How to Set Up an Affiliate Marketing Program – Small Business Guide

If you are not currently doing affiliate marketing then you are really missing a trick.

Affiliate marketing evolved from the simple concept that if another website sends you a visitor and that person becomes a customer of yours then you should say thanks to the other website by giving them a small piece of the pie.

Affiliate marketing has now become a lot more complex but the basics are still the same. You want as many sites as possible to be shouting about you to their visitors so that they come and see your wares, and then in return you pay a suitable reward to that site based on your business profitability and margins.

In this article I will go through a few of the things that a newcomer should consider when setting up an affiliate marketing programme:

1) The best commission/reward structure for your business

2) The best network/s to work with based on their affiliate base e.g. the kinds of affiliates that are with them and that they tend to attract.

3) How to get visibility on the key affiliates websites and with the affiliate network.

4) Working on new promotions and incentive schemes to motivate affiliates to promote you rather than your competitors.

Deciding on an affiliate reward structure for your business The first thing to look at is your new customer recruitment costs, e.g. If over one month you spend £5000 on marketing and you recruit 100 new customers then your new customer recruitment cost is £50. Cross reference this with your customer lifetime value(if you know it) to work out how much commission you can pay your affiliates.

A Basic explanation of how you could calculate this is as follows: The customer lifetime value will be the average top line profit that each customer brings you over their lifetime.

To calculate a customers life time value the best way maybe to take a group of customers that you recruited within a months date range and to track their spend over a few years, you will lose some of these customers, but others you will maintain so you need to have a good sample size for the calculation to be worthy.

e.g.

1000 customers recruited in June 2008.

  • Over the following 2 years they spent an accumulative 1,000,000GBP therefore you have a customer lifetime value of 1000GBP
  • BUT
  • Cost of goods sold were 700,000GBP
  • Business fixed costs were 100,000GBP
  • Variable business costs were 80,000GBP

Therefore a total profit for these 1000 customers of 120,000GBP over 2 years, and a per customer profit of 120GBP/customer.

This is obviously a very rough fag packet example but it is worth doing this exercise so that you can then determine the profitability of all of your marketing channels through looking at what their cost per new business customer acquired is and comparing it to the customer lifetime value.

Anyway, to keep from steering too wide form the point of the post… From this figure you can then determine how much you are willing to spend per customer on your affiliate marketing.

You now know that if you spend 120GBP per customer acquisition then you will break even on that customer so if you build in that you want to make 50% profit and spend 50% of the customer value then you can spend 60GBP per customer acquired.

Now, if you work out the average number of orders of those 1000 customers over the 2 years then you will know your average order size through dividing total revenue by total orders.

Say for example that the average number of orders was 4 then you will have an average order size of 250GBP.

So based on this if you can spend 60GBP per new customer order then your commission level for “new” customers can be just under 25%.

However, not all orders are from “new” customers so you could do one of 2 things:

1) Decide to average out commission across all sales by saying that every 1 in 4 customers is new therefore you can pay 6% commission overall

2) Decide to have a higher level of commission on new business orders and a lower level on other orders e.g. 10% and 5% respectively (although you will need to have the backend website functionality available to track different customer segments).

As well as the cost to the end affiliate you will need to figure in a network cost. As a basic guide this is about 25-35% of the commission paid to the affiliates. Therefore if you pay affiliates £1000/month then you will also need to pay your network a fee of around £300/month so this needs to be factored in when determining commission levels.

Always set your commission levels slightly lower than you can afford so that you have the option of increasing commissions for seasonal promotions and for giving high performing affiliates added incentives etc.

What is the best affiliate network for me? The amount that the affiliate networks are willing to disclose to you will depend on your skills as a negotiator and also the potential size of your business for the affiliate networks.

Approach all of the big networks – Tradedoubler, Buyat, Linkshare, Commission Junction, Affiliate Future and Clickbank, explain that you are going to be setting up an affiliate marketing program and that you want as much information as possible on why you should go with them.

