THE AFFILIATE MARKETING PRIMER

7 - SETTING UP AN AFFILIATE PROGRAM (Part 1 of 3):

We'll soon get to affiliate program software and the nitty-gritty of setting up affiliate programs.  First, I hope that you've read through the rest of the primer...

The initial section, "What's Affiliate Marketing All About?", gives an overview of why the targeted marketing that can be achieved via affiliates is to a company's benefit. No doubt one of the reasons you want to start an affiliate program is that you like the idea of paying for the result instead of paying for the ad. This equates to greater profit!

I read that six million people born from 1961-1981 have started their own businesses, representing about 80% of new American enterprises... It's a good guess that a large proportion of these are web-based businesses. ...Then there are all the other countries' web-based businesses.

Add to this the estimate that plenty of websites offer affiliate programs that garner up to 70% of their profits.

...Maybe these figures give you an idea of how much you might have to gain from making the effort to "do it right"!

Yes, having an affiliate sales force spread the word ("virally") about your product or service is a powerful concept.  But it does come with a price tag...
  

KNOW THE PRICE:

Here's a basic fact that has been somewhat naively overlooked in the stimulating novelty of internet and affiliate marketing:  There is a cost to the customer as well as to the merchant when you add in a layer of marketing complexity, and the reason is that someone has to pay for the additional tasks involved for the merchant and the additional income to be shared with a sales force.

Think about multi-level marketing (MLM - now more often called "network marketing")...  Have you ever noticed how much more expensive MLM products are than similar products are priced once they hit the shelves and catalogs?  That's because the draw to all those distributors (the outside sales force) is the large commissions they can make from their sales and their downlines (from their downlines, only if there are sales).  So the prices have to be padded "largely" to accommodate the expectations of the willing sales force.

A little pondering reveals that affiliate marketing has a lot in common with network marketing...  They're both a matter of recruiting a relatively anonymous outside sales force, without having to do a lot of hands-on ministering to the more traditional sales employees.  They also share the viral element I referred to a moment ago - wherein the merchant's promotional efforts are largely taken up by others and carried on by others.  Affiliate marketing is a more automated version that works particularly well in the online environment.  

In MLM, "distributors" (ID-coded sales personnel) share the burden of encouraging other distributors to be effective.  In affiliate marketing, "affiliates" (ID-coded sales personnel) are largely left to their own devices, despite any aid merchants or a possible upline give their affiliates/sub-affiliates, because there is rarely a personal connection amongst these people.  That's just the way it is.  In both cases, the sales force's job is to interest others in someone else's product/s - one tends to do it more by word of mouth, the other more by various automated webmarketing ploys (though some MLMers do market online, and a few affiliates promote products offline).  And in both cases, the majority of the sales force is untrained and on the ineffectual side, so the company relies mostly on the few who are truly effective, plus the lesser aggregated profits from the rest, as the payoff.

But the common thread I'm highlighting is that financial factor which drives the best few as well as the relatively ineffectual many of either marketer... their profit potential.  And in this time, now a number of years into the phenomenon of affiliate marketing, more savvy affiliates are looking for more profit potential - and many automatically shun programs that don't pay them at least 30% of sales (of something that will give them, say, a minimum of $10 - and of course preferably quite a bit more!). ...That's not chicken feed.  The heyday of 3%- or even 10%-commission programs seems to be past (unless, of course, we're talking about commissions on hundreds of dollars - but such affiliate products are few and far between, and how feasible is it to successfully promote such a product?).

This is not to say that you have to pay the 35-50+% commissions that are common with ebook promotions (naturally it's much easier to find the 30-50% profits to share if you're selling a product that literally may cost you only a few dollars to produce and sell - plus the cost of a couple of fancy software programs, maybe).  But if you are considering marketing something on the web - even if the product itself doesn't target webmasters (e.g., website software, how-to-webmarket ebooks, and the like) - you're probably going to be asking webmasters to be the affiliates, right?... and most of them will have heard about "the other guys" who pay 50%.  So your product pricing may well be the major deciding factor in the question of whether or not you should become an affiliate merchant.

