Guide to the Smartest Way to Launch an Affiliate Program
This guide will walk you through the good, the bad, and the ugly of affiliate marketing, and set you on the path toward success!
Why you should start an affiliate program:
Frankly, affiliate programs carry very little risk as it relates to performance marketing. At the end of the day, you’re only paying your publishers for the sales they drive.
“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.
We spend A LOT of time talking about this topic with our partners, clients and peers. Check out this fireside chat with Chad Buckendahl of sticky.io:
Before we dive into how to be successful in the affiliate space, we want to cover the not-so-glamorous parts of affiliate marketing that they won’t tell you about:
1) Just because you pay your affiliates on a Cost Per Acquisition (CPA) model doesn’t mean that the associated revenue is purely profit.
Assuming you follow this guide, your payout structure should entail making a profit whenever you’re paying a publisher. However, there is a large set of affiliates that, by nature, steal attribution for what would otherwise be considered organic traffic (i.e. customers that were already planning to buy from your website) or traffic driven by other affiliates.
We’re talking primarily about coupon sites, and they make analytics a bit more complicated than simply assuming affiliate sale = profit. You need to account for these pitfalls when designing an 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 the affiliate whose link was clicked last - just before the user purchases from your website. But savvy online shoppers often do a quick search for a coupon code before purchasing. And, just like that, that coupon site is credited with the “last click”.
This means that any affiliate who might have worked hard to drive that user to your website loses out on their cut of the cake.
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 on users expecting to find coupon sites, and converting 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 the ball, but if you only look at the score you may not know the true worth of each player." ~ Ben Kiblinger
The best affiliate coupon sites have amazing search engine optimization (SEO), which puts them near the top of Google coupon-related searches for almost any type of product. You can start receiving new users who found your store on these coupon sites when they were searching for generic types of products. These affiliates typically have large, loyal followings to whom they can promote your offers via social media and newsletters.
“Verticals that perform best offer easy-to-understand, high-demand products. Fashion, computer 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 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 would be attributed to the last click from coupon affiliate sites.
It’s important to set up your ideal affiliates for success, and accept that a performance payout model won’t work for every type of placement you want to work with.
If set up properly, 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. We’re talking around $10B [according to BigCommerce's great in-depth affiliate marketing guide].
The negatives of affiliate marketing can be mitigated with the right setup and tools your affiliates need to work with or combat this behavior. For any eCommerce affiliate program, you need to first accept that you will need to create coupons to allow 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 a special gift with a purchase above a certain value. By giving your affiliates unique codes, you help them keep users from immediately jumping to a coupon site after deciding they want to buy something.
Alright, enough on the challenges already. Let’s talk about how to become an Affiliate Management Hero!
How to Create a Great Affiliate Program
Here is the secret to successful marketing in any new channel: 1) Execution is everything. 2) Espionage is a great place to start.
Before you start your affiliate program, 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, lesser-known competitors in your space with a high ranking in those platforms are worth investigating. You’ll be able to see their creatives, payouts and other basic details you’ll need to set up your affiliate program. This research gives you a great starting point.
“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. In 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
Anatomy of a Great Affiliate Program
- Choose the right tracking platform for your program: Everflow, obviously.
- Ensure your affiliate payout makes sense for your margins and relative to your competitors.
- Calculate the Customer Lifetime Value (CLTV) as a baseline for how much each new customer is worth. Their value isn’t just 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.
- Strong offer descriptions that allow your affiliates to quickly understand the unique selling proposition of your products.
- Offer both banner ads and text ad creatives.
For banner ads, use your competitors’ 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 affiliates’ needs: 320x50, 300x250, 468x60 and 160x600.
For text ads, you want to cover all of your major product categories and provide a few text ads with strong coupon-based messaging.
- 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 - email@example.com.
Aside from these steps, there is much more nuance to be considered. Amber Spears, co-founder of East 5th Avenue, addresses the subtleties that need to be leveraged to turn a run-of-the-mill affiliate program into a powerhouse:
Once you’ve create the framework for your 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, such as Pay-Per-Call
"Look for red flags that might indicate the affiliate applicant might not be who they say they are. Look at traffic coming in from new affiliates and decide if it makes sense that real people are coming from those placements. 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 mitigate major fraud risk from your Cost Per Sale (CPS) affiliate program.” ~ Ben Kiblinger
Recruiting Great Affiliates
Most top affiliates fit in one of the following categories:
- Coupon/Cashback Loyalty
- Media Buyers
- Strategic Partners
Our friends at Publisher Discovery have got affiliate recruitment down to a science - literally! Check out this live workshop with Chris Tradgett to see the product in action:
“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
For most traditional affiliate programs, this type of affiliate makes up the majority of their top 10. There are a few reasons for this:
- The big coupon/loyalty sites have amazing SEO around their terms so they receive a constant stream of traffic.
