It’s happened time and time again. A company produces a product and pays online affiliates to sell their product with the promise that they will receive a commission.
The online affiliates begin to sell the product and end up selling more than the actual company. Then the age old question occurs, why are my online affiliates selling more than me? This seems to be a problem for ecommerce companies who sell their goods online and use online affiliates to help. There are many reason why online affiliates outsell company’s on their products, but the main two that we will focus on are price and incentives.
One of the primary drivers of consumer purchases is price. Everyone should know that consumers have become “shop around” savvy. It’s no longer the “buy because I want it and forget price.” Instead it has become “let’s shop around on the internet for the best price,” and this isn’t hard for consumers to do with shopping engines and comparison shopping sites springing up on the internet daily. If a company is selling a product online and they want it to generate more revenue than online affiliates, they need to make sure that they have the best price possible. A perfect example would be my recent purchase of a cell phone. I bought my cell phone from a third party vendor instead of my cell phone service provider. The third party vendor had a better price; they included a car charger, a leather carrying case, and didn’t require that I extend my cell phone contract. If I had bought my phone from my service provider I would have spent at least $40 to $60 more, plus I would have had to pay an upgrade fee. The third party vendor offered better incentives than my actual cell phone service provider.
Incentives to buy a product are also important factors to help a company outsell their affiliates. Let’s say that your company and your affiliates are selling product “x” for $40. This puts you on the same playing field as your affiliates, but what happens when your online affiliates adds incentives. The affiliates offer free shipping on orders over $25 for example. Guess who’s actually gaining a new customer? Correct, the affiliate. Incentives such as free shipping, a free gift, and discounts can influence consumers to buy from an online affiliate instead of the manufacturer. What’s the purpose of selling a product on your site if a consumer can go to reputable online affiliates and buy it cheaper, with better incentives?
Many online companies need to sit down and be honest with themselves about their online affiliate strategy. Online affiliates are supposed to increase company revenue not take away from it. If all of your customers are going to online affiliates, then you have to pay out more commissions. The whole purpose of online affiliates is to help your company generate more revenue by reaching consumers that normally wouldn’t know or come to your site. There’s a delicate balance that must be kept between online affiliates and companies, otherwise the online affiliate becomes a paid competitor. If you’re going to sell your product online and use an online affiliate marketing program, make sure that your website has the best price and the best incentives. Otherwise, you should let the online affiliates sell the product and focus your attention elsewhere.