Start-Up Online Company Whose Sole Source of Revenue is Affiliate Marketing Fees

Entrepreneurs are always looking for business opportunities. The largest proportion of these opportunities, irrespective of how good they may sound, expose the entrepreneurs to a lot of risks due to slow scalability, expensive overhead costs, and low-profit margins. Nonetheless, online businesses can be so attractive due to the fact that they lack the conventional hurdles that are faced by most new ventures.  Low-cost structure is one of the main benefits of online ventures (Croteau and Bergeron). Companies do not have to spend a lot of money in setting up retail space or employ personnel, which may increase the operating costs.  With a lean cost structure, businesses are able to enjoy more flexibility. Organizations can leverage the power of technology to provide more convenience to the customers, who would be able to check product reviews and place orders from the comfort of their homes.

Overview of the Online Venture

            The online venture will be an online marketplace that functions the same way as eBay. The idea of an online marketplace has transformed the way brick and mortar store operates. The technological disruption and changing customer behavior has led to the growth of online marketplaces.

            The business will develop a website or mobile app that expedites shopping from several different sources. No inventory is owned by the operator of the marketplace. Its core business is to present the inventory of other sellers to the potential customers and facilitate the transaction between the sellers and the buyers (Kestenbaum).  The business will make revenue by charging a commission for any items sold on its platform. The customers will be able to pay for the purchased items using their credit cards or through other digital payment models.

            The mission statement of the online venture is to be the most preferred destination for discovering unique selection and great value. Whether a customer is purchasing a used or new item, they will most probably find them on sale on the online platform. The business provides the sellers with the solutions, platform, and support required to take their businesses to another level and thrive. The ultimate success of the business will be measured by the success of the customers. The online business model that will be used is the brokerage model. This model connects buyers to sellers and facilitates the transaction between them (Veldhuijzen, 2011).

Affiliate Marketing

Affiliate marketing denotes one of the strategies used by new online stat-ups to make money. It is a business mode in which an organization partners with other businesses by selling their products and charging a commission (Jamie). The payment of an affiliate is anchored on the commission that is charged off the company that they area affiliates of. The links, the buttons, the banners of the product being sold contains the unique user ID, which is embedded in the HTML code.  When a user clicks a link of an image and proceeds to purchase an item, then the company will be informed that the organization is the affiliate that led them to buy the product (Davey). As a result, the organization will get a commission from the company for responsibility in driving traffic and new customers to their website.

Create Nice Content

            To ensure that it maximizes and makes more money, the online startup should create great content.. Creating something resourceful and amazing may take a lot of time, dedication and effort. However, the organization does not have to reinvent the wheel. The posts will be made engaging and capable of offering a lead that will attract the attention of the readers and make them desire to explore more about the particular product.

Practice Real SEO Techniques

Implementing good search engine optimization (SEO) techniques and facilitating traffic from search engines would be an excellent source of quality traffic. The skyscraping mechanism is a good mechanism to not just rank for loads, but also to create links to the content by becoming the most comprehensive and best resource on the internet (Libai, Biyalogorsky, and Gerstner). Using this technique, the organization will get the best content for a certain keyword and the create its own version, but make it more effective as compared to the original one. This may be accomplished by covering sections that could be missing from the competitor’s content or expanding on the topics and becoming the best resource for the product.

Upsell

Upselling is a technique of sales where the salesman encourages a much expensive purchase by a customer through encouraging them to get an upgrade version of an item for purchasing add-ons. Before attempting to sell additional product to the customers, it is imperative to understand the type of success that is more vital to them. In the early stages of the business, the startup must set aside time and discuss what they believe the customers would gain from using the particular product (Fiore, Frank, Collins, and James).  Cultivating a great understanding of the priorities of the customer is critical for establishing trust right from the beginning. If you are aware of what is valued by the customers and where they are heading to, the it is easy to identify areas in which additional products and services can assist down the line.