You'll have to give this considered thought.  If you're a "little guy" who wants to sell via a low-maintenance website and are (going to be) satisfied with the traffic you can get to it via other means, perhaps you'd rather not bother with an affiliate program...  Especially if your product doesn't lend itself well to a high ticket price (i.e., your clientele isn't likely to pay beyond a moderate amount).  It all depends on your audience, the drawing power of your (intended?) product/s, and on your desires.

If you do want to take advantage of the business expansion that affiliate marketing can indeed offer, read on! 

Whether you start with a dynamite website concept... Restructure an existing web venture to take full advantage of the best targeting of a promising market... Or create an alluring website around the product or service that you wish to be the basis for your affiliate program... The first step to a successful affiliate program is a successful product/marketing plan. ...See the next section, "START AN AFFILIATE PROGRAM AFTER YOU KNOW YOU CAN SELL IT".

The primer section "The Anatomy of an Affiliate Marketing Program" will have prepared you for the types of immediate decisions you'll have to make about how you want a program set up.

Then, you'll want to give thought to the points made in the section "How To Select the Best Affiliate Programs"... Because you want yours to be good! - and there you can see what types of features prospective affiliates are desirous of.

All of this, and what's to come, will help you plan your affiliate program, with both affiliates and your company in mind. ...Because if your affiliates are happily profiting, so are you!

Onward to how to start an affiliate program - but first, a very important "detail"...
 

START AN AFFILIATE PROGRAM AFTER YOU KNOW YOU CAN SELL IT:

Meaning...  If you haven't tested the success of your product or service before devising an affiliate program for it, you won't know whether it's the program or the offering that fails, if failure comes.  If that doesn't matter to you, okay... But don't blame affiliate marketing if things don't go well!  If your product/service is tested, only then can you judge the effects of a new marketing venture.

If your website doesn't already pull in the traffic and convert much of it to sales, work on that first. Ken Evoy's book Make Your Site Sell! is the best money you'll ever spend for help with that (because it's worth many times the little that it costs!). It's recently been updated and greatly expanded - so it's now just that much more valuable than ever.

The SiteSell book Make Your Words Sell! (by Joe Robson, with help from Ken) can also help you really burnish your copywriting to give all your writing (on your site, on your order page, in your ezine, etc.) the most magnetic pull possible!

After all, don't you want to be able to assure your affiliates at the outset that this thing is going to fly?

Then, when you know you can keep it off the ground, start slowly...  Before you start to really build up your program, give yourself time to work the bugs out!

Now for the particulars...
 

There is some "affiliate software" out there (I don't know its name) that is supposed to be able to automatically activate a link... so that no real visit to a site results. Supposedly some unscrupulous affiliates might make use of this to garner more per-click payments. (Possibly just surfing around on one's own site could similarly boost the per-impression tally?)

...Paying commissions on leads or sales precludes this from being a problem. (Those are also the most truly "targeted" choices and usually a better deal for affiliates.)

     An aside: If you're concerned about any legal aspect of setting up an affiliate program, you might want to refer to Glenn Sobel's list of internet attorneys on his site, AffiliateAdvisor.
 

MAKE COMMISSIONS WORK FOR YOU:

In terms of payouts in setting up affiliate programs, a guideline you might consider following is:  Commission rates can be higher for higher cost-to-price ratio ("high-margin") goods (such as books or software that can be downloaded by or emailed to customers).

Another is that a high first purchase commission (if you allow affiliates commissions on future purchases from customers they have introduced to your company) is an incentive to affiliates to attract new customers. Ken Evoy, of SiteSell.com, values new customers so highly that he's even willing to pay affiliates more than his net cost for first purchases of MYSS!.

One other option you might wish to consider is paying your highest-producing affiliates a larger commission - either a larger percentage, or perhaps a bonus based on number of or dollar amount of sales in a given month. You could also reward affiliates for giving you great product or marketing ideas you use. It makes sense to reward the people who are helping you the most... Plus this is a fine incentive to other affiliates to try harder.

