THE AFFILIATE MARKETING PRIMER

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

I'm directing these comments to individual entrepreneurs and small businesses, as you may have surmised - many of whom will have started out as affiliates themselves.  We'll soon get to affiliate program software and the nitty-gritty of setting up affiliate programs.  First, though, I want to make sure that if you're not an experienced affiliate you've read through the rest of the primer and thought about certain related things...

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 several years ago now 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 web-based businesses that younger, raised-on-the-web folks are operating, and 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 (and some up to 100%).

...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 or "easy profit" look 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.  (This is a demonstration of what is known as "the 80/20 rule" - the 20% being those who drive the bulk [maybe 80%] of the sales, the 80% being "the long tail", or those affiliates who produce far less per person... but it's still sales!)

The common thread I'm highlighting is that financial factor which drives the best few, as well as the relatively ineffectual many, of either type of marketer:  their profit potential.  Affiliates do have to put in work for their gains - the moreso as websites/blogs proliferate; also, online readers are more attuned to advertising - and good at shutting it out, so care is needed in promoting any products.  In this time, now a good number of years into the phenomenon of affiliate marketing, more savvy affiliates are looking for more profit potential.  Many automatically shun programs that don't pay them at least 30% of sales (of something that will give them, say, a minimum of at least $10 - and of course preferably quite a bit more!). ...That's not chicken feed to the merchant.  The heyday of 3%- or even 10%-commission programs is 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?).  What will your product/s feasibly sell for?

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% (or more). 

So your product pricing may well be the major deciding factor in the question of whether or not you should become an affiliate merchant.  Even though cheap products may produce sales because inexpensiveness is attractive to buyers, cheap products don't give affiliates enough of a chance to earn.

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.  (If you haven't read that, from the affiliate's point of view, you'll want to do so round about now.)

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 still an excellent read for help with that.  It's a free download! (and was worth a lot more than it originally cost).

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!  The book is no longer new, but the principles discussed don't die - and it, too, is free.  (You can write well for the web, even if you doubt it.)

After all, don't you want to be able to assure your affiliates at the outset that this thing is going to fly? - you need a well-put website!  (And please, get someone to copyedit it if language details aren't your thing.)

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 still some concern about "click fraud", whereby affiliate linkes might be automatically activated... so that no real visit to a site results.  Some unscrupulous affiliates might make use of this to garner more per-impression or per-click payments.   (Google has set up an information page about this topic, if you'd like to delve further.)

...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 - if not for merchant advertisers.)
 

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 was even willing to pay affiliates more than his net cost for first purchases of MYSS!, back when it was sold.)

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?  (Think of them as you would a buyer's club - they receive a discount for promoting your business to others.)

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 (often called an "affiliate network") to do the work for you?

Unless we're talking about one of the cheaper networks (like ClickBank, ClixGalore, or PayDotCom), the latter is a choice mostly for a larger business, or at least one that is well-established in earning power.  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 most search engines now 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 visits 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 commissions, making payments, and recruiting your own affiliates.  (See "AFFILIATE PROGRAM SOFTWARE" in Part 2 of this chapter for some  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 some of the most popular 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.  Some offer scaled levels of service.  (Look for testimonials from other merchants.)

Another factor you'll want to consider is whether or not to extend your reach beyond your own country.  Not all clearinghouses can accommodate that.

Only some programs allow for ongoing subscription sales.

Only some clearinghouses allow for (or specialize in) commissions from leads.  While affiliates who really "get" pre-selling may greatly appreciate leads vs. sales (and have done a lot of the work toward a sale, which is good for the merchant), this does leave the rest of the work of selling to you.

Also note that affiliates aren't just webmasters (typically called "publishers") anymore.  Aside from offline promotions they might want to pursue (still rare), they might wish to promote affiliate programs via ezines, search engine advertising, or social media sites.  If the clearinghouse you select doesn't allow for this, you've lost some marketing power.
   

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

[updated 1/2010]
 

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 a number of other vendors. ...Though I'm discussing CJ from an old perspective, merely to speak of some points to consider, and many other clearinghouses have "caught up".  The main point is:  It's important to have what you want, but one of the things you'll want to be looking for is satisfied affiliates - so there may be things to consider other than your own needs. 

Commission Junction, however, 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; whether or not it helps the merchants any, I can't say.  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.  I can tell you that during times when I've taken a hiatus from active webmarketing, an inactive website can still make sales (again, this is the power of "the long tail").  (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.)

ClickBank, a long-established clearinghouse based in the U.S., is a truly easy and inexpensive means of setting up as an affiliate merchant.  (Some merchants have started here and gone on to more sophisticated models as their businesses have progressed.   Such a change is a hassle for all your affiliates - but it also serves to reawaken some to your existence, and perhaps weed some out who realize that they aren't able to serve you well after all.)  I wouldn't place too much emphasis on the possibility of prospective affiliates locating your program via ClickBank's list - it isn't particularly easy to use, and I would rate the overall quality of the programs as quite a bit lower than that of many 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 - that is, largely digital products (but not recurring charges).  Many such sellers (including some who are extremely successful) do also take advantage of its built-in single-tier affiliate program option.  

Click2Sell is a similar network based in Europe but dealing internationally.  Not only is it a little more flexible (especially for those who aren't in the U.S. - and those with tangible or recurring-billing products), but it seems to have exceptional tracking features, there's no setup fee, and its merchant fees are a little lower.  Good features for affiliates, too.  (However, affiliates are paid by each merchant; you must manage refunds; and a 72-hour download link expiration may cause problems for some purchasers, even though it will prevent purchasers from sharing your product around.)

With those few pointers, and the chart above to begin with, you're on your own - because there are just too many optional factors to weigh for anyone to give you a perfect recommendation. ...See what you think.
 

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 depending on its category, your new program may well be a drop in the ocean.  Plus there are lots and lots of directories...

One good option is to purchase Instant Affiliate Submitter software that allows you to easily submit to many free directories "at one go".  (It's also simple to resubmit if the report tells you that your submission for some reason didn't take.)  This can save you a lot ot time! (and expense over the high charges of submission services).

But 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.  You can participate in web forums devoted to your business' area or to web/affiliate marketing - or in some of the social media websites (such as Facebook), where there is internal subject categorization.

One cost-effective way of adding affiliates to your team could be to set up a multi-tier affiliate program and let affiliates recruit for you.  (This is a case where you should definitely keep in mind that 80/20 rule - though perhaps it would be more like 10 or 5% doing 95% of that work for you rather than 20.)  But if your program isn't for a webmarketing product, it's doubtful that you can expect much of this kind of viral activity to take place (how would the affiliate recruit others if their clientele isn't made up of marketers?).

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.  A bit sticky, if your product attracts marketing-savvy customers; otherwise, it's probably not anything to worry about.  (And if your profit margin is good enough that even "discount customers" are welcome, why worry at all?)

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 Google'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, with 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 Windows software (now free, and rebrandable) 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) or, via keyword search, sites in your niche. 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.  Neil also offers invaluable advice from over 10 years of experience on how to find, woo, and keep super affiliates who really will do super work on your behalf.

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 the Guerrilla Marketing books by Jay Conrad Levinson [click here to go to Guerrilla Marketing for the New Millennium at Amazon.com, if you like].  This is an excellent brainstorming base for creative marketing concepts.  I've read a few of them and highly recommend any!
 

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
Keyword Brainstorming (...Then choose it and use it)