AFFILIATE PROGRAM FAQ
More and more of our clients are coming to us wanting to know about affiliate programs and whether they should implement one for their website. This seems like a good time to answer some basic questions about this online marketing strategy that began with Amazon.com and is now steadily growing in popularity.
1. What is an affiliate program?
An affiliate or associate program is a form of revenue sharing between two websites, the merchant and the affiliate. It is essentially a referral/advertising program that only pays for results and generally works like this: The affiliate website links to the merchant's site and provides marketing for the merchant's offering. The merchant then supplies the products and services and order fulfilment. In return the affiliate receives a referral fee for each visit, lead, registration or sale coming from their site, depending upon the agreement.
2. Who should run an affiliate program?
If you are selling products or advertising space on your website, then you need to drive traffic. Most likely you are already employing some other form of online promotion like search engine optimization or banner advertising. An affiliate program is a viable addition to your Internet marketing program. However, also be prepared to invest in managing the program and supporting your affiliates in their marketing efforts. Without this final component there is no point in making an upfront investment to create the program.
3. What makes a successful affiliate program?
There are four areas that must be addressed to ensure a successful and profitable program. All affiliate programs incorporate the first element (with varying degrees of success) but extremely successful programs feature all four:
Management: This includes all commission tracking, accounting and membership administration. These elements are most effectively handled automatically by third party software, an ASP or customized in house software solutions.
Marketing & recruitment: Although affiliates are responsible for the marketing on their sites, you will need to market to the web community in order to publicize your program and effectively recruit affiliates. This can be done through online advertising, submissions to affiliate directories, search engine marketing and other more creative means.
Communication & support: Affiliates need to be supported to be best salespeople for your products. On the communication side this means receiving regular messages from you (most often through an email marketing program) and having a forum in which build a sense of community. On the marketing support side this means providing affiliates with product oriented content and other marketing collateral on a regular basis.
Analysis: As with any online marketing strategy, the key to success lies in a test and measure strategy. Using web metrics analysis programs like WebTrends allows you to analyze the success and failures of your affiliates and identify the opportunities for growth.
4. Who should join an affiliate program?
Anyone with a website can join an affiliate program, however not everyone should. To make an affiliate relationship work for you need to have the time to properly research and then market the products you are including on your site. If you cannot make this ongoing commitment then you should not clutter up your site with affiliate offerings.
5. What should you look for in an affiliate program?
It is important to take a number of factors into consideration when joining an affiliate program. You should look for:
A stable, dependable company (Is it financially sound? Do they have clear contact information with a street address and working phone number?)
Quality product and website (Will your visitors buy once they get to the merchant's site? Is it set up to sell? Does it inspire consumer confidence?)
Relevant product (Is the merchant selling something your visitors will be interested in?)
Straightforward membership (Is it quick and easy to join? Do they require you to pay? If they do, steer clear of the program, it most likely an MLM in disguise.)
Decent commissions (Will you make over 25% or $10 a sale? Will you get residual commissions for repeat purchases made by referred customers or a higher commission on a first-time sale?)
Reliable commission tracking (Is accessible, accurate tracking information supplied for the sales and visitors you send to their site?)
Frequent, regular payment (Are payments made on a monthly basis?)
Solid merchant support (Do they give you a helping hand with marketing materials and product related content? Do they encourage their affiliates to interact and feel part of a community?)
Other issues (Do they offer a variety of payment options, beyond just credit card? Do they support a multi-tiered structure - can you have your own affiliates? Are there testimonials from satisfied affiliates? Are they planning to expand their product line?)
And the most important step you should take before joining any affiliate program is to READ the entire agreement BEFORE you sign.
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Did you know?
Forrester Research has rated affiliate marketing as the most effective of all online marketing methods.
And Jupiter Research claims that, "By 2002, 25% of the expected $37.5 billion in Internet retail sales, not including autos, will have originated on affiliate sites."
