For a product owner, one of the most overlooked revenue sources on the web is sales through affiliate marketing. The typical route goes something like this: find or create something to sell, test the market, set up a website, then start pushing traffic to it with Google Adwords, social media, SEO, or other methods. But surprisingly many businesses ignore the big potential that lies in having other people actively promote and sell the product for you.
Having affiliate marketers sell your product is like having a full staff of salesmen that consistently work for you to bring up your sales. Since they are paid strictly on commission, there is no salary overhead or other expenses associated with traditional sales rep staff. With the help of just a few solid affiliate marketers on board – you can potentially bring additional hundreds of thousands, or even millions of dollars to your bottom line. That is of course, assuming you already have a profitable business with something that is proven to sell. If you are not yet at the stage of making profits – don’t even think about using affiliates until you are ready!
But even though affiliates can help you scale your business into new levels – getting to that point can be hazardous course if you’re not sure what you are doing. There is more to it than just setting up tracking links, offer a payment plan, and wait for the money to roll in.
I spent years as an affiliate marketer myself, and became good friends with many affiliates – and affiliate network owners in the industry along the way. I have also gotten to know product owners (often called ‘the advertisers’ by affiliates) and progressed into product development and ownership myself. With all of this, I sit with a fairly good understanding of what all the parties want – and how an ideal affiliate / product owner relationship should look like.
As a product owner, there are two questions you need to ask yourself before you are ready to move forward:
- Are you ready to take on affiliates?
- Will affiliates want to sell what you offer?
Are you ready for affiliates?
Know your own numbers
This first step should be a no-brainer, but judging by the many hopeful business owners that approach investors on tv-shows like Shark Tank, it always baffles me how so many otherwise intelligent people actually don’t have a full grasp of their own numbers.
To cut it short – you should have enough margins to pay affiliates AND to cover costs associated with running through an affiliate network (transaction fees, other percentages).
Know your own sales funnel
So – you must be profitable before you can even think about bringing affiliates on board to help you. But I should be more specific and say that – not only do you need to be profitable, you also need to optimize your own sales funnel to be certain that any visitor to your site or landing pages will be as ready as possible to purchase from you. In other words – how well does your site SELL to every visitor?
We’re talking about conversion rates here, and it is one of the most important things any smart affiliate is going to look for before they consider investing time and money into driving traffic to you.
Ok so, your website is profitable for YOU at this point. Sales are coming in from various online sources – and it is costing you less in merchandise/materials/production costs/import fees/whatever it is – than the stacks of money coming in from customers drooling over your stuff. You are in the green!
But wait…you admit that even though you are profitable, you’re saying that really only 1 or 2 out of every 583 visitors actually convert into a sale? And what’s that you say..? You admit you kinda got lucky because not long after you put up your shopping cart and quick product page you never really bothered to test different elements of it because….well, sales just started trickling in and it must be working, right?
Sure, it’s working. You’re not LOSING money. But that is not what an affiliate wants to hear if they are going to work with you! They want to hear that you have made damn sure your product pages have been tested, split-tested, optimized, tweaked, re-tweaked, and that you have squeezed an extra 0.5% here and another 0.7% conversion rate here and here and here. They want to hear that for every 583 visitors, you are seeing around 47 sales – and you are seeing that number because you tested and optimized the living crap out of it before you looked for affiliates! There, got it? Affiliates will expect that what you have is already working – and that it is working REAL WELL.
Conversion optimization is a topic onto itself, but here is a quick check-list:
- ALWAYS have a call-to action clearly visible on the page.
- Anything of immediate importance (bulletpoints, short descriptions, buy buttons, etc.) should be visible above the fold, preferably not under the 768 pixel screen height limit
- Include your USP and anything else that can convince visitors why they should choose you
- Help to instill trust in your visitors with any references to reviews, quotes from satisfied customers, etc.
- Ensure that your page(s) load fast and aren’t bloated with heavy images
- Make the buying process as quick and as few steps as possible. If possible, 1-2 page checkouts are ideal. Avoid page after page after page before the sale is final.
- If possible, try to make your pages mobile-friendly. Use a responsive theme or have a developer make your pages adaptable to the most common tablet and smartphone screen sizes.
