Guide to the Smartest Way to Launch an Affiliate Program
Started considering an Affiliate or Partner program for your brand?
This guide will walk you through the good, the bad, and the ugly of Affiliate marketing. Setting you on the path towards success.
Why you should start an Affiliate program:
Affiliate Programs are your lowest risk performance marketing channel. When set up properly, you only pay your Publishers when they drive you sales.
“There is room for every company to use Affiliate marketing if they tailor the program to fit their business model. For example, a B2B client can create one by making it an invitation based program, and only using it for referral partners. The types of companies that do the most Affiliate marketing are the ones that sell products online; where customers can make decisions on their own with a shorter sales cycle.”
~ Ben Kiblinger, Managing Director of QuantumRevenue
Established Affiliates are experts at driving consistent conversions for brands. They focus on doing this day in and day out. In this guide, you’ll figure out how to set up your Affiliate program for success, while avoiding the potential pitfalls of the industry.
Before we even go into how to be successful in the Affiliate space, we want to cover the bad parts of Affiliate marketing that they won’t tell you about:
1) Just because you pay your Affiliates on a Cost Per Acquisition (CPA), doesn’t mean that the revenue you make from Affiliate sales is purely profit.
Assuming you follow the guide below, your payout structure should ensure that you’re always making a profit on whatever you’re paying out to Publishers. The real downside to Affiliate marketing is that there is a large set of Affiliates that, by their nature (primarily coupon sites), take attribution from some of your organic conversions (customers that were already planning to buy from your website). This makes it more complicated than Affiliate sale = profit. You need to account for the pitfalls of Affiliate attributions by having a smartly designed Affiliate program.
2) Traditional Affiliate Marketing revolves around Coupon Sites
To really understand how to be successful in Affiliate Marketing, you have to first understand how much of the industry has been driven by coupon sites.
Affiliate Marketing programs usually pay Affiliates based on whomever sent the last click right before the user purchases from your website. The normal cost-saving user behavior is to decide to buy something, and then, right before they complete their purchase, do a quick search to see if there is an easily available discount coupon. Pretty much every coupon site that pops up in the user’s search will be from a super Affiliate and who will now receive the credit when that user then purchases.
This also means that any other Affiliate who might have worked hard to drive that user to your website, got them to almost buy but lost credit right before the purchase because the user clicked on another Affiliate tracking coupon link.
You need to set up your program to account for this, and empower all of your Affiliates to be successful. This doesn’t mean that coupon Affiliates are strictly bad for your business - there is plenty of research that users expect to find coupon sites, and convert at much higher rates when they feel like they found a great deal.
“The biggest mistake for an Advertiser is to judge the value of Affiliate marketing solely based on what shows up on a report. The Affiliate channel, like all of their other advertising, represents just one touch point. It’s really important to keep a holistic view of how the Affiliate channel fits in with their full marketing strategy. It’s like a basketball team, everyone touches it, but if you only look at the score you may not know the true worth of each player.
Without a full attribution tool, you’re missing out on the benefit of your Affiliates across all channels, not just the ones that drive their own performance. It makes it hard to make good decisions. For example, 50% of sales last touch attributed to Affiliates may have been initially introduced by a different channel like Paid Search. While 40% of the customers touched by Affiliates may have been last touch attributed to Paid Search (an assist)..”
~ Ben Kiblinger
The best Affiliate coupon sites have amazing Search Engine Optimization (SEO), which lets them show up near the top of Google coupon-related searches for almost every category of product. You can start receiving new users that found your store’s products on these Affiliate sites when they were searching for generic types of products. These Affiliates usually have a large base of loyal followers they can promote your Offers to, via social media and newsletters.
“Verticals that perform best offer easy to understand, high demand products. Fashion, computers accessories, etc. When a user wants a product, they can look on a shopping directory or deal site, and find that product. This is where the Affiliate can add a lot of sales to your business while the customer has their wallet on the table. You just need to understand the relationships of coupon sites to the Affiliate space and build your program to be a win-win for all sides.”
~ Ben Kiblinger
3) Many of the best potential placements don’t want to be your Affiliate
Affiliate marketing puts the risk on the Affiliate’s side and depending on their business model they may not want to take that risk. Furthermore, a huge number of content publishers were burned by the Affiliate channel in the past, since all of the initial traffic from their site was getting last click attributed to coupon affiliate sites.
