The Practical Guide to Creating and Managing a Profitable Affiliate Program
by Neil Durrant
Affiliate Marketing can be the most
cost-effective Marketing method available
to promote your website.
Learn how to create and manage a profitable
Affiliate Program using this essential
step-by-step guide.
Offering a practical solution to establishing
and promoting a performance based
Marketing Program.
2000 Neil Durrant, Affiliate Announce
All Rights Reserved.
No part of this publication may be stored in a retrieval system, transmitted or reproduced in anyway without the prior agreement and written permission of the publisher.
Some images copyright www.arttoday.com
Neil Durrant 41 Bourne Road, Bexley Kent DA5 1LW United Kingdom [email protected]
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Dedicated to the Affiliate Program Manager who creates a program in the spirit of partnership.
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Table of Contents
Foreword – Affiliate Marketing comes of age
CHAPTER 1
1.0 Introduction – Affiliate secrets
CHAPTER 2
2.0 What you need to know before starting your program 2.1 What an Affiliate Program will do for you 2.2 The difference between success and failure starts here 2.3 Does size really matter? 2.4 Anatomy of a successful program or what an Affiliate wants from you 2.5 Summing up
CHAPTER 3
3.0 Planning for success 3.1 Choosing the right model for your business 3.2 How much should you pay your Affiliates? 3.3 Return-days and active cookies 3.4 When is Affiliate payday? 3.5 Paying Affiliates electronically 3.6 Will you allow Affiliates to ‘buy for own use’? 3.7 Summing up - your payment checklist
CHAPTER 4
4.0 Selecting a tracking solution that’s right for you 4.1 What you need from your tracking solution 4.2 Choosing a network or software solution 4.3 Affiliate networks 4.4 UK based Affiliate networks 4.5 Personal experience of Commission Junction 4.6 A merchant’s view of LinkShare 4.7 A merchant’s view of Be Free 4.8 A merchant’s view of Dynamic Trade 4.9 Software solutions 4.10 How tracking technology works 4.11 One key feature you must have in your software package 4.12 Tracking solution vendors 4.13 Still confused?
CHAPTER 5
3 5.0 Creating Affiliate links that generate traffic and sales 5.1 Identify all your niches 5.2 What are the best linking methods? 5.3 Creating banners 5.4 Using text links for a better click-thru rate 5.5 Classified adverts, signature files and articles 5.6 Offering a free report by auto-responder 5.7 Providing Affiliates with access to your sites database 5.8 How CollegeRecruiter.com generates 100-150 times the click-thru rate of typical banner ads 5.9 Interactive content and personalisation technology 5.10 Be creative
CHAPTER 6
6.0 Putting it all together: Implementing your program 6.1 How to get the edge on your competitors even if you can’t beat their commissions 6.2 Make sure your Affiliate referrals hit a landing page that sells 6.3 Presenting your program 6.4 Affiliate agreement
CHAPTER 7
7.0 Recruiting Affiliate partners 7.1 Put it on your home page 7.2 Get free advertising with the Affiliate directories 7.3 Affiliate directories 7.4 Personally inviting sites 7.5 Where to find the ideal sites for your program? 7.6 The most effective method to convert your prospect list into active Affiliates 7.7 Selling the concept of your Affiliate program 7.8 Locating your competitors Affiliates 7.9 Cross promotions with other programs 7.10 Advertising for Affiliates 7.11 Generating free publicity to promote your program
CHAPTER 8
8.0 Activating Affiliates and increasing sales 8.1 Why 99 per cent of Affiliates are inactive 8.2 Useful tool to help your Affiliates focus on selling not technology 8.3 Create a 'Fast-Start' training guide for your program 8.4 How to maintain your Affiliates loyalty 8.5 Free meta-refresh creator from AffiliateToolkit CHAPTER 9
9.0 Metrics – knowing the numbers that add up to more profit 9.1 Your Affiliate numbers 9.2 Examining Affiliate performance spikes
4 9.3 The most important metric to improve on 9.4 The best way to test your Marketing 9.5 Why testing and knowing your CR is so important 9.6 Performance related ad buys
CHAPTER 10
10.0 Taking your Affiliate Program International (Guest written by Stefanie Puetz-Lehmann)
CHAPTER 11
11.0 Recruiting a Program Manager 11.1 How much does an Affiliate Manager earn? 11.2 What skills should I look for in my Program Manager? 11.3 Outsourcing your Program Management
CHAPTER 12
12.0 Case study – planning and implementing an Affiliate Program
CHAPTER 13
13.0 Interviews
- Allan Gardyne - Shawn Collins - Wayne Porter
CHAPTER 14
14.0 Resources and further reading
CHAPTER 15
15.0 Glossary
CHAPTER 16
16. Comments - what do you think?
CHAPTER 17
17. Bonus chapter – Declan Dunn’s audio feeds
CHAPTER 18
18.0 Worksheets – your steps to success
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Foreword
‘Affiliate Marketing Comes of Age’ by Joel Gehman AffiliateHandbook.com
Years before the NASDAQ cratered and banner advertising died, e-commerce pioneers like Amazon.com and CDNow began partnering with topic-centric websites to drive revenues, paying a commission for each sale referred. The practice spread quickly and became known as “Affiliate Marketing”. By early 1999, Forrester Research pronounced “Affiliate Programs” as the web’s most effective traffic-driving technique – almost twice as effective as banners.