- Both types tend to have huge traffic numbers from discount seekers that regularly check them to find the best deals.
- As mentioned earlier, they are notorious for picking up the attribution from your organic users and from other affiliates due to last click attribution.
Build your program to maximize the value from these affiliates, while minimizing the downsides. This will be covered in the next section.
Media Buyers cover a wide variety of affiliates. They are professional marketers that buy ad placements to promote your products. Media buying affiliates typically make sense for promoting 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. They typically need your approval to use your brand + terms like (Brand + ‘in trend shoes’), so that they can start testing out buying keywords with little 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.
Many Media Buyers focus on Native Ads. These are 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].
Others focus on display ads in Facebook & Google. It wasn’t always possible for affiliates to consistently drive traffic on these sites, however Direct Linking now lets you track users through your landing page instead of requiring affiliate links, which lets you track every type of channel and avoid 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.
That being said, there are a couple of unique opportunities with content affiliates:
- There are super affiliates that provide you with access to a massive amount of content placements through a solution that automatically detects content and adds affiliate tracking links whenever it is relevant to your products. Check out this fireside chat with one of our clients doing exactly that.
- You can broker partnerships with content placements. Many 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 willing to test new opportunities.
Review Site Affiliates
Review sites are typically the most successful type of content affiliates because the buyer behavior suits a performance model. First, an interested buyer searches for reviews on a product category. They then find the review site, choose the product they want to buy and buy it through an affiliate link. The easiest way to find these partners is searching for reviews with your product terms.
Most review site affiliates charge a lump sum for putting together a review of your product before driving traffic through their affiliate links. A user looking at reviews is highly motivated, so this channel tends to drive extremely high-quality users.
Finding the right influencers for your program can be tricky, and there is not a one-size-fits-all model we can offer. You’ll need to dedicate resources to brokering new partnerships, or consider working with an outside agency that specializes in this work. Check out this fireside chat with James Creech from Paladin on this topic:
You need to be able to track influencer performance, but keep in mind that most social channels like Facebook and Instagram don’t allow tracking links. You can track your influencers either using Everflow’s Direct Linking method, or using clickless promo codes. Clickless promo codes tie a discount code to each influencer partner, so you can credit them for driving the sale. For example, the code ‘DOE15’ is tied to influencer ‘John Doe’, and John Doe gets credit for the sale whenever someone uses the promo code ‘DOE15’.
If you have a B2B or SaaS product, then Strategic Partnerships are key. Through sharing customers and integrations, the opportunity to create evangelists for your brand and maximize referrals is endless. A clever affiliate program can be utilized to track the performance of these relationships and make sure they are getting their fair referral fees.
One of our most prosperous strategic partnerships is with Tipalti, a global payment systems provider. We don't compete for customers, but work together to serve and attract clients who can benefit from both of our companies' services. Here's a fireside chat where we discuss this concept with Evan Weber who builds strategic B2B partnerships at Tipalti:
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
Most purchases via influencers come from mobile devices, so be sure your website is mobile responsive and that your ads are accounting for such. 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 for taking on this channel. Once you are ready to launch an app, there is a huge ecosystem of resources to help you drive user acquisition along with a host of new challenges. That is the story for another article though.
“If you offer affiliates a type of compensation that is different than a % of sale, such as Cost Per Install, Cost Per Registration or Cost 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 affil-ionaire.
Take it one step at a time, and remember that most things that are really worthwhile are not necessarily "easy." Affiliate marketing is more like "complex simplicity," and it boils down to the following ingredients:
- Set your affiliates up for success by strategically structuring your program.
- Don’t rely only on affiliate marketing alone - your brand’s reputation and product quality is key to your affiliates’ success.
- 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.
We'd love to help you get started. Feel free to get in touch if you're looking to start or expand your affiliate program!