It’s important to build your program to let your ideal Affiliates be set up for success, and accept that a performance payout model won’t work for every type of placement you want to work with.
If built correctly, Affiliate marketing can be one of your safest and most consistent revenue generating channels. Amazon, in 2015, drove 10% of its total sales from Affiliate marketing, around $10B [According to BigCommerce's great in-depth Affiliate marketing guide].
The negatives of Affiliate marketing can be addressed by having the right setup and giving your Affiliates the right tools they need to be successful both with and against coupon-searching behavior. For any eCommerce Affiliate program, you need to first accept that you will need to create coupons to allow all of your Affiliates to stay competitive.
This doesn’t mean you have to discount your brand or product. It just means you need a special promo gift, such as free shipping or special gift with purchases over $XX value. By giving your Affiliates unique codes, you help them keep their traffic’s users from immediately going to a coupon site after deciding they would purchase from your site.
Enough on the bad parts, it’s time to talk about how you can be an Affiliate Management Hero:
How to Create a Great Affiliate Program
“The first step is to calculate the amount of sales that your Affiliate program needs to deliver for it to achieve minimum viability, and how many Affiliates would need to be recruited to achieve that. This will lead to continued customer acquisition growth.”
~ Ben Kiblinger
Here is the secret for successful marketing towards any new channel: 1) Execution is everything. 2) Espionage is the best place to start your plan.
Before you start your Affiliate program, you should create Publisher accounts on the large legacy Affiliate networks, such as CJ.com or Impact.com. These public marketplace platforms are always looking for interesting new Affiliates and they’re happy to approve new, legitimate company accounts (if they ask, you can always tell them you’re considering promoting products via email newsletter).
Once you have an Affiliate account you can see how competitors in your space are
pricing their products. The ideal competitor to take inspiration from is not the largest brand (they can be successful despite themselves), but if you see any lesser known competitor in your space with a high ranking in those platforms, that is a great choice for investigating how they’ve done their setup. You’ll also be able to see their creatives, listed payouts and the other basic details you’ll need to set up with your Affiliate Program. This research gives you a great starting point.
Anatomy of a Great Affiliate Program
- Choose the right tracking platform for starting your program, which is Everflow (please note author’s complete conflict of interest due to working for Everflow).
- Ensure your Affiliate payout makes sense for your margins and is in line with your competitors. If you have strong margins, consider going a bit higher than your competitors to make your program attractive.
- Calculate the Customer Lifetime Value (CLTV) as a baseline for how much each new customer is worth. Their value isn’t just held in the first purchase, but also their repeated purchases and any residual referral benefits. For subscription-type products with normal churn, a good rule of thumb is a payout based around the first 3 months of what you earn.
“Affiliate marketing starts slower than all other advertising. The Publisher takes on all the risk. The first month is spent recruiting Affiliates and only some will start pushing traffic during that first month. On month two, more of them become active. Month three is when you start seeing steady sales. Around 90 days is when you will see if you have a program that Affiliates are getting really excited for, or if you need to tweak it to get them excited. Once it is successful, you have a campaign that can deliver for years, unlike AdWords which is fast on and fast off. You have a guarantee of your cost per customer, once you cross the threshold of minimum viability.”
~ Ben Kiblinger
4. Strong Offer descriptions that allow your Affiliates to quickly understand the unique selling proposition of your products.
5. Offer both banner ads and text ad creatives.
a. For banner ads, use your competitor’s ads as a guideline for how your ads should look. Here are the recommended starting banner ad sizes you should create (in pixels) to cover the majority of your Affiliate’s needs: 320x50, 300x250, 468x60 and 160x600.
b. You also need text ads, as many of your Publishers promote these inside the content sections of their own properties or through text ad placements on websites. You want a text ad covering all of your major product categories and a few text ads with strong coupon-based messaging.
6. Consider getting your Affiliate Program started with an Affiliate Management Agency or Outsourced Program Management (OPM). They can get your program started with a bang since they have existing relationships with most of the top Affiliates. Feel free to reach out to us directly if you’d like advice or recommendations for choosing the right OPM - firstname.lastname@example.org.