Little more than four years after launching, Amazon announced in August 2000 that its “Associates Program” had grown to over 500,000 Affiliates. What Jeff Bezos started as a polite conversation had grown into an entirely new industry – bringing with it Affiliate networks, directories, newsletters and a variety of consultants. Other innovations followed. The implementation process has thankfully gone from painstaking to straightforward. As Affiliate Marketing matured it was adopted by thousands of new merchants. Affiliate Marketing is now widely heralded as the web’s most cost effective marketing vehicle.
More than ever Affiliate Marketing is being driven by the power of context – making it useful to both commerce and content websites. It seems the line between advertising and editorial will continue to blur. Improving targeting technologies make it possible for formerly CPM-dominated content sites to net greater revenues using performance-based offers. Merchants are learning static banners aren’t enough. Instead they are pairing content with commerce offers. Finally, the frictionless nature of the web is enabling syndicated selling. The result is a whole new world of opportunities for websites big and small.
A Brief History of Affiliate Marketing Person-to-person selling is not new. Even Amway - with over 3 million “independent business owners” - is something of an Affiliate Marketer. Regardless, the origins of Amazon’s Affiliate Program have become legend. It was during a dinner party conversation that Jeff Bezos first recognized the power of formalizing a commission program to other websites that link to Amazon. While Amazon only pays a commission when a sale is made, high- priced items like cars and financial services like credit cards pay instead for new users, click-thrus or qualified leads.
Despite Affiliate Marketing’s well-documented effectiveness, the time and cost involved in building an Affiliate Program has kept some merchants away. Other pioneering merchants like PC Flowers & Gifts, BigStar and EPage were often forced to build their own Programs – in some cases ahead of Amazon.
6 Consider that by September 1999, more than three years after Amazon launched, just over a thousand merchants offered Affiliate Programs. What the industry needed most were simple, less expensive ways for merchants to benefit from the power of Affiliate Marketing.
Affiliate Marketing Today Affiliate Marketing is now part of the web’s very composition. The cost and effort required to launch a successful Program has been dramatically reduced as a result of both new and improved Affiliate networks. Internationally, dozens of players are cropping up in Europe and Asia, making Affiliate Marketing accessible to new geographies. Network providers also drastically reduce the cost of acquiring a base of active Affiliates - an otherwise expensive and time-consuming task. For merchants looking to jumpstart their Program the modern day Affiliate network has become an incredible option.
The race is now on. In the last year the number of merchants offering Affiliate Programs has more than quadrupled to over 5,000. Literally millions of websites now participate as Affiliates – from personal homepages at Geocities and Homestead, to Media Metrix stalwarts like Weather.com and LookSmart. While banner click-thru rates average 0.5 per cent or less, Affiliate networks average 3 and 4 per cent or more. Overall, an estimated 20 per cent of all e- commerce revenues are driven by Affiliates.
In four short years, Affiliate Marketing has become a staple of web marketers. Ultimately, Affiliate Marketing looks destined for even greater prominence. By 2004 both eMarketer and Forrester Research estimate that online advertising will reach for $22 billion. Performance marketing is expected to account for some 54 per cent of the total, or more than $11 billion in Internet marketing expenditures. Clearly those without an Affiliate Program are in danger of being left behind.
The Future of Affiliate Marketing The holy grail of marketing remains right message, right place, right time. At one time personalization looked to hold the answer. Only MyYahoo! has ever really succeeded in getting visitors to profile themselves. Instead, new targeting technologies are relying on the power of context to predict the most likely product matches – many via completely hosted solutions, and on a scale never before thought possible.
It’s one thing for Amazon to make profile-based book suggestions to its users. It’s another thing to make anonymous product recommendations from an inventory of millions when visitors are on an unknown Affiliate site. Contextual merchandising is converting former CPM addicts into Affiliate Marketing believers. For many top websites, contextually driven Affiliate Marketing represents a chance to loosen the grip of banner-based revenue streams.
Merchants are now realizing that Affiliates need better tools as well. Banners, buttons and even direct product links are useful, but without related content the power of context simply doesn’t happen. Emerging technologies promise
7 to allow merchants to push pieces of their websites to Affiliates. Affiliates are about to get the content necessary to create context.
Whether termed Affiliate Marketing, collaborative commerce or syndicated selling, the web is changing the very nature of commerce and content. As friction between partners decreases, new forms of integration and aggregation are made possible. And the worlds of editorial and advertising look to become even more interwoven as merchants and publishers pursue profitability.
Affiliate marketing has become the currency of the web. It could be the web’s simplest, most cost effective marketing vehicle. As both merchants and publishers continue to recognize the power of context, Affiliate marketing’s best days are yet to come. In a few short years, performance marketing looks to become the tail that wags the dog – representing over half of all Internet marketing dollars. Despite the jargon and hype, Affiliate Marketing stays true to its origins as a better way of connecting buyers and sellers – and rewarding those that facilitate the connections.
