Affiliate Programs - Important Pros And Cons

An affiliate program involves undertaking promotion and sales activities on behalf of a parent firm or organization and earning by way of commissions or referrals. An Affiliate business is very easy to set up and requires minimal investments in terms of money and time on the part of an affiliate. It also provides a good learning experience in terms of exposure to the various aspects of running a successful business. An affiliate acts as a conduit between a company and its customers. Due to the no frills nature of an affiliate business, it is one of the most popular businesses undertaken by people who have good salesmanship qualities but lack the necessary resources to set up their own ventures. The major pros and cons of starting an affiliate business are enumerated below.

The major advantages of joining an affiliate program are:

1. Huge earning potential – An Affiliate program provides an unlimited earning potential to the subscribers by way of the sales commissions and referral incentives that have no upper limit. Any person with good social and networking skills can earn handsomely by setting up an affiliate business.

2. Limited liability – An affiliate business carry very limited liability on the part of an affiliate. There is no minimum requirement of sales or referrals. An individual can get as high or as low as possible. Each sale is considered on its own merit and there are no penalties or appraisals based on the past performance. In a nutshell, this business carries no baggage.

3. Limited investment – Setting up an affiliate business requires very limited investment by the subscriber. Some of the parent firms themselves bear the cost of any such investment on behalf of an affiliate. The required investments are even less in case of an Internet based affiliate business.

4. No time constraint – There are no eight-hour shifts in an affiliate business. The subscriber is free to choose his/her own working hours. In the end, it is the results that matter rather than the amount of time spent on achieving those results. This promotes efficient time management by the affiliates.

The major disadvantages of joining an affiliate program are:

1. Dependence on the parent firm – An affiliate business is entirely dependent on the parent firm. Any change in the policy by the parent firm has a major impact on the affiliates. The customer always sees an affiliate business as an extension of the parent company. Any change in the fortunes of a parent firm changes the fortunes of the affiliates.

2. Low conversion rate – Sales is a critical component of an affiliate program. Despite a high number of potential customers, the average rate conversion of a potential customer into a customer is very low. This conversion is dependent on the salesmanship of the individual affiliate and may vary but the average is abysmally low.

3. Limited participation – An affiliate has a limited participation in the activities of a parent firm and has no say in any critical matters. In this way, an affiliate member plays a passive role in the policy formulation process of a parent firm despite being heavily affected by it.

4. Service nature – An affiliate member may consider himself as an affiliate business owner. However, at a fundamental level he/she is a service provider to the parent company. This makes running an affiliate business no different than working as an employee in the same company.