Affiliate marketing for retail stores: basics, ROI estimates and how-to’s
A friend of mine is a coffee roaster with a specialty webshop for coffees and teas. I swear she’s got the best beans in town, and I love her product so much I’d wear a custom hoodie with her logo every time I go outside. Seriously though, I never miss a chance to recommend her coffees to other friends of mine. And I’m sure I’m not the only one who’d be happy to spread the word around.
So the day I started working here at Tapfiliate, I asked her if she’s doing affiliate marketing for her little retail shop and if she’d be willing to be part of my survey for small retail business owners who aren’t yet using our tool.
I was surprised to hear she hasn’t used affiliate marketing as a channel yet. Why? Just because it’s not so obvious for a retail business as paid advertising, social media or SEO. As a small business owner you’ve got so much on your plate, and everyone’s trying to sell you on their service for SMM, Google Ads, bookkeeping and even electricity! Often you simply don’t get the time to research on less obvious things.
That’s why I’ve decided to put this article together. And however basic it may look to the online gurus, hopefully it will help other small business owners like my friend to understand the value and costs of affiliate marketing, and how to get started.
What is affiliate marketing?
In a nutshell, affiliate marketing is marketing your business or product via recommendations, reviews and other word of mouth. Unlike traditional reviews on Google, Facebook or Yelp, these recommendations are trackable. And when someone comes to your website via a review from, say, Anne B, and makes a purchase, said Anne B gets a commission. Therefore, people that leave this kind of recommendations have an affiliation with your business and are called affiliates.
So you should see a retail affiliate program as a relationship between three parties: a retail business, a consumer and an affiliate.
Now if everything runs smoothly between you and your affiliates, they will keep sharing their recommendations and get rewarded, their audience will become your new customers, and your retail shop gets consumer reviews that are genuine, positive, and are earned without any financial risk involved on your side.
How do we make this happen, technically?
This is done via a unique web link (affiliate link) that your affiliate shares with their contacts or audience. As soon as someone clicks the link, the affiliate program software (like Tapfiliate) knows that person has come through Anne B’s recommendation. As soon as that person makes a purchase, the affiliate software gives credit to Anne B for helping with that sale (even when the purchase happens a few days or weeks later).
In affiliate marketing terms, you are now an advertizer: someone who has a product and is looking for more sales. Anne B is an affiliate, or publisher: someone who publishes information about your retail business or your consumer products, and gets commission for the sales coming in via their recommendation.
In other words, an advertizer (you) pays commission to a publisher (Anne B) who helps generate more consumer sales.
Is an affiliate marketing program a valid new channel for your business?
Absolutely! It is easy to set up, low-risk, and has a great potential for marketing your business. It can be more effective than other channels, with the average order value for affiliate sales being 21% higher than other marketing channels.
Besides, affiliate promotions use native methods that are more beneficial and often more powerful than traditional advertising. As a side effect, your business benefits from unique content like blog posts, reviews & testimonials, social media posts, videos, infographics or word-of-mouth recommendations.
How much does it cost you?
Affiliate marketing is a low-risk marketing channel: you only pay commissions when there is a sale (unless you choose otherwise). You may, of course, choose to pay for a lead, independent of whether they buy or not (and as an affiliate tool, we at Tapfiliate give our customers such an opportunity). But this is not so common.
So if you run a specialty store that sells coffees at an average price of $10 per pack, here’s how your monthly affiliate program costs breakdown would look like. If you got as few as 8 affiliate sales per month, you achieve positive ROI, and with 18 sales per month you get 2X what you invest:
As you can see, I’ve included the cost of affiliate software in this calculation. I will now explain what it is and why you need it.
What is affiliate management software?
This is pretty straightforward: to give your affiliate credit for a sale, you need to know they were the one who referred it. This is the central thing an affiliate tracking tools does.
In order to get started, affiliate management software lets you:
- Create a unique web link for each affiliate
- Track referrals coming in from that affiliate
- Set up commissions that you pay per a referral
- Make payments to your affiliates
These are the most basic features. As your affiliate program matures, you may see that you want to reward some of your affiliates more than others because they bring in more sales, or refer customers that buy more (ex. jumbo packs of coffee instead of smaller 500g packs), or pick up their orders thus saving you delivery costs.
Things to look for in affiliate software are:
How easy is it to integrate the software with your website?
Without development skills, you are probably looking for something easy to integrate. For example, if you’re running a Shopify store, Tapfiliate integration will take 1 minute.
How reliable is it in tracking affiliate sales?
There are multiple reasons why affiliate sales get “lost”, and it is important that your affiliate software has a technology that allows not missing the sales, so that you don’t let down your affiliates. Tapfiliate invests in top-of-the-line tracking tech to make sure affiliates get credit for their sales.
There are a number of tools out there that we encourage you to take for a test drive before you decide which one you’d like to use for running your affiliate program. We at Tapfiliate offer a 14-day Free trial which you’re welcome to start any time.
How do you get started?
Here’s a quick checklist for starting an affiliate marketing program for your retail store:
1. Set goals for your affiliate program.
How many sales do you expect to drive via affiliates to break even? What profit do you expect ideally?
2. Decide on the right affiliate commission.
This is up to you, but usually you’d want to check how much your competitors or other businesses similar to yours are paying their affiliates.
3. Decide on how long your affiliates are eligible to earn a commission after someone clicks on their affiliate link.
4. Set up your affiliate program software for:
Affiliate tracking links
Affiliate assets (things like banners, article inserts, quotes and other things affiliates can quickly reuse when they’re sharing information about you)
Commission payouts
Usually this is easier than it sounds, and takes between 30 minutes and 1-2 hours, depending on your digital skills. Tapfiliate offers a 14-day Free Trial, so you can see how the software works with your setup. You can get started here.
5. Start recruiting affiliates
Think how you’re going to invite your first affiliates. This blog post we did a while back gives a wealth of ideas on how to find affiliates for your business.
6. Optimize your affiliate program
When your affiliate program is launched, you can see that it’s efficient from day 1. More often than not, it may happen that it needs some fine tuning. You might need to experiment with affiliate assets (ex. try different graphics, calls-to-action and product descriptions). Or it may happen that in order to motivate your affiliates, you need to offer a higher commission, or a recurring commission. We got you covered: this article will guide you through doing a health-check and boosting efficiency of your affiliate program.
Ready to go?
Hope you see now that an affiliate program for a retail or specialty store can be a valid, low-risk source of new clients. To give you more confidence, here’s another number: affiliate marketing generates 3 times more leads than traditional advertising. This is true for e-commerce and for retail shop affiliate marketing programs and justifies the effort you would put into setting up your program.
Good luck with your new marketing channel! And let us know if you decide to take Tapfiliate on a 14-day free trial and need any help with setup. Tapfiliate’s customer support are the nicest affiliate marketing rockstars you’d ever meet.