Joel Gehman is publisher of AffiliateHandbook.com. He consults, writes, and speaks about the dynamics of affiliate marketing. Joel has experience in all facets of internet marketing, online advertising, and e-commerce. He's worked at startups, Fortune 500's and techs in New York, Silicon Valley and now Philadelphia. Joel authors a regular column on affiliate marketing for ClickZ.com and has been published and cited numerous times. He speaks regularly at industry conferences and events. You can email Joel at [email protected].
Acknowledgements: © 2001, Joel Gehman, all rights reserved, used by permission of Joel Gehman
8 CHAPTER 1
1.0 Introduction – Affiliate secrets
Affiliate Programs provide the answer to every marketer’s dream - results guaranteed advertising. If it doesn’t work you don’t pay a penny, it’s that simple.
a. Grab yourself a software solution. b. Throw together a quick Affiliate offer and add a few banners for good measure. c. Before you know it you have a sales force of literally thousands of websites all working for you.
You may well ask, so what’s the secret?
Well I’m sorry to dampen your excitement but it isn’t as simple as A,B,C!
Yes, Affiliate Marketing can be a highly effective and profitable Marketing method. However, it takes time, careful planning and excellent management to create a successful Program.
Your Program will need tender loving care in order to develop and grow.
Unfortunately, until now there have been very few resources dedicated to helping you, the Affiliate Program Manager.
Why are some Programs hugely successful whilst others falter at the first hurdle?
What are the great Affiliate Marketing secrets that no one’s told you?
How can you find these ‘Super Affiliates’ that will drive hundreds of eager customers to your site?
How can you maximise on their results and sales once you have them?
This step-by-step guide is designed to take you through each stage of creating and managing a successful Program, offering tried and tested techniques that have been proven to work - in the real world.
You may be disappointed to find that there isn’t a quick and easy trick guaranteed to create a huge following of successful Affiliates. If it were that easy then everyone would have a successful Program ☺
But…it’s not that complicated!
Read through the following guide and then work through the accompanying worksheets.
9 And remember, if you dedicate consistent time and effort to the planning and management of your Program, you will secure a new profitable sales channel for your business.
Wishing you every success,
CHAPTER 2
2. What you need to know before starting your Program
Before deciding that you absolutely must have a Program just because everyone else has, take a step back…
Yes, launching a Program can be one of the most effective forms of Marketing your site.
However, you will need a clear plan of action as well as an understanding of the resources required, both in terms of time available and financially.
A profitable Affiliate Program does not look after itself. It is not an automated sales generator.
An effective Program needs commitment and dedication, not just to launch a Program and acquire Affiliates, but also to help your newly developed sales force actually sell.
You will need a well thought out Program, a generous splash of knowledge and an ongoing commitment to work with your Affiliate partners in order to help them generate quality, targeted visitors to your site.
2.1 What an Affiliate Program will do for you
Affiliate Marketing provides you with a system to reward site owners that provide links to your site.
This allows you to develop a sales network of sites with each one sending you targeted traffic. Rewarding on a performance basis, you could describe your Affiliate network as a commission only sales force.
Affiliates direct traffic to your site in return for a commission on sales generated, a bounty on leads or ‘actions taken’, or simply a set figure for each unique visitor that they send to your site.
Providing you with risk-free advertising - no more money wasted on ineffective advertisements!
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The table below demonstrates Affiliate Marketing to be the most effective Marketing method available.
Ranking Technique Popularity Effectiveness 1 Affiliate Programs 17% 4.3 2 Email to Customers 77% 4.3 3 Public Relations 45% 4.1 4 Television 30% 4.0 5 Outdoor 17% 3.7 6 Email (opt-in lists) 23% 3.5 7 Magazines 34% 3.4 8 Radio 32% 3.4 9 Direct Mail 30% 3.4 10 Sponsorships 34% 3.3 11 Buttons 55% 3.2 12 Banners 89% 2.8 13 Newspapers 32% 2.6
Research Source: April. 1999 Forrester Research. Effectiveness ratings represent average scores based on a scale of 1 (poor) to 5 (great).
Affiliate Marketing is not about generating ‘cheap’ advertising but developing profitable strategic relationships.
Through education and training of your sales network you will receive more than just banner impressions, e.g. third party endorsements of your product or service, reviews/articles in newsletters plus the associated branding this brings etc.
2.2 The difference between success and failure starts here!
There are thousands of Programs, each one vying for the support and loyalty of Affiliate sites. If at any time an Affiliate is unhappy with your Program they will quite simply walk away, welcomed with open arms by your competitors!
Remember Affiliate Marketing is about performance. If your Affiliates are successful then so are you.
11 Take delight in issuing your Affiliate checks. Every cent, dollar or pound earned by your Affiliate represents a profit generated for YOU.
Measure the success of your Program in direct proportion to the earnings of your Affiliate Partners.
If you plan and operate your Program with the philosophy that Affiliate Marketing is a great way to get free or cheap advertising then I’m afraid ultimately….
…you will fail.
Operate your Program in a manner that provides a fair partnership for your Affiliates. Rewarding a generous income in proportion to effort will result in a powerful, active network of happy and loyal Affiliates.