Ask them:

  • How many affiliates drove a sale for them last month?
  • So that you can compare their size and reach with others
  • How many affiliates are promoting merchants in your industry?
  • So that you can see their reach in your vertical
  • How much revenue did they drive for your entire industry last month?
  • To judge the level of bottom line success in your vertical. You should also look (if possible) at the % breakdown of the revenue by affiliate e.g. what % of revenue is made up by the top 5 affiliates? Is there a lot of long tail/small affiliate opportunity?
  • How many new affiliates did they recruit last month?
  • To judge how actively they are growing and how proactive they are.
  • How many new merchants did they recruit last month?
  • Ditto, are they an arrogant and lazy network?
  • How many merchants from your industry are with them? (good to go with the bulk as there will be a good affiiate base ready to promote you if they are already promoting your competitors).
  • Who are the biggest 5 affiliates working with them?
  • Who are the biggest 5 affiliates with them for your industry?
  • How much commission will they charge on sales?
  • Can they run multiple commission rates?
  • Can they do lead generation on a fee per lead basis?
  • What does their management fee include? How much support and help can you expect from them with affiliate recruitment/reporting/problem shooting/industry updates?
  • What technology do they offer that is unique to them?

If you can get a fair bit of detail on all of these questions then you should be in a good position to approach the negotiating stage and play them off against each other. Obviously the amount of leverage you have and how far you can go will largely depend on the size of your business and what kind of revenue you will bring the affiliate networks. Make the networks excited about your marketing and growth plans. Explain your past performance and what your plans are for the next year – if they see you as an expanding and growing brand then they will stretch further to meet your needs.

By the time you have got to this stage you will have your preferences, go with the data, the best deal and your gut feel. If you like and get on with the people on a genuine level and trust that they will take your business seriously and will spend time promoting you then go with them, but only if the commercials and their business proposition stack up too. Getting visibility with the key affiliates for your market Once you have your account set up and you are ready to go the first thing to do is to put together a target list of affiliates that you want promoting you. Rank the affiliates on the list by potential and then work with the networks on getting the best real estate possible on the affiliates sites.

Get the affiliate network to give you a list of every affiliate who has driven a sale for any competitor of yours (that is in their network) within the past 6 months. Ask the affiliate network to rank the affiliates in order of revenue driven (obviously without the sensitive data) if they mess up and give you the sensitive data (unlikely) then all the better. Put together a promotional plan for the first 3 months and make sure that your offers blow the competition out of the water. Affiliates are businesses in their own right so are just interested in promoting the merchant who can earn them the most cash, so if you give them a better % commission and your conversion rate is as good as your competitors or better then you will quickly win them over. Check out the top affiliates EPC (earnings per click). You then need to work out how you can give them the opportunity to earn over this with you – basically calculate: (site conversion rate x (commission rate per sale X Average order size).

Ensure that the affiliate network have agreed to give you featured merchant status for the first month and that you are featured all over their website/blog/twitter/facebook etc and emails.

Email all of the other affiliates straight away introducing yourself as their support at your company, explain your proposition, affiliate program terms (commission rate etc) and explain that you have an unbeatable offer for the first month that is going to have sky high conversion rates.

Save some fat in the promotional spend plan for the top affiliates so that you can offer them something special for a great location on their site.

Once you have the top 10 on board and are recruiting the long tail through the email then get on the phone and work your way down the list getting more and more affiliates on board, there will be many that you cannot get hold of and/or who do not reply; do not be disheartened as this is normal, affiliates are busy people. Just try to think of good ways to grab their attention and leverage all contacts at the network to aid you in getting in contact with the affiliates.

Keep in close contact with the network – let them know that you will make them work for their commission, be thankful and complimentary when they are good but beware of them being more lazy after the initial flurry – you need to hold the pace for at least the first 3 months and then it should start to get easier as you have some secure relationships that do not need too much maintenance. This applies to both affiliates and the networks.

New affiliate promotions to get the affiliates promoting you instead of your competitors This is obviously a tricky one with no clear right/wrong way. There are a few rules that I would stick to though:

Keep things fairly simple – as mentioned above affiliates are busy so if you come up with a highly complex (however fun) promotional idea they may just switch off before you sell it in to them.
Keep things fresh – do not just dole out the same old promos every month to the affiliates, there will be no real incentive for them to keep promoting you and trying new things for you if they already know how it will perform on their site.

