Affiliate Marketing Vs Dropshipping

A reader of the blog contacted me to get my opinion on these two topics. For this blog, let’s assume we’re only talking about affiliate marketing of physical products. As with the digital products, the comparison is like apples and oranges.

I prefer dropshipping over affiliate marketing for a variety of reasons so let’s compare the two.

During both affiliate marketing and dropshipping, you’re often creating very little value outside the revenue generated right there and then. However, affiliate marketing, in my humble opinion, is an even lower hanging fruit than dropshipping and I consider dropshipping itself to be a pretty low hanging fruit.

The reason why I think that is because in dropshipping you control the offer end to end. You control the sourcing price of the product. You can play with the quality of the product to increase or decrease the sourcing price. You control the sale price of the product. So, if you’re able to sell the products but unable to make a profit, you could always increase the price and make it profitable for you.

With affiliate marketing, your hands are tied. You only get certain commission per sale. The commission is determined by what the goods cost, how much they are sold for, and how much does the offer provider want to pay you after keeping profits. If your advertising costs are higher than your commissions, then your only option is to optimize advertising. You can not play with the sourcing cost of goods and the sale price to make a profit.

In addition, in affiliate marketing your access to data about the customer is very limited and restricted. You can often not reach out the same customers again to generate more sales in the future without adding additional email capture steps in your funnel. You may also not be able to use the customer data to create lookalikes on ad platforms to target similar customers due to lack of access to customer data.

When dropshipping, you have a much better lock-in with your customers, and a better access to data. While lifetime value often stays low in both cases, you still have better control with dropshipping.

You could also copy anyone’s offer as almost all products are available for sourcing in China and recreate a dropshipping store using the same product, similar landing page etc. So it’s not that difficult at all to use someone else’s offer to create your own dropshipping store.

In addition, for dropshippers just like affiliate marketing, there’s very little to no work that needs to be done with regards to shipping and handling of the products as there are plenty of Chinese vendors who can make this process very seamless for you.

In the end I’m not too fond of both the models, but if I had to do one, I’ll definitely go after the dropshipping model.

The 1/2 Rule For E-Commerce Metrics

Although there’s no standard for e-commerce metrics, you should still aim to hit certain floors for your metrics in order for you to have a working funnel. I call this a 1/2 rule.

When a user lands on your product page, you need to track the progress between the different steps he needs to go through. A large or unexpected drop at any step should make you want to investigate that particular step of the funnel.

After landing on the product page or landing page, the user may have to add the product to cart. After adding the product to cart, user would land on the cart page. At this point, user would need to initiate check-out to land on the check out page. The user then needs to input his shipping and billing info in order to place the order.

While what percentage of users reach on each of these pages will largely vary depending on the type of products, price of products and the source of traffic, for typical dropshipping stores selling products between $20-$100 I recommend to at least watch out for the 1/2 rule.

The 1/2 rule suggests that if 20 people added the product to cart, at least 1/2 of them should initiate check-out which should lead 10 users to the check out page. And if 10 made it to the check-out page, at least 1/2 of them should purchase giving you 5 purchases in the end.

Landing page optimization is very important and I recommend that you use heatmaps to optimize your funnels. If you get your advertising, creatives and product selection right, but there’s a problem with your landing page, cart page or check out page, you’ll end up wasting all your efforts.

After all a chain is only as strong as it’s weakest link.

The Secret E-Commerce ‘Hot Sauce’ That No One Talks About

When I started blogging and later ventured into internet marketing, things were a lot different than they are today. During 2009 and 2010, 93% of my traffic came from Windows and Mac. Only 1% traffic came from iOS and Android. This meant, I largely ignored how mobile users viewed my sites and only focused on desktop.

Mobile Evolution

Over the past 10 years, I’ve seen mobile traffic go from under 10% to over 90%, and that brought quite a lot of challenges for me. While mobile has certainly increased the potential audience by manyfold, the responsibility now lies on the website founders to serve content in a way that works perfectly across the large variety of screen sizes, OS, browsers etc.

For content websites, the estate for ads just squeezed into nothing. We couldn’t serve the same quantity of ads anymore. But I’m not gonna talk more about that right now.

For e-commerce which we only ventured into in 2016, mobile had already taken over by the time we started it, bringing its challenges with it.

E-Commerce Struggle

Early in our cycle, we identified what we believed was a winning product and we created a large set of ad sets which we also believed would give us a winning campaign. Despite that, we had a low conversion rate and while we made sales, we struggled to make a profit.

We were sure the product would work, we had data to believe in it. We saw others grilling and scaling it. As for ad campaigns, we had spent enough on Facebook before (outside of e-commerce) to be sure that what we were doing with ads was also not a problem. Which brought us to our final conclusion, that it was the landing page that was the problem.

Often I see, people working really hard but focusing on the wrong things or fixing what isn’t broken. I bring this up, because a lot of people just change their products or ad strategies without thinking about other possibilities.

Landing Page Struggles & Heatmaps

Back to our problem; we couldn’t think that our landing page could be problematic because our store was powered by Shopify. We expected the store and theme to be optimized to work in a perfect manner. But mobile can be tricky and so we introduced heat-maps and video recordings to see exactly how users interacted with our landing pages.

We used a tool named Hotjar, but you could use anyone you like.

I’m not going to go into details of the wide range of things you can do with heatmaps, but personally I focused on scroll heatmaps the most. While it’s a natural behavior for the loss of audience from top to bottom, if the colors change abruptly or sharply, it means a significant number of users left the page there. This can mean, among other things, that user is either not interested in content below that point, or is unaware that the page has more content to offer.

This can be solved by either removing an element at the point of abrupt exit, or introducing new elements that convey to the user that there’s more content available below. After making certain changes, I saw the conversion go up, but not enough to be excited about it.

Video Recordings

The next logical step for me was to watch thousands of video recordings of users interacting with our store. And so I did that.

The reason why I started this blog post with emphasis on mobile was because after watching hundreds of videos, I saw how different the user interaction was for different devices having different screen res, OS, browsers, in-app browsers (such as site loading inside Facebook) and how many changes were needed for everything to be in harmony across the board.

Conclusion & Further Reading

After making those changes to the theme and landing page, we were able to bump our conversion by 120% and so the secret ‘hot sauce’ of e-com, at least for me, is the heatmap and landing page optimization.

I’ve previously written three posts about our dropshipping experience explaining what dropshipping is, how we scaled it, and how we grew it by 837%.