Is affiliate marketing a stepping stool to becoming a merchant?

I do want to mention that I have sensed some similarities in most of the responses thus far and would like to point it out. Most of you who are or have been a merchant in the past describe the business as being yours alone. There were a lot of use of "I" as opposed to "we" when speaking about merchant experiences. I couldn't tell from the postings how big any of your companies were in terms of staff members to help out with all of the labor involved.

I tend to get the hint that maybe what affiliates seek most is to be independent. I myself can't say that I love or hate my customers since I don't ever hear from them. My call center and customer service reps handle almost all communications. I have a great warehouse team who handles shipping, ordering inventory, returns, etc. I hardly ever speak to vendors since my warehouse manager handles that for me. I don't manage our site since my web team in-house and overseas handles that. Our e-mail marketing, affiliate management, comparison shopping PPC management, in-house tech support is all outsourced. Our accounting firm now acts as our controller keeping our books.

I do want to mention that I do have several advantages over most. I owned a tech consulting company where we sold and fixed PC's, offered a variety of Internet services, web design, etc. I also went to school and majored under Computer Information Systems. This prior education and experience allowed me to handle most of the setup of our internal business systems in the early stages of our business.

However, I am a lot like like some of you. I sought to do everything myself such as answering phones, site maintenance, managing my affiliates, packing/shipping, marketing, vendor communications, customer service, etc. I also attained Ebay Power Seller status within the first few months. I did have my fiance's help along the way. But mind you - we both were young workaholics, perfectionists and control freaks. By our 3rd year we were raking in seven figure revenues, which was a lot of money for us being in our mid-twenties.

It took us about year or so before we sought help and even then, we only hired family to help out. At the peak of our early years there was me, my fiance, my mother and sister. But I still considered it to be "my" business even then. When my mother and sister moved on, I hired my fiance's brother and wife. That lasted about a year. Afterwards we both ran out of family members and almost gave up the business since we both didn't have any experience in management. It scared us to death to hire total strangers, and back then our business resided in our home. We thought about if for a while and decided to make a go at it. I'll be the first to admit that the next several years were bumpy when it came to finding good people. In 2007, we ended up outsourcing human resources. We also hired a business coach to train my fiance and I in management since we are acting directors in our company.

Today I can tell you that "we" did it as a company. We compensate our employees well. We teach them to manage themselves and the partner companies we work with. They're not totally independent yet, but they're getting close. Now "I" simply overlook the marketing, manage our SEO and PPC campaigns, and train my staff every once in a great while. Sometimes I don't even have contact with my staff but just a few minutes a week. My headaches nowadays have to do with the same stuff affiliates mess with, which is market research, strategy, marketing, educating myself, testing, tracking and analysis. I'm more of the idea generator while I hand off all of the work to others. Once I hand off the work, I have my staff overlook the quality of the work based on the standards set by me and the company. A good resource for what I am explaining here is Michael Gerber's "The E-Myth" series of books.

So what's my point? The point is, this certainly is hard work. However, over time you can get better at it as you discover little tricks you can institute. It's all a choice as chopper put it. It's also about compensation. I believe that most people have a price in where they will tolerate things that they hate if the price was right. To me, work is work. Eventually even if I were to become primarily an affiliate, at some point if I wanted to earn seven or even eight figures, I wouldn't be able to do it all by myself. So whether you avoid managing people, risks, and setting up business processes today - all of that will come into play in the future if your goal is to have time freedom and build a long-term, profitable affiliate business. As an affiliate you can only build so many websites, analyze stats, communicate with so many AM's, research a market, test, track, etc. Making money is simply a game of numbers. Find something that works and duplicate the heck out of it. You will only achieve a certain level of success if you try to do everything yourself whether you are a merchant or an affiliate. At some point you will want to hire out. It's simply a smarter way to work overall and long term. Someone has to know what it is you have setup just in case something happens to you and your family depended on the income of your business.

In regard to lawsuits, I've experienced first-hand where affiliates have been sued for millions for coming up with their own content that was NOT provided by the merchant. The merchant got sued along with them even though they had no knowledge that their products were being mis-represented in the marketplace. I hear about affiliates being slapped with trademark and/or copyright infringement all the time. Listen carefully to session 2 in Jeremy's program. Ultimately it comes down to how your business is setup, where it is setup, your level of risk taking, and little bit of luck. If your pocketing money either as a merchant or an affiliate, you can and may be held responsible for your actions. We got sued a couple of years ago for a product we sold. It was a frivolous lawsuit and we won - but it still ended up costing us tens of thousands of dollars protecting ourselves. Being incorporated doesn't necessarily mean that you are totally protected. A corporate veil may still be pierced and personal assets be gone after. Tip: Speak to an attorney and accountant about Nevada and Maryland corps. even if you do not reside in either one of those states.

Sorry for sounding like I'm pro-merchant. As hard as I try, that's just how it comes across for now. I'm hoping to change that by starting this journey with the newbies and pros. Only time will tell. Hopefully I can lend some of you some insight from a merchant's perspective that will help your affiliate business.

Thanks for the input thus far!

Jamie

LizWiz,

Sorry, but I somewhat disagree with your opinion. First, I never said that being a merchant is easier than being an affiliate. In fact, at the moment I feel that they're pretty even until I can better understand the key differences in how the affiliate model works.