If possible base your promotions for the top affiliates around their site and what works well for them e.g. if you sell T-shirts and cushions and one site is flying on the cushions then give them special offers around cushions.

Use the data you have after each promo – see what works for who and try to understand their site use profile so that you can meet their needs.
Show your face at affiliate events, make friends in the industry, do people favours and just generally enjoy yourself as if people see you being fun and positive socially then it will impact the business relationship you have with them.

If anyone has anything that they think could be added to this post then just let me know and I will add it in. All the best with your affiliate marketing!

10 Things You Didn’t Know About Affiliate Marketing

Most people have heard of affiliate marketing, even if they haven’t actually started doing it. Affiliate marketing is basically referring people to various products and services around the internet. For each sale you generate through your affiliate link, you earn a commission. The size of the commission depends on the products themselves, who is selling them and the percentage offered by the seller to the affiliate.

But what is actually involved in affiliate marketing? What do affiliates do on a daily basis? How do they earn money and how do they learn what to do?

1 An Example Of A Successful Website

There’s several ways of marketing products and services online. Many affiliates create a blog first and sell products and services through their blog. Martin Lewis has a very successful website called moneysavingexpert.com. This is also an affiliate website. By creating content and helping people decide which service to use: which credit card offers to choose, the best interest rate etc. moneysavingexpert.com makes money by sending website visitors to various offers. If a sale is made through this website, the link this credited to it and a commission is made. By creating content, offering value and helping people make sensible choices, the website has built a reputation and become more prevalent over time. Google ranks the site highly in the search engines and thousands of people use it to make purchasing decisions every day.

2 How Can I Get Started As An Affiliate?

Affiliate marketing is huge. There are thousands of people already making their main source of income from the internet. To get started as an affiliate you need to learn some basic strategies and build various methods of generating traffic from the internet to those offers. A lot of affiliates start with a simple blog. Many travelers ‘blog’ about their travels. If you don’t have a passion or interest to blog about, you can start by following an online course which will help. See my bio for more info on this.

3 How Long Does It Take To Make A Living?

Some people go into affiliate marketing with the intention of creating a second income. Some people want to make big money. Depending on how much time you can dedicate to your affiliate business, and how dedicated you are to it, is a big factor in determining your results. Results vary from person to person. With a large advertising budget and the right business model, some affiliates have replaced their living in 6-12 months. For others it can take years before it replaces their existing income. Depending on your approach, advertising budget, and business model, it can take between 3 months and several years to build it to a point where it can replace an existing income.

4 Can Anyone Do It?

One of the great things about affiliate marketing is that the technology is now available to allow anyone to build their own online business. As long as you are prepared to learn and implement that knowledge, anyone who can operate an email, can use online platforms and tools to build their own online business. The main thing you need is the desire to learn. Affiliate marketing isn’t for everyone though. It does take a lot of hard work and it can take years before you are rewarded financially.

5 What Are The Pitfalls Of An Affiliate Business?

You need to dedicate some time to your affiliate business for it to work for the long term. Some people go into affiliate marketing thinking it is some magic pill which will pay them instantly in cash. Much like a job you can’t expect to get out more than you put in. Affiliate marketing is performance related. This means you don’t get paid unless you can successfully sell products and services online. If you don’t know what you are doing it can take years to do this. You can’t be a dabbler and expect to earn the big money. The big earnings are created over years of hard work. Don’t expect to achieve this with only a small amount of input.

6 What Are The Best Things About Affiliate Marketing?

Affiliate marketing offers an incredible amount of flexibility and freedom. You can work an affiliate business from anywhere in the world providing you have a laptop and an internet connection. You can choose your own hours and build it up around existing work. Many people come into affiliate marketing because it offers this kind of flexibility. They can choose their priorities in life: spend more time with family, choose your working hours, travel and work abroad. No more commuting to work or working long hours for a boss you don’t like.