            When the organization onboards a new customer, it would be imperative to agree upon measurable, realistic, and clear goals of success for cooperating using the particular product or service (Markidan). The business should leverage what they have already understood about the priorities of the customers, and create an action plan with realistic milestones to remain on track with regards to the progress.

To establish a need for more services later in the lifecycle of the customer, the business needs a way to recognize areas in which the current game plan is inadequate, or sections in which the company could afford to increase its resources for excellent results. Careful tracking essentially becomes more important here.

SWOT Analysis of Affiliate Marketing for the Startup

Strengths

To begin with, affiliate marketing is a pure marketing form. This means that the marketer does not play a major role in creating the product or offering the after sales support for the particular product or service (Bhimani).  This explains why it is mostly preferred by new online ventures. The profits can also be extremely high for the affiliate marketers. This is because the costs associated with support and after sales management have been eliminated.  To increase the profit margins even further, the affiliate organizations can offer several products to the same consumer.

            With the massive advancement of technology, the obstacles for developing creative ideas for product development have been eliminated. With new opportunity, organizations are able to create new products in which majority of them are products that are sold over the internet. The advantage of such products is that once they have been developed, then several copies of the same product can be old by the developer.

Weaknesses

Control is limited because the affiliate is not selling its own products. The product quality, sales, and after sales support are entirely taken care of by the owner of the product.  Thus, a startup company must ensure that the affiliates it is referring its customers to are providing quality services that exceed the expectations of the customers. Otherwise, the customers may assume that the affiliate is not referring them to quality products and is just in it to make money quickly.

            Several affiliates enter affiliate marketing only to make money but do not have adequate knowledge. In their quest to become instant millionaires, they are forced into tricking their users into purchasing products under them without having the slightest knowledge as to whether the product is genuine or fake.

Opportunities

An affiliate has a wide array of products at its disposal which it can promote. For example, Amazon has millions of books and other associated products which can be promoted.

            The growth of the internet and ecommerce is also opening new opportunities for affiliate marketing. Currently, the internet has billions of users worldwide, and the number is continuing to grow with the introduction of high speed fiber optic networks (Bhimani). Besides, there are some affiliate networks that pay provided that the customer is still paying for that particular product. This highlights the idea of real passive income online.

Threats

Although the opportunities are immense, the moon also has a darker side. One of the threats in affiliate marketing is lack of knowledge. This affects the ability of affiliates to offer high quality products to the customers. Also, an affiliate can be making thousands of dollars every month and this can be eliminated by just one email.

            Affiliate marketing programs also have low entry barriers, hence new competitors can easily enter the market and provide significant challenge to the startup (Bhimani). The product owner only makes payment for verified sales hence they would not mind having everybody as their affiliate as long as their terms of services have been adhered to. This leads to fierce competition among the affiliates.

            The last threat to affiliate marketing is the traffic source that is offered by the affiliate sites. The Google organic search has been removing affiliate sites to some extent and the pay per click marketing is also deviating from the affiliate programs. In the past, pay per click marketing in Facebook Ads and Google AdWords allowed affiliate links. However, this has since changed and the affiliate marketing is no longer permitted by some of these platforms.

Using Content to Build Audience and Brand

The first thing to do is to tailor the content to the target audience. Although selecting a niche is vital, matching the content with the target audience is even more imperative. Content that is created with the audience in mind have high chances of converting readers to customers (Qureshi). Thus, it is imperative for the affiliate organization to know its target audience deeply. It is important to conduct research about their lifestyle, their age, the solutions they are looking for, what they often search for on the internet, etc. When this is gotten right, it becomes extremely easy to create engaging and quality content.

            The startup should also prioritize credibility ahead of traffic. There is no need rushing to commercialize the content, rather, the company should first dedicate itself to building a reputation as a reliable source, offering valuable and attractive content that simplifies the lives of the readers.  Nevertheless, many startups do the opposite.  They are much more interested in the idea of maximizing traffic and as a result fail to establish a base of loyal, trustworthy, and interested readers wo have the desire to purchase items that are recommended to them. For this reason, the online startup should establish its own credibility using content (Qureshi).