Once you’ve create the framework for your Affiliate program, here are the main things you’ll want to focus on:
- Recruiting great Affiliates
- Building a win-win coupon strategy
- Using reporting to make better decisions
- Keeping your program safe from fraud
- Leveraging Agencies
- Adding More Channels like Pay-Per-Call
“Most Affiliate programs are well insulated from fraud if they are paying a % of sales. It’s important to look at how relevant the Affiliates are to the product. One type of fraud scheme is where the Affiliate has created multiple accounts with websites that don’t belong to them and all of the information is falsified. They can use the fake account with a US bank account to take payments. It’s tough to find if they are committing fraud on only a few conversions per account or on multiple fake accounts.
Best Practice: 1) Look for red flags that might indicate the Affiliate applicant might not be who they say they are. 2) Look at traffic coming in from new Affiliates and decide if it makes sense that real people are coming from those placements. 3) Look at sales that come from those Affiliates and check them against your internal records to see if they are good. If you do this, you’ll eliminate any major fraud risk from your Cost Per Sale (CPS) Affiliate program.”
~ Ben Kiblinger
Recruiting Great Affiliates
“The number of Affiliates you need is really dependent on how engaged they are. You can have a successful program with a dozen Affiliates that do a good job. The reality is, most Affiliates will not actively promote a product. Out of those Affiliates that choose to promote your program, only a fraction of those will send enough traffic to generate sales. You probably need to have 500 Affiliates join your program to get 125 to actively promote you with maybe 25 of them sending meaningful traffic. While it’s nice to think you can focus on just recruiting the 25 correct affiliates, you really need to find the 500 that self-select your product as one of their next possible major revenue generators.”
~ Ben Kiblinger
Most top Affiliates fit in one of the following categories:
- Coupon/Cashback Loyalty
- Media Buyers
- Strategic Partners
For most traditional Affiliate programs, this type of Affiliate makes up the majority of their top 10. There are a couple reasons for this: 1) The big coupon/loyalty sites have amazing SEO around their terms so they receive a constant stream of traffic. 2) Both types tend to have huge traffic numbers from discount seekers that regularly check them to find the best deals. 3) As mentioned, they tend to pick up the attribution from both your organic users and from other Affiliates since users click on their promo code tracking links right before they finalize their purchase.
Build your program to maximize the value from these Affiliates, while minimizing the downsides. This will be covered in the next section.
Media Buyers covers a wide variety of Affiliates that are professional marketers that buy ad placements to promote your products. Media buyer Affiliates start making sense for promoting your products in two cases:
- If you have an app that you’re promoting, media buyers are one of your highest quality sources for driving app installs and engagements. The big media buyers have already found the best ad placements for driving new installs and the good ones have already layered on anti-fraud systems to ensure that they can maintain long lasting relationships.
- For desktop products, you can find professional search engine marketer (SEM) Affiliates. Typically they will need you to give them approval to use your brand + terms like (Brand + ‘in trend shoes’), so that they can start testing out buying keywords with less risk. SEM is often a very expensive channel to test, so don’t be surprised if they’re not interested in taking that risk for newer brands to the space.
- Native Ads - This are media buyers that specialize in buying content-oriented placements on major websites, and then driving those users to another content piece that is built to drive performance. This channel is one of the best ways to get placements on major websites like MSN or Yahoo. You can see our interview with a Native Advertising specialist that was ran on ReadWrite.com - [See it Here].
- Facebook & Google display ad buyers - traditionally it wasn’t possible for Affiliates to consistently drive traffic on these sides, as both companies regular deactivate affiliate links. A new solution has opened these channels as an option for Affiliates again - Direct Linking. Direct Linking lets you track users through your landing page instead of requiring affiliate links, which lets you track every type of channel and avoid the cookie issues.
Content Affiliates use their content websites/apps for promoting your products. This type of Affiliate is pretty rare, with the exception of review content Affiliates, as discussed below, so you shouldn’t expect pure content Affiliates to automatically join your program. As mentioned, content is often a bad match for Affiliates as the user will often go to a coupon site after being initially sent from a content Affiliate, so many publications stopped doing this channel.
That being said, there are a couple of opportunities around content Affiliates:
- There are super Affiliates that provide you with a way to access a massive amount of content placements. They do this by providing content placements with a solution that automatically detects their content and adds Affiliate tracking links whenever relevant to your products.
- You can broker partnerships with content placements. Most quality publications are not going to want to work on a performance basis since it creates risk on their side, but there are always placements and Partners out there willing to test new opportunities.