Affiliate marketing also offers incredible scalability. A business which is local is always limited to the people who can travel to that business. An online business can be global. Using digital products in conjunction with a global reach, you can scale using tools and software to reach thousands of people through digital technology. By using automation much of the work involved with an online business can be pre-built. By building automation into the business model, you can focus your activities on reaching a larger audience through content creation and paid advertising.

7 Why Am I Struggling With My Affiliate Business?

A lot of people struggle with their affiliate businesses.This can be for a number of reasons. Firstly building up an affiliate business takes time. You need to dedicate a lot of time to an affiliate business in the first place. Only when you reach a ‘tipping point’ do you really start to see your progress. Many affiliates simply don’t realise how much work is involved. They underestimate how much time they need to dedicate to their online business to make it work.
Paid advertising can allow you to grow your affiliate business quickly. But it costs money and you need the right products too. You can’t advertise small value items with paid advertising. You won’t generate enough profit to cover your advertising costs. You need a range of products and an email list to advertise through.
Content marketing takes much longer to work, depending on your chosen area of business. If you find an untapped niche to market your blog in, you can make some fast progress. However, with a competitive niche you will struggle to get noticed above all the other content which you will have to compete with. There’s several reasons why you might struggle. The main one is lack of knowledge. Get the right education first and your affiliate business will move much faster.

8 What’s The Best Affiliate Model To Use?

There are many different affiliate models, all offering something different to suit the individual. Some affiliates target search traffic and aim to get their content found on Google. Some create their own products and sell them directly to customers. However, having a range of products which you can sell over and over to existing customers is a great model for long term success. Selling a single item online is limited. It means you can only make one commission from each sale. By choosing membership products to promote which also offer back end sales and a built in sales team, you can benefit from monthly commissions and up-sell commissions for the lifetime of any given customer. Selling membership products is definitely a game changer when it come to affiliate marketing because you make an income from each customer, rather than a single commission. But a good model to choose is one in which you have a passion for and can keep doing for the long term. Choosing products which you have no interest in is a short sighted plan. Think about what you would like to do online to generate an income. If you choose to go with your passion, your business will last much longer, and be more successful.

9 Can I Just Sell My Own Products?

Many affiliates create their own products to sell online. However, when you are starting out it is a good idea to learn the basics of marketing first. That way you can start earning more quickly from your affiliate business. I spent a long time creating my own products when I first discovered affiliate marketing. But I didn’t sell anything because of a couple of reasons. Firstly I didn’t research whether my products would have a big enough demand. Secondly I didn’t know how to market them. By joining a program which teaches you how to market products first, you can start making money more quickly. Don’t waste time creating products if you don’t know how to sell them. Marketing is a much more important skill for making money online. Once you know this skill, you can then apply it later when marketing your own products and services. Also your own products will be limited in range. By using an existing product range, you can benefit from products which are already selling. You can choose a program which offers high ticket commission, monthly memberships, back end sales and a built in sales team. Building your own products which offers all of these things not a possibility for most people when starting out.

10 What’s The Point Of Affiliate Marketing?

Some people struggle with the concept of affiliate marketing.They think it sounds too ‘salesy’. When I understood affiliate marketing I immediately found it appealing simply because I needed a flexible way to work around my contract work. I had to drop what I was doing at a moments notice if the phone went. This meant other jobs were awkward to juggle around. No-one wants to employ a ‘flaky’ employee. I wanted to work from my laptop and affiliate marketing gave me that opportunity. For many people this is the reason why they choose affiliate marketing. They can earn an income from their laptop, choose their working hours and not have a boss or place of employment. You don’t have to sell directly to anyone or even talk to a customer. There is no stock to hold. Added to this, the scalability of affiliate marketing which lets you scale up to a global audience and deliver products on autopilot, makes it the best flexible business of the future.

Key Benefits Of Affiliate Marketing

Since I decided to take the plunge 5 years ago and start working for myself as an online marketer, affiliate marketing has been the best thing I ever got involved in and is now part of my daily schedule.

