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 Now that the idea of doing business
over the internet has been firmly established, many
potential internet businessmen are searching for the best
way to do business. Usually the choice comes down to
whether you want to set up your own business and online
store, or sign up for an affiliate program.
First of all, let's define what we mean by an affiliate
program. An affiliate program is basically an internet
business set up by someone else. They could be selling
physical goods, education, information or any other
products that can be sold online. By signing up as their
affiliate, you are helping them promote their business or
store. In return, they will pay you a commission for each
sale you bring them. The amount of commission varies
between different affiliate programs. Examples of
affiliate programs include Amazon.com and Wordtracker,
which you can visit at:
http://www.onlinebiz-help.com/links/wordtracker.html
1) EARNINGS
So how does an affiliate program differ from starting your
own online store? Let's start by looking at the potential
earnings. (After all, the main reason everyone wants to
start an internet business is for the money). When you
sign up for an affiliate program, you will be paid a
commission for each sale you refer to the online store.
This commission can range from 5% to 15% for physical
products, and possibly up to 50% or more for virtual
products such as subscriptions and ebooks.
On the other hand, if you start your own store, your
profit can be much higher. For virtual products, your
profit can be 100% of your selling price. After all, once
the newsletter or ebook is created, you do not need to
spend any more effort. When someone buys your ebook, they
just download it from your website. If you are selling a
physical product, your profit depends on whether you are
manufacturing the product yourself, or buying from a
wholesaler or dropshipping company. Your profit in this
case could easily be more than 40% or 50%.
So, if you only consider the potential earnings, starting
your own business is more lucrative than joining an
affiliate program.
2) LOGISTICS
However, money isn't everything (Or so they say). When you
are starting your own internet business, there are a
number of logistic issues you need to look at. Here are a
few things you would need to take care of:
a) Create your website
b) Design your product (if you are selling new products)
c) Create your product (if you are selling new physical
products, or any virtual products)
d) Set up an online store
e) Set up a merchant account or payment gateway
f) Set up a warehouse or storage space (if you are selling
physical products)
g) Have procedures and staff ready to fulfill orders
h) Set up an affiliate program to get others to market the
products for you
i) Monitor for fraud
j) Monitor stock levels
As they say, "No pain, no
gain". Having your own store pays very well, but
requires a substantial time investment from you.
On the other hand, if you sign up for an affiliate
program, all you need to do is set up a website to promote
the program. All the ads, banners, marketing text etc will
be provided to you by the affiliate program. Your only
responsibilities would be to get people to visit your
website, and hopefully click on the affiliate links to buy
the products that you are promoting.
3) CONVERSION
Whether you have your own business or are promoting an
affiliate program, the bottom line is the conversion rate,
or the percentage of visitors that actually buy something
from you. A number of factors influence this conversion
rate. Factors as quality of the product, quality of the
website, customer support are all important. However, I
personally believe that the most important factor is
trust.
When a potential customer arrives at your website, he will
need to trust your site enough for him to be willing to
buy from you. After all, on the internet you are just a
faceless salesman. He doesn't know who is actually running
the site and whether he will actually get the goods that
he orders.
Having said that, one of the key methods of garnering
trust is by recommendation and referral. If a store is
being referred to or recommended by another website, the
potential customer will feel that the store is
trustworthy. After all, if the store is not trustworthy,
why would the other website recommend it?
This is where affiliate programs shine. When you refer a
potential customer to the store for which you are an
affiliate, the customer will feel more relieved, since the
store is being recommended by your site, a 3rd party. The
customer will be more likely to buy from the store,
benefiting both the store, and you as well.
There are both pros and cons to joining an affiliate
program. You might earn less with an affiliate program
compared to starting your own store, but I believe the
benefits of not having to be responsible for the logistics
makes affiliate programs are very viable
"passive" source of income.
For more information on affiliate programs, do visit http://www.onlinebiz-help.com
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