            Broad spectrum keywords should also be used. The online startup must be creative in the variety and type of content that they publish. Otherwise, the audience may be bored and may drift away to other competitors.  This can be achieved by creating tutorial and how-to articles. These get immediate traction from the audience. Implementing these are some of the critical ways of providing value to the readers as well as share with their friends and family.

            Emphasize the user queries, not the keywords.  Ranking an online website on one specific keyword is no longer a bid deal. What matters most is the ability to capture visitors capable of showing interest in what the organization wishes to sell. Keywords are still vital. However, people search for precise topics and search queries. As a result, the focus of the content should be on precise topics that trigger interest and encourage readers to purchase the products. The idea here is to ensure that the search topic is prioritized over one or more keywords to create original content for the customers.

Potential Risks Faced by the Online Startup

The first risk of the online venture is credit card fraud. Customers will use a credit card as the main method of payment.  However, some malicious people may use stolen credit cards to pay for the items online. Also, a hacker may use stolen credit card information from other customers on the company’s platform. Due to this, the company must come up with a framework to strengthen the security of the customer’s credit card information.  The data should be encrypted such that it is only accessible to customers with the corresponding decrypting key.

            Customer disputes is another risk faced by the online marketplace. There are several issues that may result in customers filing for dispute. For example, the customer’s order may not have been received, the received product could fall short of their expectations, or their credit cards could have been charged more than once. Whichever dimension it takes, customer disputes may reduce the confidence of the customers in dealing with the businesses. The business must do everything possible to ensure that customer disputes do not arise whatsoever.

            Privacy issues is another risk that could face the online marketplace. Customers provide their personal information to facilitate the transactions. However, this personal information may be compromised and may be used for other purposes other than the one that it was initially meant for. Some customers may sue the organization and claim millions of dollars in compensation if they feel that their personal information has been used negatively against their will.

Works Cited

Bhimani, Shabir. “SWOT Analysis of Affiliate Marketing.” IM Tips, from https://imtips.co/swot-affiliate-marketing.html

Croteau, Anne-Marie, and Francois Bergeron. ”An information technology trilogy: business strategy, technological deployment and organizational performance.” The journal of strategic information systems 10.2 (2001): 77-99.

Davey, Catherina. ”5 Reasons to Start an Affiliate Marketing Business.” 2018, https://retireat21.com/making-money-online/affiliate-marketing

Fiore, Frank, Shawn Collins, and James L. Foreword By-Marciano. Successful affiliate marketing for merchants. Que Corp., 2001.

Jamie. ”What is Affiliate Marketing?” 2018, https://makeawebsitehub.com/what-is-affiliate-marketing/.

Kestenbaum, R. ”What Are Online Marketplaces and What Is Their Future? ”Forbes, 2017, https://www.forbes.com/sites/richardkestenbaum/2017/04/26/what-are-online-marketplaces-and-what-is-their-future/#76e538da3284

Libai, Barak, Eyal Biyalogorsky, and Eitan Gerstner. ”Setting referral fees in affiliate marketing.” Journal of Service Research 5.4 (2003): 303-315.

Markidan, Len. ”How to Use Upselling to Increase Customer Happiness, Retention and Revenue...” 2018, https://www.groovehq.com/support/upsells.

Qureshi, Umair. ”7 Content Marketing Tips to Boost Your Affiliate Earnings.” 2018, https://www.cloudways.com/blog/affiliate-content-marketing-tips/.

Veldhuijzen, B. ”The 9 types of online business models; which one do you use?” TNW, 2011, https://thenextweb.com/offers/2018/09/01/task-pigeon-will-get-your-whole-office-cranking-out-projects-and-now-its-90-off/