Source: Forrester Research & Jupiter Research
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Affiliate Program Glossary
Here are some of the more common affiliate program terms you'll likely run in to, and their basic definitions:
Affiliate: An independent party that promotes the products or services of a merchant in exchange for a commission. Also an associate, partner, reseller, or referral partner.
Merchant: A company that has set up an affiliate program and has agreed to share a commission with affiliates who promote their website, products and/or services. Also termed an advertiser, vendor, or simply referred to as an "affiliate program".
Commission: The income the affiliate receives for generating a sale, lead or clickthrough to a merchant's website. Sometimes called a referral fee, a finder's fee or a bounty.
Pay-Per-Sale: A program where you receive a commission for each sale of a product or service that you refer to a merchant's website. Also referred to as Cost-per-Action or CPA for short.
Pay-Per-Lead: A program where you receive a commission for each sales lead that you generate for a merchant website. Like pay-per-sale, pay-per-lead is also referred to as a Cost-per-Action or CPA for short.
Pay-Per-Click: A program where you receive a commission for each click (visitor) you refer to a merchant's website.
Pay-Per-Impression: A program where you receive a commission each time that a merchant's ad or link is displayed on your site. Pay-per-impression programs are generally measured in CPM (a cost per 1000 ad displays or impressions).
Conversion Rate: The percentage of visitors from the affiliate site that are "converted" into a sale, lead or click.
Clickthrough Rate: The percentage of visitors who clickthrough on a link to visit the merchant's website.
Two-Tier Commission: Two-tier, or multi-tier, refers to the practice of a merchant paying commissions to both the affiliate that referred a sale, lead or click, and the affiliate that referred that affiliate to the program.
Residual Commission: Refer to programs that provide affiliates the ability to earn an income, month after month, for referring a sale to a merchant. They usually offer some type of service for which the customer is charged an ongoing subscription fee.
Tracking Method: Tracking refers to the way that a program tracks referred sales, leads or clicks. The most common are by using a unique web address (URL) for each affiliate, or by embedding an affiliate ID number into the link that is processed by the merchant's software. Some programs also use cookies for tracking.
Cookies: Cookies are small files stored on the visitor's computer, which record information that is of interest to the merchant site. With affiliate programs, cookies have two primary functions: to keep track of what a customer purchases, and to track which affiliate was responsible for generating the sale (and is due a commission).
Affiliate Management Categories: There are five basic categories of affiliate program management solutions:
Commission Based ASPs (Application Service Providers) Payment is a percentage of sales revenue. Commission Junction and LinkShare are examples of commission based ASPs.
Fee Based ASPs These are hosted solutions that charge a flat monthly fee for services. Affiliate Shop and My Affiliate Program are examples of fee based ASPs.
CGI Programs These are Perl programs hosted on the merchant's Unix server that don't charge recurring fees or commissions. Little Salesman Affiliate System and the Ultimate Affiliate Package are examples of CGI programs.
E-commerce Programs like ClickBank incorporate an affiliate program.
In-house Custom Applications
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eMage Sites of the Month
Internet Affiliate Marketing Association
Professional association for affiliate managers, includes forums, resources and levels of certification. Requires free membership for full site access.
Affiliate Announce
Service that submits your affiliate program to all of the major affiliate directories. Also includes a list of the 40 top affiliate directories if you want to submit yourself.
Report on Affiliate Management Software
A great ebook by Dr. Ralph Wilson of compiled user reviews of various affiliate management solutions. Written in 2001, so a little out of date, but still based on quite solid information. Only $22.95 USD.
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eMage Tip of the Month
Not all affiliates are created equal. Some affiliate relationships are going to be much more profitable than others. Here are some tips to ensure your affiliates send you the most lucrative visitors:
Check out the web presence of your potential affiliates. How do they rank on search engines? Are they actively promoting themselves online? Do they own a high level domain (i.e. Cars.com as opposed to JoesAutobody.com)?
Make sure the target audiences of your affiliates line up demographically with your audience.
Encourage your affiliates to place your links and banners in relevant locations that will send qualified traffic to your site. If links are not placed accurately, they won't be generating enough, or at least not enough of the right kind, of visitors.
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