- Review Site Affiliates:
Review Site Affiliates
Review sites are the most successful type of straight content Affiliates. They have the advantage that the buyer behavior suits a performance model. First, an interested buyer searches for reviews on a product category. They then find the review content Affiliates site, choose the product they most want to buy and then buy through the Affiliate links. The easiest way to find these partners is searching for reviews around your product terms.
Almost all review Affiliates charge a lump sum for putting together a review of your product and then drive traffic through their Affiliate links after that. A user looking at reviews is heavily motivated, so this channel tends to drive extremely high quality users.
You’ll find another set of non-Affiliate user review sites, those that show your listing near the top.
For recruiting influencers, you’ll need to go out and find them rather than expecting any platform to provide solid influencers. A great influencer will either be used to being paid in a lump sum payment and not interested in being paid for performance, or they prefer to go through agencies so that the agency can manage all of the different relationships. If you’re looking to find new influencers on your own, you’ll need to focus on spending the time brokering new partnerships, in the same way as content sites, which takes commitment and time from your side.
With influencers, you need to be able to track their performance and a lot of the social channels don’t allow for tracking links. You can track your influencers either using Direct Linking, which tracks back to them when the user reaches your website, or clickless promo codes. Clickless promo codes are tying and tracking the discount code to each influencer partner, so you can credit them for driving the sale. For example, the code ‘pinter5’ will be associated with influencer ‘tom’, whenever someone purchases while inserting the code ‘pinter5’ then ‘tom’ will be considered as the Affiliate which drove that sale.
One important thing to keep in mind with the influencer channel: When we worked on a case study of a fashion brand driving a massive amount of purchases through influencers, we saw that 97.5% of their influencer driven purchases were coming from mobile devices. Make sure your website is mobile-optimized and that your ready to track this channel properly
If you have a B2B or SaaS product then Strategic Partnerships are your best type of ‘Partner’ channel. You have countless customers and integrations that can be evangelists for your brand and cross-share customer lists and referrals. A clever Affiliate program can be utilized to track the performance of these relationships and make sure they are getting their fair referral fees.
Mobile & Affiliate Marketing
“Mobile is important to Affiliate marketing in three ways: It represents a large % of shopping dollars for Consumer Packaged Goods (CPGs). Mobile is an important source of leads for any business who provides potential customers with a phone number to call. Additionally, there are some products and services that deliver a better user experience on mobile.”
~ Ben Kiblinger
The biggest change we’ve been seeing is the merging of the digital and mobile world when it comes to performance marketing. As mentioned above, almost every influencer purchase comes from mobile devices.
As a first step for reaching mobile, be sure your website is mobile responsive and advertising is accounting for it. Adding tools, like Pay-Per-Call, allow you to have active mobile advertising that drives results without investing a mobile division of your website.
Take easy steps to prepare your brand to take on this channel. Once you are ready to launch an app, there is a huge ecosystem of resources to help you drive user acquisition and a host of new challenges and fraud to fight. That is the story for another article though.
“If you offer Affiliates a type of compensation that is that is different than a % of sale, such as pay per install, pay per registration or pay per subscription, then what can happen is Affiliates will promote your offer in a way that delivers the best result for them based on that compensation plan. The metrics for customer lifetime value might not reflect the same level you see from organic traffic. It’s important to monitor how Affiliates are promoting your products and services and how this may affect the quality of customers you’re getting. If you’re paying the correct amount for the value of the customers you are receiving then you will have a great, healthy program. ”
~ Ben Kiblinger, Managing Director of QuantumRevenue
Congratulations, by making it this far into the article you’re now ready to become an instant affili-llionaire.
Well not quite. Honestly, Affiliate marketing success boils down to the following ingredients:
- Structure your Affiliate program to allow your Affiliates to be successful
- Don’t rely only on Affiliate marketing - your brands reputation and product quality massively helps your Affiliates succeed.
- Relationships are everything. You need to reach out to Affiliates, keep them engaged and pay them enough to keep them excited.
- Affiliate Management Agencies help a ton here as they already have the relationships and know what the Affiliates need.
- Keep a watchful eye to protect both your brand and best Affiliates from being hurt by bad egg Affiliates that try to steal credit for everything.
Doesn’t that sound easy! Now you know all of the secrets to go out there and build up one of the lowest cost and most consistent of all performance marketing channels.