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Pick a Marketing Model That Lets You Pay for Results, Not Potential How affiliate marketing can help you find consistent return on investment.

By John Rampton

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Visual Generation | Getty Images

In an era of caution, companies need to invest in marketing efforts that lead to a direct payoff and don't require more than they can afford. Over the past week, I've had to evaluate all the things I'm doing at Calendar to see what's really moving the needle. It's astonishing the things we're spending money on that aren't actually driving revenue to our bottom line.

As today's environment forces drastic behavioral shifts in our daily lives, companies of all sizes and in all industries are evaluating the changes they need to make to stay nimble in our new economic reality. As businesses adapt to the stay-home economy, they'll be focusing on which investments drive the best possible outcomes.

Businesses are used to pouring money into marketing channels that require upfront, flat-fee investments for promised inputs and potential outputs. Rather than invest in these marketing channels, companies can leverage affiliate marketing, which only requires them to pay partners once they've achieved the desired result.

Related: How to Build a Reliable (and Profitable) Affiliate Network From Scratch

What is affiliate marketing?

When managing their marketing budgets, companies should invest in channels tied directly to outcomes and avoid unnecessary risk. After all, if they pour all their funds into marketing but see no payoff, how will they afford to develop their products and services further?

Affiliate marketing (often called "partner marketing") is simple: A brand partners with a publisher, or an affiliate, to market a product or service to its audience using a tracking platform. Unlike marketing channels that require upfront payment, brands pay publishers a percentage-based commission for each sale generated through their content.

Forrester predicted that by the close of this year, U.S. ecommerce sales would total $500 billion. Combine that with predictive analytics firm Custora's prediction that affiliate marketing will influence 14 percent of ecommerce purchases in the U.S., and that means affiliate marketing will impact $70 billion worth of sales. Pepperjam's Adobe Summit 2017 Survey revealed that only 4 percent of are investing in affiliate marketing, meaning there's a big opportunity.

Related: Three Trends That Will Drive the E-commerce Sector In 2019

How affiliate marketing pays off (in more ways than one).

Affiliate marketing offers a cost-per-action (CPA) payment structure instead of a cost-per-click (CPC) or cost-per-impression (CPM) structure. This creates a sustainable, competitive advantage because businesses only have to pay for converted sales and leads after the publisher finalizes them. Even during tough times, brands should always want to pay for incremental revenue. It prevents businesses from throwing good money after bad — they don't need to invest large amounts of money into marketing campaigns or ads that turn out to not convert as expected.

Instead of continuously investing money into Facebook and Google, hoping it leads to conversions, affiliate marketing enables brands to broadcast their product to a wide audience of potential customers with a pay-for-performance pricing model. It also enables them to be more hands-off, allowing their affiliate partners to use their brand standards to do the work themselves. Affiliate programs can even include partners who will share the brand via Facebook or Google; unlike traditional methods on those platforms, these will be paid based on those campaigns' performance, allowing a low-risk entry to these channels.

Related: How Much Should You Spend on Social Media Marketing?

Even in an uncertain economy, this framework can scale. Because the marketing investment is only a portion of the revenue the partnership brings in, businesses just have to figure what they're willing to pay for each transaction or new customer. They don't have to worry about pouring excessive budget into a single channel.

In a precarious marketplace, businesses need to stabilize their immediate future by investing in channels that they know will drive profit. Affiliate marketing is the model for this moment: It's built on transparent and trusting relationships, where brands and partners set clear expectations and companies only have to pay for the outcomes they get.

People are at home, and that's where affiliate marketers can capture their attention. Companies can stay ahead of the game by using affiliate marketing to maximize their ROI and make sure they're paying for outcomes, not inputs.

John Rampton

Entrepreneur Leadership Network® VIP

Entrepreneur and Connector

John Rampton is an entrepreneur, investor and startup enthusiast. He is the founder of the calendar productivity tool Calendar.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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