Brands and businesses are constantly looking for ways to generate revenue using digital means such as websites and social media platforms. Since the onset of the COVID-19 pandemic, businesses have realised the importance of maintaining a strong online presence. Moreover, digital marketing strategies have further strengthened a business’ ability to sustain itself without a brick-and-mortar outlet.
This article deliberates two digital strategies businesses use to improve revenue – lead generation vs affiliate marketing.
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What is Lead Generation?
Many businesses thrive on obtaining prospect-related information and then selling that information to companies that have the tools to convert prospects into paying customers. They act as lead magnets to capture a database of individual contact information. This information is then segmented and sold or outsourced to other businesses.
What is Affiliate Marketing?
Affiliate marketing is a great way to monetise a business’ website – many brands and companies that run blogs or are influencers refer website visitors to other business products and services. What’s in it for a business? They get paid a commission each time a visitor takes a specific action, such as signing up for a trial, a newsletter, or providing their contact information.
Lead Generation vs Affiliate Marketing – What is better for a business?
Both lead generation and affiliate marketing are great digital strategies for monetising one’s online presence or increasing profits. What is better for a business depends on many factors, such as the business one engages in and which strategy one thinks is more beneficial.
As distinct tools that serve different purposes, here’s a breakdown of each of their pros and cons –
| Lead Generation | Affiliate Marketing | |
| Objective | Create business campaigns to gather information to match businesses to their right customers. | Promote third-party products and services to earn commissions. |
| Revenue Sharing Terms | Paid based on an agreement / one-time fee. | Paid per click on a commission basis. |
| Aim | Capture data of prospects that have a high probability of converting into customers. | Encourage customers to purchase specific products or services. |
| Examples of Clients | Insurance companies, event companies, legal services, home repair & modelling, education, financial services like credit cards, loans and mortgages, dating, senior care, and medical services. | Beauty and cosmetics brands, influencers, blogs, websites, real estate businesses, health & fitness brands, etc. |
Pros of Lead Generation
- Based on profitability: Depending on the industry, lead generation may be more profitable than affiliate marketing. For example, in more service-driven sectors (such as insurance, medical services, home repair, legal services, etc.), the value of a qualified lead is much more than earning a sale-based commission.
- Regulations: Lead generation is helpful in situations where affiliate marketing may not be lawful. For example, many federal and state rules in the US prohibit commissions in many sectors. In such cases, generating revenue through leads can be done lawfully.
- Lesser risk: One of the main advantages of lead generation over affiliate marketing is that lead generation ends at collecting a customer’s information. In affiliate marketing, the customer has to take specific action for the affiliate marketer to make a commission. Therefore, there is lesser risk involved in making money through the lead generation channel.
- Capture information using tools: For affiliate marketing to be successful, one needs to constantly update widgets and banners on their website to get customers to click them. For lead generation, one can simply use a good customer relationship management software or tool to capture leads easily.
- Negotiate Better: If a business can sell generated leads directly to the end-buyer, it may be able to negotiate better the overall rate associated with the database. This will allow businesses to maximise their profits per lead.
Cons of Lead Generation
- Many industries don’t need leads: Think of aggregator companies like Amazon or Ikea – they don’t necessarily need leads. Such companies prefer affiliate marketers who will encourage customers to take specific actions. For example, Amazon would prefer that users subscribe to its Audible subscription – an affiliate marketer can easily achieve this.
- Leads need to be qualified: Generating leads isn’t the endgame; generating qualified leads is. Companies don’t just pay for randomly collected user information. They have specific standards that each lead needs to meet to fulfil the criteria of being a prospect. For example, a list of leads of visitors in the UK region is not helpful for a sports goods shop in the US.
Pros of Affiliate Marketing
- Easy Setup: Affiliate marketing is considered easy to set up because one needs to add links in the form of banners and widgets to their website to get started. Once these are added, affiliate marketers must navigate traffic to improve website monetisation.
- Widespread technology: Solopreneurs and companies can easily set up affiliate marketing by installing third-party tracking technology. Many companies even have access to more extensive affiliate networks that one can join to navigate and monetise traffic.
Cons of Affiliate Marketing
- Cookie blocking/erasing: Since affiliate marketing relies on cookies, if visitors have cookies blocked, the affiliate marketer is likely to lose the commission – even if the visitor makes a purchase.
- Negligible room for negotiation: Commission rates for affiliate marketing are highly volatile. Affiliate marketers need to rely on other factors like cookie duration, higher volume of traffic, terms of service, etc. These can lead to loss of revenue and negatively impact marketers, especially those that do not have high volume traffic.
- Impacted by SEO: Too many widgets and links on a website can negatively impact a website’s ranking on search engines. Affiliate marketers must deploy links carefully to avoid being penalised by search engines.
Be Mindful
Both lead generation and affiliate marketing are great marketing tools; however, it is essential to analyse which means to apply for which situation. When deploying each strategy, a business should be mindful of the following aspects –
- Suppose a business has built a robust customer database. In that case, it could consider monetising lead generation in the long run for its own products or services instead of selling this database to a buyer. A business can easily use the database to generate profit and double its revenue.
- A business should avoid losing trust with its clients by ensuring it undertakes affiliate marketing only with trusted brands. Since a business cannot control the customer experience offered by other brands, it may be lowering its market reputation if customers click on links through its website which are not promising or trustworthy.
Conclusion
Now that the concepts of lead generation and affiliate marketing are clear, businesses need to understand which option is more viable for them concerning maximising revenue generation. If unsure of either strategy, it is best to test both to see which one works better.