It is without doubt something that all people who are interested in starting an online business or those who already have an online business, should investigate and take up.

If you are undecided or have little knowledge about affiliate marketing then I hope that you find the below information helpful and that it will clear up any doubts that you have over what the key benefits of affiliate marketing are.

1. Commission basis

For the affiliate marketer this is a key advantage as every time that somebody makes a purchase, the affiliate receives a set commission of the profit.

For the affiliate merchant this is an advantage as they only pay the marketer when they make a sale, so no money is wasted on marketing spend.

2. Huge audience

For the affiliate marketer – having built up various marketing lists or websites, they can make use of their huge audience base and ensure that the traffic they send over to the merchant is qualified and that sales are made, making the affiliate more money.

For the affiliate merchant – they receive access to a wider audience base than they may have had before, creating more interest in their products, resulting in more sales and all without investing any more money or time.

3. Ease

For the affiliate marketer – once they have set up their additional sites and links across to the merchant, it is very simple to manage and often affiliates will continue to make money from sales without having done anything for months.

For the affiliate merchant – they do not have to invest time and money writing content or creating expensive images in order to promote their services/ products. Instead affiliates will apply to be a part of their programme and all the merchant need do is have many affiliates all working towards promoting their products/ services and wait for the sales to flood in.

4. Steady cost

For the affiliate marketer – building on the last point, an affiliate can keep receiving commission from sales of a product or service for years, despite not doing a lot of work to promote it. You do need to invest time at the start but then you have a regular source of income coming in for the market life of the service/ product.

For the affiliate merchant – they set up all the costs so the chance to make a huge profit on sales without having spent much on marketing, is very likely. They do not have to pay their affiliates much per sale to make the business relationship worthwhile, as it tends to work best on a quantity basis so everyone is happy with the set amounts.

5. Brand Visibility

For the affiliate – there is a lot to be gained reputation wise from working with a range of brands and you will find that you get a lot more work should you be able to prove that you have succeeded with others in the past.

For the affiliate merchant – they receive free brand exposure on a continual basis, which is never a bad thing. If you have many affiliates working on promoting your brand, you’ll soon see a boost in search engine rankings and online sales; Amazon.com is an excellent example of where this has worked in the past.

6. Outsourced expertise

For the affiliate marketer – they get the continued experience to improve and work on their methods of online marketing, investing only their time, not money.

For the affiliate merchant – they will be able to utilise all kinds of affiliates who are experts in SEM (search engine marketing) and SEO (search engine optimisation) without investing a lot of money, yet still manage to get to the top of Google rankings.

7. Transparency

For the affiliate marketer – through the various affiliate programmes, it is possible to see exactly when sales are made and payment is automatic, so you do not have to worry about chasing merchants for payments.

For the affiliate merchant – they can see and manage their R.O.I (return on investment) extremely easily and do not have to worry about tracking the origin of each sale.

8. Online market

For the affiliate marketer – there are an endless number of affiliate programmes out there and the demand for online shopping is not going to decrease, so the earning potential for affiliates is huge. You can access any number of markets with your affiliate work, whether you choose jewellery, hygiene, pet insurance or food.

Use long tail pro to find targeted long tail keywords with low competition, ensuring maximum affiliate sale for you.

For the affiliate merchant – as previously mentioned, online demand is not going away any time soon, therefore merchants are able to continue to expand product ranges to meet a range of online markets with the knowledge that they have a number of affiliates on hand to promote quickly and at a low cost.

9. Home-based work (aimed at affiliate marketer)

If you become successful in the world of affiliate marketing then it is entirely possible to create a long term Passive Income from it and a huge bonus to this is that you can work cheaply from home and be your own boss. You don’t have to pay to sign up to affiliate programmes and there are a huge number to choose from, all from the comfort of your own home.

10. Overcoming tradition (aimed at affiliate merchant)

Using affiliates to promote your products and services will guarantee that you receive a lot more exposure than you would by using more pricey traditional marketing methods. Having a number of affiliates promoting what you are selling and only being paid when a sale is made, is one of the most cost effective marketing methods ever as well as being incredibly successful.