There’s a pretty active discussion on Jeremy Palmer’s Quit Your Day Job forums about whether its better to be an affiliate or a merchant. (I’m paraphrasing the intent somewhat).

I’d expand it to encompass taking on a network role in the merchant-affiliate equation too.

I don’t think any of the roles are necessarily “better”, because all the parts help to complete the system.

Trying to come to the conclusion that one is “better” than the other is like saying a car engine is more important than the tires. In that case, take off one of the tires and try driving off.

I’ve had the opportunity to take up roles in all 3 positions, and its been an educational experience.

I identify with the points several of the affiliates raised about not having to deal with customers, refunds, frustration, etc. At the same time too, once you have several products development cycles and product launches under your belt, and you create systems to deal with not only problems, but solutions at enhancing your business competitiveness, you bring your business to a new level.

I personally like being in the product owner/merchant role, because I like building things (probably partly due to my engineer roots), and having a brand is going to be one of the strongest unique selling propositions (USPs) as affiliate marketing, and the online marketing industry matures in general.

Part of being a successful merchant lies in having realistic expectations.

Here are a couple of my personal experiences:

• Refund rate: Expect a variable rate from 5% to 20%, depending on the quality of your product. The quality of the leads being generated play a part too.
• Customer service expectations: You can’t expect to provide a high ticket item, without providing some sort of customer service. Including starter guides, FAQs to go with your product somewhat mitigates the need for heavy duty customer service, but you will still need some element of support. If you’re being crushed by the weight of email support, why not use an online help desk, customer support ticketing system, or work with outsourcers like AgentsOfValue?
• Low Overall Margins: Jeremy brought up a good point that during the launch of PPC Classroom, unexpected developments pummelled the margins of the product. Having managed a company involved in offline manufacturing , I’d say that online product development is a fraction of what brick-and-mortar manufacturing costs. Just a mould can cost upwards of $20,000. But the advantage is once the prototyping and proof-of-concept capital expenses are incurred, the second and future manufacturing runs are vastly cheaper. In the case of a proven info product, I bet the second and third versions of an established product will be vastly more profitable.

From what I’ve seen, the vast majority of affiliate marketers continue to focus on generating leads and selling those leads to CPA and affiliate networks.

By focusing merely on the front end (or lead acquisition) side of things, you are essentially a traffic arbitrager – acquiring traffic at an inexpensive cost and reselling this traffic to the networks – pocketing the difference as your profit.

Only about 10% of affiliates (typically in the Super Affiliate category) are actively building their brand. The brand can be used to leverage and launch new verticals, or be sold to a larger company or even a venture capitalist or brought to the public markets if it achieves critical mass.

While it’s great to generate immediate profits, staying in the industry long term also requires making some long term plans.