A CEO of a dynamic and progressive company should not be making a lot of decisions. A CEO's job is to lead, inspire, motivate, set vision and standards for the company. My business only got so far when I tried to take control of every decision for my company. It's once I started draw upon my staff's input and ideas and allowed them to take ownership of some of their own decision making is when my business started to reach new heights.

For example, one of the techniques I use so that I don't ever have to deal with a customer is that I tell my customer service reps to deal with customer issues themselves if it takes less than $100 to resolve a situation. Since our average order size is $67, the last time I was bothered over a customer service problem was over a year ago! Plus, I have a customer service supervisor in place for them to go to if it needs to be escalated. It doesn't mean that I don't pay attention to my customers or don't care about upholding great customer service. It just means that I created a way to not have to deal with customers directly by empowering my staff to do so on behalf of myself and the company.

In addition, not every company has the owner acting also as the CEO. Just this year I started thinking about hiring a CEO for my company since I feel that I love sales and marketing more than I enjoy leading.

I can tell you with 100% certainty that one disadvantage of affiliate marketing is something you just mentioned. That is, not dealing with customers directly. Somehow, some way, you're going to have to find out what consumers want. You can use all the research tools and demographic services you want. But ultimately, if you can survey customers directly and ask them what they want, experience their buying habits for a particular niche first-hand, what makes them happy and what makes them turn a nose - you'll have a greater chance of converting them. You must always remember that you are always dealing with customers, whether direct or indirect. You may "think" you're not dealing with them by distancing yourself, but sooner or later you get pulled back into dealing with - people.

I've noticed a trend in the Internet Marketing industry lately. There has been quite a few top Internet Marketers who are going back to their roots to connect with their past customers. For example, I am Jeremy's customer since I paid for PPC Classroom. Although he may had not ever had to deal with me from a customer service perspective, he now has invited me into his coaching program for free. John Reese recently came out with a coaching program for just a few thousand dollars. All throughout he emphasized that he would help everyone as much as he can in order for them to be successful. There's a $10,000 seminar going on at the end of this month that I was invited to. While reading the sales letter, I noticed a comment they made about wanting to find new JV partners. I wrote the speakers back and told them that if it were important for them to find new partners, than why charge so much money? I asked them if they were afraid of scaring off some potentially great JV's from attending with the high price tag. I received an immediate reply back and was offered a 75% discount.

Don't get disillusioned and think that what you don't like are customers. It's people that you're ultimately trying to avoid. I'm an introvert and always have been. I tend to distance myself from people. But put me in a sales position and I can sell just about anything. Time is money and everyone is correct in implying that customers can take up a lot of your time. Well then, institute a way to where you don't have to deal with them. The truth is, "people" take up a lot of time.

You see, business is all about people. You can only hold them off for so long, but again, you can improve every situation. When we first started we did not offer a way for customers to call us. We simply did not post a phone number on our site. We made outgoing calls if there was a problem with the order, but overall, the phones were dead the majority of the time. We then posted our toll number and phone calls increased. Later, we acquired a toll free number and calls increased even more. After a while, we outsourced all of our sales calls to where my in-house staff only handled customer service. There were still quite a few service related calls. We then found out that the majority of the calls had to do with tracking their order, so we prominently placed a "Track Order" button on the top of our site. That immediately killed 50% of the incoming phone calls from day one.

Here's an interesting point about outsourcing our sales calls. We ended up finding out that our call center did not signup as many autoship customers as our in-house team did when they were taking the calls. So we brought the sales calls back into our facility during business hours and only use the call center after hours, the weekend, and overflow calls that come in if no one picks up during business hours after the 3rd ring.

My point is, I noticed that there are a lot of top affiliate marketers who once were fine staying underground. But now they are all coming out offering low cost or even free programs to re-connect with their customers. That's because ultimately, in my opinion, it's an invaluable opportunity when you can speak directly with your audience. Don't kid yourself. Even if you've built a large mailing list, as you should as an affiliate, you will invariably receive a few responses back from your list members each time you promote something to them. The question is - who is going to reply to them? You? An employee of yours? Or one of your VA's from India?

Business in general is hard work. You may be right that being a merchant is much more involving than being an affiliate, but that depends on who you're talking to. If I told you that we did $5 million our 3rd year in business with only 3 of us working it, would you at least be interested in finding out how? If your answer is no, than you're probably better off working for someone else. The reality is - people will gravitate towards a way of making money that works for them. As much as I would love to generate $5 million as an affiliate, I'm not yet sure if "I" can until I try it for myself. Sometimes the "easier" something is to get into, the "easier" it is to fail in it. In one of the network marketing companies I'm joined up with, it costs only $40 to become a distributor. In a short time, I was earning an amount double of what most people take home in a year. But although hundreds signed up for the same money making opportunity, they were in and out of it just as fast as they filled out the distributor application.

I find that being a merchant keeps you disciplined since you have a lot more at stake. A few years ago I trained a group of 8 people who were close to me how to make money direct-linking Google Adwords ads simply using affiliate links as the destination url. About 3 out of 8 of those people were consistent enough in creating enough ads to generate a $400-$600 a month consistently. This went on for about 6 months until all of them just straight out quit altogether. They left their ads up, but ceased creating new ads. To this day, they are all still working the same jobs they did when they started. Figure that one out.

Going back to affiliate marketing, my ultimate goal is that Jeremy and others can show me how to exceed what I am earning with less overall time involved. I don't even so much care if the work is harder, just as long as I can spend less time in the business and generate more revenue.