After making sure you have a site or sales page(s) that have proven to convert as well as they can – THEN start preparing for the technical setup. By the way, I’m not saying you should spend forever + a fortune on testing/optimizing until you are blue in the face, but at least give it some good effort! It is healthy for your own sake too, even if you end up not using affiliates. Always optimize! Anyway, so by technical setup I mean of course what goes on in the background and tracks all affiliate sales, commission calculations, statistics, payments, and so forth. Now granted – there are two ways you can go with this. Either A) get in touch with a reputable affiliate network, or B) do it all yourself.
Working with an affiliate network
Benefits of working with an affiliate network are:
- You get help setting (almost) everything up in a more streamlined process
- You get instant exposure to all the affiliates who are signed up for that network
Downsides to working with an affiliate network:
- You may have less control over who runs your offer, and what they are doing with it
- Requirements / restrictions in terms, pay cycles, etc. otherwise not constricted if running direct on your own
There are mainly three types of affiliate networks:
1) Digital product networks for ebooks, webinars, membership sites (Clickbank.com)
2) Physical goods / Ecommerce networks (CJ.com, ShareASale.com)
3) CPA / Lead / Performance marketing networks (Neverblueads.com, A4D.com, Convert2Media.com)
So depending on what type of product(s) you have, and you want to try starting out with a network, check out the appropriate type of network from above. Each network will have different terms and requirements for you to sign up as an advertiser, but they all usually require you to pay an initial setup fee.
Be ready to pay them The money that gets paid to affiliates will come from funds you have deposited to the affiliate network. Some networks handle this differently, and will sometimes allow some flexibility in how long you have to pay. For instance, for CPA networks – advertisers (that’s you) sometimes only pay the networks on 30- or 60-day cycles, and the networks take the hit first in order to pay their affiliates weekly or bi-weekly. Talk to the network you are thinking about working with, and see what they require.
Back-end management You will be assigned a rep from the network who will help you with setting things up, and you will also get access to their back-end interface where you can manage and monitor your ongoing campaigns, pay structures, etc. Likewise, the affiliate network should provide you with a way to spot “bad” affiliates who are sending you fraudulent or poorly converting customers.
But be careful here not to jump the gun too quick – dropping affiliates left and right at the slightest notion of foul play. If you piss off the wrong people (affiliates), it can give you a bad reputation in the affiliate communities and forums, so always try to resolve any issues with your network rep and/or the affiliate before you take drastic measures. Communication is key.
The affiliate networks will take a certain percentage of your sales (this is after all, how they make their money), so as I mentioned in the beginning – your commission structure (fixed $$ or percentages + transaction fees) must make sense for your own sake too with respect to your margins.
You should already know your numbers before going in, and don’t just pick commissions out of the air because “they sound good”. You may also set things up to reward your best performing affiliates with a bigger payout after they have reached certain pre-set sales goals. This is a great incentive to make sure the best affiliates will want to sell more of your stuff – and it will also make you more money. Win-win!
Next, most networks will expect that you provide advertising creatives such as banners in various sizes, and ad copy texts for affiliates to grab and use. Now – when I was an active affiliate myself, I never used these creatives. Often times, they were cookie-cutter and looked like they were thrown together in a hurry by a disgruntled intern at some cheap agency. Either way, just know that you have to provide creatives and ad copies for affiliates to use – but don’t expect anyone to actually use them.
Product datafeeds If you have a good amount of products, you should definitely provide the affiliate network with a datafeed. This way, an affiliate can pick and choose the products he or she wants to promote – or perhaps download your entire feed and build their own niche-site around it (I did this for a while, as a ShareASale affiliate). If you do frequent product updates, consider offering your datafeed as a downloadable file that can be accessed on-demand.
Determining your terms and limitations
Another very important aspect is to write down all the rules that you will require affiliates to follow. Your affiliate network rep will help you get these straight and possibly give you some good recommendations – but here are some of the things you should think about in your terms and conditions:
- What type of traffic should your affiliates be allowed to send to your site? Search only? E-mail/newsletter traffic? Display traffic? Anything goes?
- Should you allow incentivized traffic? For physical goods, this is less risky and not that big of a deal – but if you are paying affiliates per lead or for trial signups only – incentivized traffic should be avoided. (Incentivized means that the affiliate may give something to the end user in return for signing up / ordering through their links).