The long-term success of your Affiliate Program will depend on the on-going support and loyalty of key partners.
If you create a Program that is profitable for Affiliates then it follows that you too shall profit.
Your Program’s success should be measured by the success of your Affiliates, ultimately it is the same thing.
Planning your Program’s strategy with this in mind will set the foundation of success for your Program.
At times when planning your Program you will need to make decisions that seem at odds with your needs. Wondering if your Affiliates will ‘really notice’ or if it ‘really makes a difference’?
Take a step back and put yourself in…
…their shoes.
It really does help to remind yourself of your overall objectives and provide a balanced decision.
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2.3 Does size really matter?
There is a myth we ought to dispel before you start planning your Program.
“Recruit a Sales-Force of Hundreds of Thousands of Affiliates Selling your Product”, scream the headlines of some of the Affiliate tracking software sites.
Over a period of time and with persistent Marketing efforts yes you will. However, the raw numbers are not important!
Be aware that the vast majority of your Affiliates will not be active. They may join and not post your links or they may not have the levels of traffic to make any noticeable impact on your sales.
Often quoted is the ’80:20’ rule: 80 per cent of sales are generated by the top 20 per cent of Affiliates.
From my own experience and in carrying out the survey below, I suggest that these figures are closer to an active Affiliate rate of just a few per cent.
Active Affiliates Survey
What percentage of Affiliates meets your minimum commission level each sales period? Percentage
Don't know 17%
less than 1% 6%
1%-2% 33%
3%-4% 17%
5%-6% 6%
7%-8% 11%
9%-10% 11%
11%+ 0%
Source: www.AffiliateMarketing.co.uk, October 2000.
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It’s quality not quantity that counts when it comes to Affiliate Partners.
Later we will examine some techniques to help increase your active Affiliate rates. We will also look at how you can recruit partners that are likely to fall into your top performers bracket.
2.4 Anatomy of a successful Program or what an Affiliate wants from you!
Whilst working to the philosophy that you need to create an attractive Program that Affiliates will want to join and continue to promote, pull on your Affiliate shoes and think about what an Affiliate wants from your Program –
Motivator #1
Money!
The prime motivator to join your Program will be for profit.
Let’s say that a potential Affiliate has a site that he wants to make pay its own way. Whether that’s simply a handful of dollars each month to pay for his web hosting fees, or enough to allow him to turn professional and give up his day job!
If you’re thinking of offering him 0.05 per cent on your $10 book on Whelk Farming, then think what his reply will be, hmm…
No thanks!
There are now thousands of Affiliate Programs available to your potential Affiliates. If an Affiliate is going to invest time and effort promoting your site then I’m afraid your offer and incentives will need to be a little more exciting.
Your potential Affiliates don’t want false promises of untold wealth for little or no work, just a fair commission that will make their partnership worthwhile.
Motivator #2 – Added Content
If your Program will bring a potential Affiliate quality free content, which in turn will generate more repeat traffic for him then adding your news-feed or interactive feature to his site could be motivator #2.
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There are some great services that provide genuine value added content to a site. For example:
www.moreover.com
Moreover.com offers free up-to-date news on hundreds of subjects. It also has its own Affiliate Program paying commissions when you refer another site to utilise their free content!
However, please don’t stake a claim to providing added content if it’s undeserving.
Many merchants tell potential Affiliates that by adding one of their banners to his site will improve its content. Maybe they believe that their banners are ’content enhancing’ but I can’t quite see why ☺
Although Affiliate motivators are mainly monetary based there are many more considerations a potential Affiliate can take into account before joining your Program –
If an Affiliate sends you his traffic will you close the sale?
How good a job is your site doing to convert your Affiliate’s traffic to sales? If you have poor sales copy, amateur graphics, a slow loading site or an old- fashioned ‘visible hit counter’ it screams ‘I’m a beginner’. In which case your Affiliate will move on quickly to his next opportunity!
I highly recommend Ken Evoy’s book ‘Make Your Site Sell’. It’s an essential guide for anyone who wants to discover how to improve their site’s ability to convert visitors into buyers.
http://www.sitesell.com
Do they like your product?
Your Affiliate needs to be sold on your product.
If he’s a customer and he likes your product then he’s much more likely to join your Program. Additionally, rather than just placing a banner on his site, he’ll spend a little time telling his readers why he likes your product - from personal experience.
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Is your Affiliate agreement fair?
Your Affiliate will look over your Affiliate Agreement, examining points such as:
Return-days.
Do you pay commissions when a buyer comes back to your site at a later date?
Minimum commission levels. Will you make your Affiliate wait forever for a check whilst their commissions accumulate to an excessively high minimum payment level?
Are your terms and conditions fair and acceptable?
Do they like and trust you?
If for whatever reason your site leads your Affiliate to doubt your credibility then he is unlikely to work with you.
You don’t need to be a well-known brand name. Personally I feel more comfortable dealing with an individual rather than an anonymous “Affiliate Team”.
It could be that your Affiliate doubts your product’s claims or notices a lack of customer testimonials.
Maybe he’s noticed in a recent discussion forum a criticism of you or your company. Rather than take a chance he’ll simply look for another Program that he feels comfortable with.
