at once running both stores, so you hire a store manager to run the second pizza parlour and you pay them a part of the profits for you.

As well as your profits from your first store, you are making profit from the second store, but paying a part of that profit to the person running the store. If you want to expand further, you would open more stores and hire more store managers.

In the offline world these store managers relate to your affiliates and the stores are their own websites, promoting the pizzas, which are your products.

By recruiting affiliates you are gaining access to a wider potential customer base. Realistically, with the tens of millions of people online, you cannot reach out and market to them all. The affiliates market your product to customers who may not see you, or who may not buy from you for some reason, yet will buy from the affiliate.

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