I had one other thought this morning about affiliate programs while I was eating breakfast.  They require 3 conversion steps while other product sales only require 2.  That may not seem like a big deal but let’s look at an example and I think you’ll see the problem.

Example 1: You sell a product on your site.

Let’s assume you get a 1% conversion rate at each point during the sales process.  In this scenario we’ll use pay-per-click advertising to drive traffic to the site.  Your ad shows to 10,000 people.  At a 1% conversion rate, 100 people click on your advertisement. If your site has a 1% conversion rate you’ll sell 1 product.

Impressions to sales ratio: 10,000 to 1

Example 2: You promote an affiliate partner’s product.

In this scenario, your has to show to 1,000,000 people.  Why?  Because you have to fill the sales funnel with a lot more names because there’s an additional conversion point in this sales model.  So you show your ad to 1 million people.  At a 1% conversion rate, you get 10,000 people to click through to your site.  If your site still converts 1% of all people, 100 people will click through to your affiliate partner’s site.  Of those 100 people, 1 is likely to buy the product if they have a 1% sales conversion rate on their site.

Impressions to sales ratio: 1,000,000 to 1

You see, by adding the additional step of making people click through to the partner’s site, you increase the number of leads required by 100 times, just to make 1 sale.  So if you show your ad to 1,000,000 people, you could sell 100 products through your site, or get a commission for one product sold through another site.  That’s a huge difference in website traffic.  I’d always opt for the solution that requires less traffic.  Hope that helps.

More in Affiliate Programs
More on Affiliate Partnerships

Yesterday I was writing about the drawbacks to affiliate programs.  Today I had a couple more thoughts.  Some of the affiliate partners may not have a sophisticated application that allows you to sell the products yourself.  Most affiliates simply provide you with unique tracking URLs and they calculate your commissions based on the referrals you […]