What sales reports do you provide?
Your Affiliate wants easy access to his statistics, and at a bare minimum, wants to be able to see:
1. Number of visitors he has sent to your site 2. Number of visitors converted to sales 3. Commission earned
What tools will you provide to direct traffic to your site?
Do you have a variety of banners in various sizes, which suit your Affiliate’s website’s style and color scheme?
What about some good, well written sales copy? Sure, your Affiliate may like to write his own but it’s always helpful for him to work from someone else’s ideas and suggestions of proven sales benefits.
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Are you making it easy for your Affiliate to create interesting links - perhaps using graphics and product shots?
What about a quality free report delivered by auto responder, or a search function to interrogate your database from his site?
Once the Affiliate has joined your Program how well are you going to look after him and retain his interest?
Do you pay commissions on time?
If you are late paying your Affiliate or don’t pay at all, rather than just take your links down he may feel it’s his duty to warn other webmasters not to join and…
trash your hard-earned reputation!
Do you stay in touch?
Provide your Affiliate with useful and informative newsletters. These will not only motivate but also help and bring ideas that enable him to earn more with your Program.
An automated email each time he generates a commission also does a good job. It reminds him of that great decision he made to join your Program and may spark ideas for new promotions!
Your Affiliate recognises that there are a multitude of Programs interested in tapping into his traffic. With this in mind he knows he can afford to be choosy over which Programs he elects to promote.
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I strongly recommend you become an Affiliate yourself.
Choose a topic of personal interest and create a site based around your subject. Find and join relevant Programs and experience first hand what’s entailed for an Affiliate to create a site, generate traffic and promote an Affiliate Program.
This will provide an invaluable and ongoing learning experience that will better equip you to help train your Affiliates.
2.5 Summing up
Affiliate Marketing is one of the most effective Marketing methods. However, do not underestimate the commitment required to provide dedicated resources and time to work your new sales channel.
Remember that size doesn’t matter. It’s the quality of your Affiliate Partners that counts.
When planning your Program you will need to find the right balance between your needs and those of your partners. Resist the temptation to penny-pinch. Look towards building strong long-term alliances.
Launch your own personal site now. The experience and knowledge you accumulate will provide you with invaluable resources and tips to pass to your Affiliate Partners.
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CHAPTER 3
3. Planning for success
Before worrying about which tracking solution you need, examine your requirements and create an action plan for your Program.
Once you know exactly what you want from your Program, the selection of your technology solution is so much easier!
3.1 Choosing the right model for your business
Affiliate Marketing comes in many shapes and forms and is constantly evolving as marketers experiment to find the best system for their company and Affiliate partners.
Let’s look at the different compensation models :
Pay-per-click
Pay-per-click rewards Affiliates with a set figure (usually just a few cents) for each unique visitor that they direct to your site.
Personally, I’m not keen on pay-per-click Programs as either an Affiliate or a Merchant. The prospect of earning 3 cents per visitor doesn’t really generate a lot of excitement.
However, it may be your only option if you’re simply looking for additional site traffic, or don’t have a product to sell / action that you want your visitors to perform.
If you use this compensation model be prepared to dedicate time to watching out for Affiliate fraud. Pay-per-click is one of the easiest ways for a fraudulent Affiliate to cheat the system. You’ll be surprised at the lengths some will go to for a moderate gain!
Pay-per-lead
Pay-per-lead rewards Affiliates when they refer a visitor who completes a certain action.
For example, you may want to increase your newsletter subscribers and offer a bounty for each new valid email address they sign-up.
Perhaps your product is too highly valued to be ‘sold off the page’ but your website generates email enquiries through the completion of a form. Allowing you to reward Affiliates ‘per lead’.
19 Pay-per-sale
Pay-per-sale, as the name suggests, rewards Affiliates for sales generated by visitors they have referred to your site.
The reward can be either a percentage of the order value or a set ‘bounty’ per sale.
Hybrid Programs
Hybrid Programs allow you to mix and match your compensation methods to suit your needs.
For example you may elect to reward your Affiliates with a small pay-per-click commission, as well as a pay-per-lead commission for newsletter sign-ups. You may then choose to add an additional percentage for any sales generated.
Two-Tier Programs
Affiliate Marketing allows you to ‘buy’ visitor referrals to your site. However, you can also take the next step and offer incentives to Affiliates for promoting your Affiliate Program.
Two-tier Programs bring an extra incentive for your Affiliates, not only to promote your products, but also promote your Affiliate Program by introducing new Affiliate Partners.
For example, at the same time as promoting your product, an Affiliate may have friends and business contacts that would be ideal partners for your Program.
Under a two-tier Program your Affiliate can introduce these contacts to your Program and in return he will earn an additional commission on the sales that they generate.
This has nothing to do with…
…Pyramids or multi level Marketing.
You’ll find that the ‘Affiliate Industry’ frowns upon MLM or Pyramid selling.
Those unfamiliar with the concept quickly assume that a two-tier Program is the same as MLM.
20 Whilst there is a fine line, there is also a distinct difference.
Two-tier Programs are designed to simply motivate those with appropriate contacts to publicise the Affiliate Program to other webmasters.
