The Essence of Affiliate Marketing (why it’s being done badly)

Originally published on October 15, 2009:

Screen shot 2009-10-15 at 12.40.38 AMThis is one way social media has changed the sales process.

Traditional corporate sales forces are hired for their industry expertise. A product or service that targets the hospitality industry will seek account executives with that background. But suppose the company realizes that its service is a better fit for the financial industry. The problem is the domain expertise and social networks of hospitality industry AEs won’t transition to banks. That, in essence, is why corporations can’t react swiftly. Shifting sales and marketing focus is a common problem for companies big and small, especially internet companies. And the key to transaction execution is the direct channel between the AE and the client.

Social media has changed the sales process so that the key to the transaction may not reside in the AE / client channel, it’s finding the special intermediaries who can facilitate the transaction. Before social media, those intermediaries were hidden inside industry tubes that outsiders couldn’t penetrate. Social media (think LinkedIn and Twitter) opened these tubes. Moreover, the ideal intermediary can put together the deal more efficiently, collect a fee, and continue with their day job. They will have the domain expertise to know what they are doing, and they don’t necessarily need to be trained extensively. And most important, they will do this because the recession changed their mindset towards being more entrepreneurial to seek these kinds of opportunities.

So, what’s more profitable? A national company that has 100 full time sales staff, or a few founders working together with 100 affiliates who are found and contracted to complete the transaction for a fee? Figure in the HR costs of hiring.

What’s the moral to this observation? The recession together with social media has created a multi-tasking worker who is independent and looking to leverage themselves in as many profitable ways as possible. That’s why we see all these affiliate marketers out there plugging various teeth whitening and insurance products, but they are doing it wrong. Why? True affiliate marketing entails a highly pinpointed strategy to create transaction opportunities; very few will meet qualifications based on very specific domain expertise. Most of today’s affiliate marketers are unqualified so they spam out MLM systems that try to hook in the masses.

Affiliate marketing, although a dirty word now, is evolving online together with social media to create a new and profound business development paradigm that can be applied to enterprises. At Domus Consulting Group, we have developed operating examples of this new business model that work, and they have nothing in common with spamming or MLM.

About Pat Kitano

Patrick Kitano works with brands in developing hyperlocal engagement solutions and is administrator of the Breaking News Network, a national hyperlocal network devoted to community service. He is the author of The Local Network on Street Fight, and is reachable via Twitter @pkitano and email