Businesses of all sizes make 2 mistakes when it comes to affiliate programs for promoting products and services:
- They don’t do affiliate marketing; and
- If they do, they don’t manage it well.
I work both sides of the affiliate marketing fence. I am an affiliate marketer (i.e. promote products and services) and I run an affiliate program for a product I sell as part of my offline business. It’s an Ebook I sell. The remainder of my business offers services, which I don’t sell via affiliate marketing due to regulatory restrictions (I work in a profession that prohibits paying for referrals). If my business could use affiliate marketing more, I would do so in a heartbeat.
Briefly, what is affiliate marketing?
In my view, affiliate marketing presents one of the best marketing opportunities available. If you think only small, non-reputable companies have affiliate programs, you’re wrong. The biggest retailers in the world use affiliate marketing. Companies such as Amazon, Walmart, Sears to name a few.
Affiliate marketing works by getting webmasters and bloggers to market your products and services. You pay a commission for sales and/or leads (you can choose).
Sales and leads are tracked by cookies on the computer. When a customers clicks on an affiliate marketer’s link and then buys something from your website, that sale referral is tracked to that particular affiliate.
You can have the tracking last for 1 day or a lifetime. By this I mean that if an affiliate marketer sends a referral to your site, but they buy 3 weeks later, then depending on the duration of your cookie tracking (which you choose), the affiliate may or may not get a commission. Common tracking durations are 30, 60, 90, and 120 days. Some companies offer lifetime tracking (as an affiliate marketer I love lifetime tracking).
Steps for choosing an affiliate program:
STEP 1: Determine your commission structure
There are generally two types of commission structures:
- pay out an amount (usually a % or flat dollar amount) per sale; or
- pay a dollar amount for each lead.
Most businesses use option 1 above. Only businesses that have high lead conversions such as credit card applications pay per lead. Pay per lead can be more risky in that if your leads don’t buy, you could end up paying more in affiliate commissions than sales generated.
STEP 2: Determine the payout specifics
If you pay upon a sale, determine whether it’s a percentage or a flat dollar amount. Consider paying more when affiliate marketers reach various sales levels. For example, if an affiliate makes 10 sales in a month, structure your payouts so that either all sales result in a higher payout or all sales after the initial ten garner a higher payout.
STEP 3: Determine your cookie tracking duration
How long will your affiliates’ referral tracking last? If an affiliate sends a referral 30 days ago, will you still apply the commission to that affiliate. Most companies track and apply sales commissions for 30 to 120 days. Some only 1 day (Amazon). Others, for a lifetime.
STEP 4: Choose the type of affiliate program
There are 2 broad types of affiliate programs a business can use:
- In-house managed affiliate program using affiliate software; or
- Becoming an advertiser with an established affiliate network.
Advantages for an in-house managed affiliate program:
- Your business saves money by not paying an affiliate network a percentage of sales or a fee.
- You can customize your affiliate program as you see fit. In an affiliate network, you get only the features available.
Disadvantages of an in-house managed affiliate program:
- You must dedicate resources to managing the program, including paying affiliates.
- You don’t get exposure to many affiliates like you do when a member of an established affiliate program.
- It’s very easy and fast to get your affiliate program up and running.
Advantages of using an affiliate network:
- You gain exposure to thousands of affiliate marketers who check for new products and services to promote. Affiliate marketers are constantly on the lookout for high-converting and quality products and services to promote.
- You get access to tutorials and information to help you successfully manage your affiliate program.
- You’re basically outsourcing the management of the program including commission payments. However, you still need an affiliate manager to deal with your affiliate marketers’ questions. The affiliate network does not do this.
Disadvantages of using an affiliate network:
- It costs your business money.
- You’re constrained with the features and technology the network offers. However, the big affiliate networks (see below) generally offer the best and latest features to help your affiliate marketing program succeed.
Note, you won’t necessarily be accepted into any affiliate network. You must apply.
STEP 5: Choose your affiliate marketing network or in-house affiliate marketing software
What are some established affiliate networks?
- ShareASale (my favorite affiliate network)
- Linkshare
- Commission Junction
- Google Affiliate Network (yes, even Google is in on this type of marketing)
- Pepperjam
- Clickbank (digital and website membership products only)
What are some good affiliate marketing software programs?
STEP 6: Determine your terms of service
You must consider what restrictions your affiliates are subject to such as:
- Can they use your business’ name (or product/service name) in a root domain such as “www.YourProductName.com”
- Can your affiliates bid on any keywords? Or do want to prohibit PPC bidding on any of your trademarked names?
- Will you stipulate any disclaimers affiliates must place on their sites in addition to the FTC regulations affiliate marketers are subject to?
Next, read my ShareASale review or discover the affiliate marketing features to get by reading my article “How to Set Up a Killer Affiliate Program for Your Business“.
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