To maintain an ethical Program the focus must be maintained on the sale of product rather than simply recruiting more members.
Also, there should not be a ‘start-up’ fee. The income from an Affiliate Program should derive solely from the sale of product.
Typically you will find that a Program is no longer considered an Affiliate Program once you go beyond two-tiers. The logic is that the more tiers you have the more the commissions are divided through the levels - moving the focus away from product sales to recruitment.
Adding a 2nd-tier commission can be a very powerful way to leverage your Marketing efforts in promoting your Program. Nevertheless make sure you maintain focus on selling the product!
Two-Tier with a twist!
Many two-tier Programs offer a commission-based percentage on the 2nd- tier’s net sales i.e. earn 20 per cent on every sale you generate plus 5 per cent of the sales generated by Affiliates that you referred to the Program.
But that’s not the only way you can do it…
Some Programs offer a small bounty plus an additional commission. This is based not on the order value itself but on the actual commission due to the referred Affiliate.
For example, Affiliates earn commissions on their direct sales plus a $1 bounty for introducing a new Affiliate plus 5 per cent of this Affiliates commissions.
Paying Affiliates to give away freebies!
Your business model may require a mass user base fast.
Recently a number of new Programs have offered a CPA (cost per action) deal by giving away their free software applications for acquiring ‘registered users’.
These have proved hugely popular and very successful. If you’re giving away a free useful tool or service, plus paying a bounty to an Affiliate for helping, you have a combination Affiliates love!
21 Such a model will only fit if your business model is designed to reach critical mass fast and has a solid back-end product.
In the long-term this kind of Program might run into trouble. The estimated future value per subscriber may not meet expectations, or the next round of funding may not make it through.
If you are operating such a Marketing strategy I will presume that you have carried out very careful research on conversions and profits for your back-end product.
One point worth consideration – in your research findings was there any variation on conversion rates according to how the customer found your site?
Will Affiliate generated traffic improve or decrease these conversions?
Not sure?
Then test thoroughly.
Roll out your Program on a soft launch with selected partners and make sure there is no large difference in your conversion rates from your ‘spreadsheet’ samples!
Even more models and options!
The chance to be creative doesn’t stop there.
Some sites don’t always lend themselves to an obvious commission based route. Perhaps your business involves generating page views through unique applications and your income stream is based on advertising sales.
How about a revenue share of the CPM with the Affiliate that introduces users to your app?
Understand the different payment models and options.
This will help you to develop the best model to achieve your objectives whilst also providing an attractive offering for your potential partners.
3.2 How much should I pay my Affiliates?
I don’t know your profit margins or business plan so I can’t tell you exactly how much to pay your Affiliates.
Perhaps you already have an idea in mind?
22 Consider these pointers to help clarify your thinking -
• What are your current customer acquisition costs?
• What is your current profit margin per customer?
• Will you be rewarding your Affiliates on direct profits per transaction or covering your costs on the first order with profits based on future customer transactions (without Affiliate payment)?
• What are your competitors offering their Affiliates?
It’s easy to check on competing Programs.
Simply log on to any one of the popular Affiliate Program directories such as – www.AssociatePrograms.com or www.cashpile.com
Drill down through the appropriate categories to locate Programs working in your niche area.
Whilst checking their commissions, make sure you join the Program’s yourself to gain first hand notice of any new sales promotions!
It may be that you can’t beat your competitor’s commission payments.
Perhaps they have the luxury of generous funding and are offsetting profits for customer acquisition.
All is not lost! Later we will look at how you can find your edge.
Do remember though that the more you can offer Affiliates, the more attractive your Program will be. Don't expect Affiliates to get too excited about earning 0.05 per cent on a $10 product.
Here’s where you need to try your Affiliates shoes on for size!
23 You will also want to be able to motivate your Affiliates to continue and optimise their performance.
Top performing Affiliates expect, and should receive, a higher commission rate than the ‘standard deal’.
You could base this on a tiered performance basis. Reward increased sales volumes with additional commissions. Illustrate the relevant figures to help motivate your Affiliates to strive for the next ‘level’.
For example –
Earn 5 per cent on all sales up to $499 per month Earn 7 per cent on all sales from $500 - $750 per month Earn 9 per cent on all sales over $751+ per month
Alternatively, you might like to hold these bonus commissions back, presenting them to key partners as a selling point when making personal introductions.
Either way, plan an additional ‘Super Affiliate’ loyalty bonus with your figures.
3.3 Return-days and active cookies
It is rare for a visitor to buy on their first visit to your site. After having a quick look around your site there is a very good chance they will be distracted or want to compare prices before hitting the order button.
Where does that leave your Affiliate?
Your Affiliate will send you many sales but lose out on the due commission unless you activate a policy of ‘return-days’ or active cookies.
‘Return-days’ quite simply means that your tracking system places a cookie for a specified number of days on the visitor’s browser. If that visitor returns to your site within the specified timeframe the cookie is read back to ensure that the referring Affiliate is rewarded with their due commission.
Remember that you are building partnerships. An Affiliate earning commission is a happy and loyal Affiliate that will continue to bring you sales!