There may also be this issue to consider:  Will you give affiliates a commission on the products or services they buy from you? Perhaps you'd be afraid that that's all they'd do (i.e., that they'd sign up just to buy at a discount). But on the other hand, you are willing to pay them the same commission for any other customers they bring to your site... And the happier they are with your program, the more enthusiastically they're liable to promote it. Besides, once you build up a sizeable affiliate base... wow, those can be a lot of customers! - why not sell to them?

Lastly, don't be fooled by the idea that affiliate programs are "totally free to join!" for affiliates... Affiliates have to invest a substantial amount of their precious time in getting set up to promote your offering. The more experienced the affiliate, the more s/he has to offer you - but the corollary is that such an affiliate also has become wise to his or her own value (and is more analytical about yours)... The more you can give, the more you'll get in return.
 
 

Apart from the details involved in starting an affiliate program, you have one big decision to make:  Will you set up and run your own, or will you pay a clearinghouse (sometimes called an "affiliate network") to do the work for you?

You may wish to do some calculating on possible effects on your bottom line of either option in order to make such a decision. Or the decision might be purely obvious if you just don't want to spend any time fiddling with something of this nature yourself (or at least not now). But, as for affiliates, so for you - the choice of how much effort you want to expend yourself on this is yours to make... Whatever fits best with your plans is best.

You may be able to save money (i.e., make more money) by operating a program yourself with affiliate program software, as you can avoid monthly fees and/or the additional per-result fees the clearinghouses charge.  And you'll be able to design it exactly the way you want it.

Aside from flexibility and cost savings is the "branding" benefit you (and your affiliates) gain from having your own company/website name in the URL your affiliates (and prospective affiliates) use, instead of that of the clearinghouse.

Matched to that is the fact that some search engines use "link popularity" as one factor in prioritizing your website's listing... If you have an affiliate program with affiliate links coming directly to your site, these may be viewed by the search engine as "links"... so visitors to your own site could increase through better search engine placement.

The major downside to operating a program yourself, once set up, is that you must do all the work of keeping track of/making payments and recruiting your own affiliates. (See "AFFILIATE PROGRAM SOFTWARE" in Part 2 of this chapter for some recommended options of different types.)

Still, there does seem to be a good deal of flexibility in the choices offered to you by the various clearinghouses. You have the high card in your hands in any case, when it comes to attracting affiliates, which is the amount of payment offered. Plus there are things you can do outside the clearinghouse arena to make your program more attractive and your affiliates more successful (which, of course, translates into higher income for your business).

Other than it involving less work for you, perhaps the greatest advantage of going with a clearinghouse is that it serves as a channel for recruiting more affiliates. Interested people will visit the clearinghouse's website to search for programs that will work for their niche... Which means you'll automatically attract affiliates who are suited to your own purposes (that is, "well-targeted" affiliates).
 
 

Following is a list of clearinghouses. You'll want to check carefully into the policies and fees of the vendors you're interested in, as they differ greatly in some instances.
 

AFFILIATE PROGRAM CLEARINGHOUSES (3^rd-PARTY VENDORS):

[updated 3/2006]
 

First, I'll say that as an affiliate who has been signed up with some of the above-listed vendors, I very much favor the approach of Commission Junction, in these respects:  

• Easy-to-follow sign-up features
• Allowing for one self-chosen password for any number of programs you wish to sign up for
• The website is relatively clear and easy to navigate
• They pay for referrals of new affiliates and merchants

(Each of these points I considered to be a downfall for many of the other vendors. ...Though things may have changed by this time - I'm discussing CJ from an old perspective, merely to speak of some points to consider.  It's important to have what you want, but one of the things you'll want to be looking for is satisfied affiliates.)  

Commission Junction, by the way, now requires that affiliates make some money for them within a certain period of time - which makes it inconvenient for affiliates to experiment with their programs.  This practice is convenient for CJ, in that it tightens up their database of affiliates by weeding a good many out - but whether or not it helps the merchants any, I can't say for certain.  I would think, though, that a merchant would rather have the chance of a sale from a "lesser" affiliate than not; and that the practice keeps a goodly number of affiliates from signing up in the first place.  (Since CJ is a long-established major player in this field, it's likely that other clearinghouses will be seeking to fill in where CJ's policies exclude.)

