We all understand the concept of brokers. In insurance these are people who are licensed to sell products on the behalf of insurers. Business brokers sell businesses among entrepreneurs. And the much loathed labour broker sells the services of contract workers to different organisations.
However, you don’t have to be a licensed broker of any sort to market or sell the products of big brands. Any person can do it provided that they promote a product legitimately and do not misrepresent the company. This is called affiliate marketing or affiliate sales. You can promote books from Kalahari, insurance from Hollard or airline tickets from TravelStart and never work for them or be licensed to broker their products.
Unfortunately many South Africans are not aware of this opportunity. It is not a secret but affiliate marketing has largely remained in the domain of website owners. In other words you have to have a website, no matter how big or small, in order to be approved to market or sell big brand products and services.
The sad part is that in a country where unemployment is rife and 50% of all start-ups fail in the first 2 years, a simple business model such as affiliate marketing is ignored. Online affiliate marketing has existed in South Africa in some form or the other as early as 2003. The investment is minimal and the risk can be mitigated by the fact that you can easily sell your website if it does not perform well.
If you had the money to invest would you put it in mining within South Africa or the local internet economy? You would probably laugh at the comparison. Mining, of course. Well, consider that mining makes up 4% of South Africa’s GDP. The internet economy – 2.5%. Not bad for technology that has only existed for some 20 years in South Africa. That 2.5% of GDP is up from 2% of GDP in 2012. So now where would you put your money?
Why does big business allow affiliate marketing?
It is not uncommon for new entrepreneurs who are looking for business opportunities to wonder why big business will give them the chance to market their products. If you have already read our guide to affiliate marketing article then you will understand the way the system works.
It’s a simple concept. Big brands cannot control the internet so they have to partner with others to sell online.
We are used to a world where large corporates dominate the business environment. With their huge financial resources, small to medium enterprises (SMEs) cannot compete in the same industry unless they can offer a superior product at a much lower price. Most of the time this is not possible.
And big business continues to rule the business world while small businesses feed on the crumbs.
The internet is a dynamic platform that cannot be dominated by any single individual, organization or authority. You can type ‘hamburgers’ into Google today and you may find McDonald’s at number 4 or 5. Tomorrow it may be at number 2 and the day after at number 10.
In the past 6 years that we have been in the online business we have never seen McDonald’s website at number 1 on Google for the word ‘hamburgers’. Yet McDonald’s is the world’s biggest burger franchise.
No company, no matter how big or small, owns the internet. There are too many people using different online tools. Some people will use email, others will use Google and social media has now become popular. There are too many websites to be controlled.
Big business knows that it is more profitable to “play ball” with other online entities from the small work-at-home blogger to the medium-sized digital media industry. Even if your website gets just 100 visitors a month, big business knows that a few of those visitors could be potential customers.
And it all adds up at the end of the day.
How does affiliate marketing work?
Here is how the affiliate marketing system works:
- You sign up as an affiliate either directly with the company or their ad agency.
- You place a picture ad or small email form on your website for the company.
- Every time one of your website visitors click the ad you get paid, or every time one of your visitors will fill out the form to request a quote you will get paid.
It does not matter if your visitors do not buy anything. That is not your concern. Big business wants to reach mainly South African customers online so they will pay you a fee to give them some space on your website or for referring a lead.
What is you don’t have a website? Well, some affiliate campaigns allow you to get prospective customer details from email marketing, telemarketing (phone calls) and SMS marketing. Unfortunately the recent POPI Act (Protection of Personal Information Act of 2013) prevents you from sending thousands of emails or SMS’s a day. You can do it the old fashioned way – face to face.
But if you’re serious about an online business then you need a website.
Even though affiliate marketing does not require you to be a licensed broker or company employee to sell big brand products, you should never misrepresent yourself. Never claim that you work for the company or you are a broker for them. This can result in immediate cancellation of your affiliate agreement.
How much does affiliate marketing pay?
When looking at big South African brands, the payout varies among campaigns and products. For example, Hollard Insurance may pay you R30 every time one of your website visitors requests a funeral plan quote. Some South African car insurers pay as much as R60 for a quote request. And a few companies like PPS will even payout R70 per lead.
These campaigns are known as CPA (cost per acquisition) campaigns. You can earn for a quote request as mentioned which is then also known as a CPL (cost per lead) campaign. The website visitor who requested a quote is considered to be a lead. They may or may not buy the company’s product but you still receive a commission for the referral.
Then there is another type of CPA campaign known as CPS (cost per sale). In a CPS campaign you earn a commission every time somebody you refer buys a product. For example, online retailers like Kalahari and Loot payout 5% for every sale.
So if somebody you refer buys R300 worth of products from Kalahari then you receive R15 commission.
All of these companies either pay you directly via EFT in a South African bank account or pay via their advertising agencies. Payments are made monthly.
Update: South African online retail giant Kalahari announced last week that it will be ending its affiliate program as it merges with Takealot.com. Do not be disappointed. Loot.co.za still has an excellent affiliate and referral program.
There are very few business models that offer so much potential and require so little effort with automation. If you want to start a web business then take the time to do some research. The ability to generate an income online first requires knowledge even before you start a website.
If you are still unsure about whether it is possible to make money online, consider the fact that by 2016 there will be over 24 million internet users in South Africa – consumers who can be targeted for a range of products or services. There is almost no small business that can reach as many consumers as an online business with an investment of less than R10,000. The internet is the way forward for starting new businesses – embrace it, capitalise on it and become an ontrepreneur.