Activate your return-days for as long as possible.
One of my Programs has with a return-day setting of 9,999 days. In reality, the cookie, computer and / or customer will be long gone in that time frame. I put it in place to emphasise the point to my Affiliate partners that I want them to earn their due commissions.
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Depending on your visitor’s browser, return-days based on active cookies are not always 100 per cent accurate. A small percentage of users set their browsers to refuse cookies.
Do not underestimate the importance of return-days. Sophisticated Affiliates (the ones who really know how to drive quality traffic) will be checking your return-day policy as part of their due diligence when reviewing your Program.
3.4 When is Affiliate payday?
The biggest motivator for your Affiliates comes when they open their morning post to find your check, and a personal note, congratulating them on their sales.
I remember receiving my first ever Affiliate check. It was only a small amount but it was a mark of achievement. I was proud of myself for earning an extra $25 ☺
If that company had decided to save costs by only sending Affiliate checks when commissions reached a much higher figure I may well have lost interest. Loss of interest would have resulted in me dropping the Program in favour of the next ‘get rich quick’ offer that had found its way into my Inbox!
Find the right balance.
Yes, issuing checks will incur bank fees. However, setting a minimum accumulated commission amount at $200 is too high.
Find out what your banking charges are and then work them into your Program’s overall costs.
Ideally you should aim for a minimum check amount of $25-$50.
If your Program is planning to accept international Affiliates then bear in mind the costs they will incur when cashing your check - they may be rather high.
You might want to implement an option for your Affiliates to request a higher payment level in order to save their commission being swallowed up by their bank!
You also need to decide when you will do your Affiliate accounting.
Hint: To maintain Affiliate interest aim for monthly payments. Paying quarterly means too long in between checks!
25 3.5 Paying Affiliates electronically
Most Programs pay Affiliates by good old-fashioned check.
In a way this is a nice physical reminder of their efforts. There’s nothing quite like…
…opening your post to receive an Affiliate check.
However, issuing checks can be costly and take up a lot of administration time.
You could look at paying electronically.
PayPal offers an electronic transfer service. Provided your Affiliate has set-up an account you can make payments direct into their account via email.
PayPal also offers a batch processing service. Simply upload a comma- separated file listing the Affiliate’s name, email address, amount due etc. and PayPal will automatically process your payments.
With a maximum of 25 cents per transaction, paying your Affiliates via PayPal’s ‘mass payment’ option will probably be cheaper than issuing checks.
Affiliates receiving payment can receive up to $500 into their personal account - free of charge. However, once receivables accumulate beyond this amount they will have to upgrade to a premium/business account.
The upgraded service is free of charge but they will then incur a small fee on incoming payments (currently from 25 cents rising to 1.9 per cent of the transaction).
Until very recently PayPal transactions were only available to US merchants but they have recently launched an International service. Although mass payments are not yet available, they are promised as ‘coming soon’.
Using PayPal may help to streamline your Affiliate payments and is certainly worth a closer look.
In spite of this, remember that Affiliates may not be happy if they are forced to use this system. Especially if their earnings take them into the premium category and they incur costs when receiving payments!
26 Consider using this service as an option for those Affiliates that want it.
www.paypal.com
3.6 Will you allow Affiliates to ‘buy for own use’?
You need to decide on a policy of ‘buying for own use’.
Will you allow Affiliates to purchase your product or service via their Affiliate link, effectively giving them a discount on your service?
Some Programs strictly prohibit such practice whilst others actively encourage it.
There is a great advantage to Affiliates actually using your product / services. It provides them with first hand experience and better knowledge of what they are selling.
If they love your product they will tell their visitors why. This will result in recommendations far outweighing the selling power of any banner advertisement.
It makes sense to encourage your partners to utilise your products and services. However, consider the effect that this will have on the originating Affiliate.
If the visitor arrives from an Affiliate link and then joins your Program, with the sole intention of buying at discount, then the original Affiliate is effectively cheated out of their commission.
If you operate a two-tier Program then the ‘hurt’ is minimised a little. Decide on an on-going policy.
Consider stating in your terms and conditions that customers can create an Affiliate account and buy from their link for their own use. However, the Affiliate account must be established predominantly to market your products and not just to buy at a discount. It’s then down to you to police the activity and make a judgement call if you feel your terms aren’t being honoured.
27 3.7 Summing up - your payment checklist
So far we have only examined the ‘nuts and bolts’ of your Program but already you will find your Program is taking shape.
After working through this checklist you will have a great outline of your ‘Affiliate Offer’:
• What compensation method will you offer (per click, lead, sale)? • Will you offer a hybrid Program, mix and matching the above pay types? • Will you offer a two-tier commission structure? • What commission percentages do you intend to pay? • Do you have a private or public ‘Super Affiliate’ bonus worked into your budget? • What return-days will you offer your Affiliates? • When will you pay Affiliates and what will your minimum check limit be? • Will you offer Affiliates the choice of electronic payments or higher minimum payments for International Affiliates?
CHAPTER 4
4.0 Selecting a tracking solution that’s right for you
Often I hear comments like:–
”I have been looking for the right solution for the last six months”.