This excerpt from an article by Allan Gardyne (www.AssociatePrograms.com) presents one established company's views of two clearinghouse vendors (ClickTrade and Commission Junction) from the merchant's perspective, and a rationale for a switch between them.  (I include it as the only such comparative information at hand, not as a particular plug for CJ.com. ...Not to mention that ClickTrade no longer exists - hmm! It's illustrative of the types of issues that affiliate program managers face.)

ClickBank is a truly easy and inexpensive means of setting up as an affiliate merchant (and some merchants have started here and gone on to more sophisticated models as their businesses has progressed). ...Though I wouldn't place much emphasis on the possibility of prospective affiliates locating your program via ClickBank's list - it isn't easy to use, and I would rate the overall quality of the programs as quite a bit lower than that of the other (more expensive to use) clearinghouses.  However, its accessibility has made it extremely popular as a means of selling intangible (only) products or services on the web - and many people (including some who are extremely successful) do also take advantage of its built-in single-tier affiliate program option... more on ClickBank (and others) later on.
 
 

So, as you've noticed if you've done any looking at affiliate clearinghouses, they can be an effective means of matching "cruising affiliates" up with your business, should you choose to go that route in establishing a program.  Of course, there are other methods of finding affiliates...

You can list your program in a variety of directories [see a selected list "AFFILIATE PROGRAM DIRECTORIES" in the primer section "How to Find Affiliate Programs"].  (You'll have to give some thought as to which would be the most effective category for you in each directory.)

Though with the incredible growth in popularity of affiliate programs, most of these directories have grown huge - and your new program may well be a drop in the ocean.  So you'll probably need to look for other ways to attract affiliates, as well.

You can advertise for affiliates in ezines or trade magazines whose subject matter is related to your company's offerings. Here's a forum that fully welcomes announcements of new affiliate programs:  the I-HelpDesk Web Review Discussion List - join here:  http://www.helpdeskwebreview.com (MLM programs not welcome).

One of the most cost-effective ways of adding affiliates to your team is to set up a multi-tier affiliate program and let affiliates recruit for you.

Making it clear on your website that you do have an affiliate program is another free means of attracting (targeted!) new affiliates.  This is a little controversial, in that your advertising an affiliate program might give people an obvious chance to save themselves money by signing up as an affiliate and then buying your product.  That would mean less profit for you, of course; but it could also mean that your affiliates would lose sales thereby, depending on how your affiliate URL tracking works.  Sticky.

If you wish to put some effort into finding affiliates without having to advertise, you might also consider this:  Find out what sites are linked to your competition's websites (an easy way to do this is via AltaVista.com's search feature "link:www.othersite.com")... If you know that your competition has an affiliate program, many of those links will be from their affiliates' sites. If your offering isn't exactly the same, the ones whose sites you like might be happy to consider adding your program to their affiliate arsenal... You could approach them with a personal email message telling them about your program. Any good high-traffic site, particularly, on which your offering might be complementary is a possibility for such a tactic.

An even easier, and more powerful, approach to the mechanics of this is to use Neil Shearing's Internet Success Spider. It's an online service that you can use as often as you like to find and prioritize by size the sites linked to any website (your competition's or your own). As Neil characterizes it, the Spider is a great way of finding "super affiliates", those already successful in other programs who might like to add in yours.

You'll no doubt come up with other creative ideas for detecting and recruiting prospective affiliate partners in your own field. Here is one of those places where you can help yourself by remembering that venues other than websites are possible for advertising... Might flea-market or convention vendors, for instance, pass out brochures on your website? What about partnering with companies presenting their wares or services at conventions or shows?

You too would likely benefit from reading Guerrilla Marketing [and the other Guerrilla books - click here to go to Guerrilla Marketing: Secrets for Making... at Amazon.com, if you like] by Jay Conrad Levinson. It is an excellent brainstorming base for creative marketing concepts.  And there's great basic as well as specifically online-oriented marketing information, in a feed-your-brain format, in his new online course, Guerrilla Marketing for the New Millennium - I've taken it and highly recommend it!
 

There's lots more! - See PART TWO of 7 - SETTING UP AN AFFILIATE PROGRAM...

  Wondering what to try next in your marketing arsenal?...  ThinkJointVenture.com