Is an affiliate program ever a bad idea?

[thecleaner]

Ive come across some very niche areas lately online. For some reason or another these guys dont offer an affiliate program.

Is it possible that when you have discovered a niche market to dominate it can sometimes be better NOT to offer an affiliate program?

[markwelch]

(1) If a merchant has an affiliate program, it will impact the merchant's ability to "compete on price." There are merchants who rely almost exclusively on "low price" as their sales tool; many of these folks rely extensively on free traffic from Google (whose search results often include Froogle data), and they have razor-thin margins that don't leave room to pay affiliates, nor for other marketing such as pay-per-click.

(2) There are also "single-season" merchants (either an entire company, or a division within a company) who exist only during a short interval (for example, Halloween costume sites, or sites that promote sales of Christmas wrapping paper), and which "shut down" at the end of the "season." Most affiliates are looking for longer-term relationships, and in any event it takes many months (years, really) to build a successful network of affiliates.

(3) It's likely that some manufacturers/trademark-owners may prohibit affiliate marketing as part of their efforts to control usage of their trademarks.

(4) Some merchants actually would prefer to sell products through "retail distribution channels" instead of online, and thus they don't want to encourage online sales instead of retail consumer purchases at local stores.

Those are just a few examples where an affiliate program is probably not an appropriate marketing tool for a particular company. I can think of others.

It's important to understand that setting up and operating an affiliate program does require "time and skill" -- time to set things up and monitor the program, and skill to make sure tracking is working properly. Time is also required to insure that affiliates are not acting improperly (such as using adware/spyware/malware to poach commissions from transactions they didn't inspire, or PPC-bidding on prohibited keywords). I've talked with merchants who acknowledge that they could probably increase sales if they had an affiliate program, but they just aren't willing to make the effort.

[markwelch]

Oops, I almost forgot: many companies are bound by restrictive contracts regarding their web sites, in which they have agreed to pay a percentage of sales or profits to a programmer or consultant who set up the web site. If these contracts don't provide for deduction of marketing costs before dividing the earnings, then the merchant may not be able to afford to pay affiliates.

The marketing hype of some affiliate-technology companies may also lead some merchants to believe that they should not pursue an affiliate program. The high fees at LinkShare, Commission Junction, and now Kowabunga are not affordable for many merchants, and yet the salespeople that the merchants speak with will suggest many reasons why less expensive solutions (like ShareASale, ShareResults, ClixGalore) won't work. (If you rely on a BMW salesperson's advice about Ford automobiles, you'd never buy a Ford, even if you can't afford a BMW.) Every business owner has a limit to the amount of time she can devote to researching new strategies, and if that time is filled by time-wasting morons, then nothing new is going to happen.

[webjourneyman]

Create your own individualized affiliate program, i.e. find companies with products you can sell on your sites taking % (I believe the term is drop shipping). Then enjoy the money untill those buisnesses figure it out and start asking other site owners to be their sales persons.
Imagine amazon did not exist and you found a publisher that published books your visitors would be interested in.