“We have been planning our Program for months”.
“We have spent months evaluating the right tracking solution for our needs”.
Why?
If you have identified that you need an Affiliate Program, every day, week and month of delay is quite simply lost traffic, lost sales and lost profit!
Spend six months planning and a few Internet years have past you by. You can’t afford to wait whilst your competitors establish long-term partnerships with sites attracting your potential customers.
Ultimately, the success of your Program will not be solely based on your choice of tracking solution. More importantly your success relies on, how you promote and work your Program.
28 The most important thing is to get your Program operational with a good Affiliate offer and start developing your Affiliate relationships!
With so many tracking options available, each with different features and costs, the whole decision making process when trying to find the right solution can become confusing!
Let’s try breaking it down in order to help you find the right solution. Meeting both your budget and time resources.
4.1 What you need from your tracking solution
Lets look at the basic functions of a typical tracking solution:
#1 Affiliate sign-ups
You want a potential Affiliate to arrive at your site, review the Affiliate offer and upon agreeing to your terms and conditions, sign-up.
Most systems allow you to choose if Affiliates are ‘auto-approved’ i.e. accepted as an Affiliate into your Program immediately or if all applications are held awaiting your manual approval.
Your brand is important and of course you want to ensure that sites displaying your banners and links meet with your desired image.
One draw back to this is the time wasted. If you insist on manually approving Affiliates, they will be delayed in the placement of your links.
The instant an Affiliate signs-up, their interest in your Program is at its peak, delays caused through manual approval runs the risk that their attention is focused on a new project by the time you accept them.
Wherever possible I suggest you auto-approve your Affiliates. You can, of course, still review all Affiliates and retrospectively cancel any undesirable accounts.
#2 Provide Affiliate link codes
Once approved your Affiliate needs to know how to link to your site.
Just about every system will send an automated email. This will provide the Affiliate with their unique link codes and instructions on how to place their text links, banners and any other link creative that you offer.
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#3 Real time reporting
Your Affiliates want to be able to check their statistics at their convenience.
Your system should allow them to log into an administration area, and at a minimum, check their click-thrus and sales statistics.
Typically this administration area will also include a download area enabling them to grab the code for your range of banners and buttons etc.
#4 Management reports
You will need real time statistics showing how many Affiliates have joined your Program, how many are active and the impressions that are being generated over your defined time periods.
Plus, of course, you need to see the total sales and commissions due to each partner.
#5 Payment processing
Your tracking system also needs to report on what commissions are due according to your minimum check cutting policy.
Of course, these are just the very basics. There are a variety of value added features amongst the different solutions available that you and your partners may find useful.
4.2 Choosing a network or software solution
In launching your Program you can either –
• Use one of the Affiliate networks such as Commission Junction or Linkshare • Use a third party ASP or rented software solution • Build you own system from the ground-up
Unless you have some very specific requirements your tracking needs will be ‘ready built’ and available commercially. If you require custom features, building your own system from the ground-up will be very expensive and time consuming.
The key decision you need to make is whether you will ‘go it alone’ with your own in-house tracking solution or use the services of an Affiliate network.
30 Networks lighten the load in terms of ‘management time’. However, that doesn’t mean your Program will look after itself!
Licensing a 3rd party software solution will suit those keen to keep contacts and Affiliate ownership in-house. It also suits those with niche Programs, especially those able to dedicate resources to actively recruiting key partners for their Programs.
4.3 Affiliate networks
Networks provide more than just the necessary tracking and reporting functions.
They provide important extras, which both reduce the ‘management’ time of your Program and provide a pool of ‘ready made’ Affiliates to tap into.
The ‘big 3’ US networks are: BeFree, Commission Junction and LinkShare.
Start-up costs vary greatly from approximately $1295 for Commission Junction, rapidly rising to $5000+ for LinkShare and Be Free.
You will also pay varying transaction fees. For example, with Commission Junction you will pay an additional 20 per cent of the commission paid to an Affiliate. Note that this is based on the commission payments not the actual order value!
Additional costs for LinkShare and Be Free can rise steeply once you start to include check writing fees, banner serving costs, Affiliate approval and support costs etc.
Your network will usually handle paying individual Affiliates. Some will also ensure Affiliates are pre-approved to their network’s policy i.e. no adult sites etc. Some also offer fraud protection services.
Each will provide you with detailed statistics. But more importantly they will provide access to their base of hundreds of thousands of existing Affiliates.
Once live and your Program is promoted through the network your Affiliate numbers will quickly increase.
It’s worth noting that although your Affiliate numbers can quickly reach hundreds or thousands, the Affiliates sitting in the wings of your chosen network may not be the most relevant or active Affiliates for your specific Program.
Don’t rely solely on your network’s efforts for your Affiliate recruitment.
31 Remember that only the top few percent of any Program’s Affiliates generate the bulk of traffic and sales. Your ideal partners will need to be tracked down and introduced to your Program personally.
However, the networks can provide you with a reliable, scalable reporting & tracking system, whilst reducing your time in issuing checks and approving Affiliates.
US based Affiliate Networks:
www.befree.com www.cj.com www.clickexchange.com www.dynamictrade.com