- Should you limit what keywords affiliates may use in promoting your product? Keep this in mind if you yourself are going to be running your own search campaigns – possibly alongside with affiliates.
- Should affiliates be allowed to place their own landing pages before visitors are redirected to your landing pages? If so – you might want to request approval of such pages.
- Be clear on what constitutes a sale. For physical goods – make sure that the order is completed, and was made by a real user with a real credit card.
- How will you handle cancelled sales or refunds – and how will this affect the affiliate’s payout for those sales?
Setting up for direct affiliate relationships
If you decide to go solo, there is nothing wrong with that. You should still think about the things I mentioned above, but you also need to figure out more of the technical stuff yourself. You are going to need a system such as HasOffers.com for setting up and managing things on your own.
Benefits of working alone, direct with affiliates:
- More left in your pocket, as you are not having to pay anything to middle-men (affiliate networks)
- The chance to more carefully pick who you want working with you
- A more personal approach towards the affiliates
- You will often attract more serious affiliates who want healthier margins and a more direct merchant relationship
- More overall control
Downsides to working alone, direct with affiliates:
- Harder to get the word out there about your own affiliate program
- You are on your own, and don’t have any middle-man “negotiator” (affiliate manager at the network) to resolve disputes or issues between you and the affiliates.
Will affiliates want to work with you?
Inexperienced affiliates will just blindly look for whoever is offering the highest payout, while seasoned and experienced affiliates have a better understanding of what the “right” payout should be for a given type of product. I suggest that you look at your competitors or similar products to see what is being offered to affiliates from them. You can search for YOUR PRODUCT on the affiliate networks themselves, or simply Google “YOUR PRODUCT affiliate program”.
For example, let’s say you are in the sports gear industry, and your competitors are selling a very similar titanium bicycle pump to the one you offer. You notice that they are paying affiliates 8% of sales. If you then offer affiliates 2% on the same item – chances are you will have less (if any) affiliates interested in even testing sales out for you. You have to stay somewhat competitive. It’s ok to pay out a little less than your competitors do – IF you can prove that your sales funnel actually converts better than the other guys!
Because – as an affiliate, at the end of the day, I want to know how much money I can add to my bottom line.
Smart affiliates also know that the best payout isn’t always the best thing. The affiliates who are going to bring you volume, are the ones who are paying for traffic. They pay close attention to their spend, conversion rates, and income. The most valuable metric to an affiliate is going to be the EPC, or Earnings Per Click. Here is an example:
Your affiliates get paid $20 for each sale of your product (PAYOUT) Your sales page converts at around 4% (CVR)
EPC = PAYOUT x CVR = $20 x 0.04 = $0.80
The affiliate is paying for traffic, at perhaps $0.60 (CPC)
Therefore, he is earning a Net EPC (NEPC) of EPC – CPC = $0.20.
This is how much he will profit for every click he sends to you.
Affiliates always shop around and compare for the best stuff to sell. Where can they make the most money? And…if there are two similar offers/products – which one makes more sense to them? Now consider this: Phil the affiliate is looking for affiliate programs for titanium bicycle pumps. He notices there are a few players in the market:
Can you spot the better deal from the Phil the affiliate’s point of view? Remember, better = better EPC.
Now you see why having a well-oiled and greatly converting landing page matters so much. It also means you don’t have to compete with others to offer the highest possible payout, because smart affiliates (and trust me, you really only want smart affiliates) will know that conversions (and hence, EPCs) matter way more than the payout dollar amount.
But how about that “claimed” conversion rate? How can the affiliate be sure that each of those three companies actually convert that well? The answer is – they don’t – and this is where they will often split-test different merchants, or split-test the same offer from different affiliate networks. Why?
- Because some affiliate networks have a shady practice of “shaving” off conversions to pocket for themselves. This is one big reason why some affiliates have moved on to work directly with merchants instead of using middle-men, and..
- Listed conversion rates are averages, not absolute. If the company has a hundred affiliates who are sending poorly converting traffic to them – the listed conversion rate is not going to look good. That doesn’t mean there is anything wrong on their end. It could also go both ways. A conversion rate could be artificially high if the average is based on just three guys who have spent truckloads of money on traffic and optimization of their ad sources – just to get the conversion rate to that point.
Be prepared for affiliates to test you out with some test traffic at first. If they like what they see – they will stick around!