Today, more small or independent businesses are leveraging marketing and advertising channels formerly thought to be something only large businesses could afford or benefit from (both due to their access to/utilization of better technology and systems as well as due to having teams of experienced marketers or advertising agencies at their disposal). One of these forms of marketing and advertising is affiliate marketing.
Before I dig into the topic further, I’d like to briefly differentiate between referral marketing and a referral program. Referral marketing is a type of marketing that drives sales (or leads) via referrals from a third party. Affiliate marketing is a type of referral marketing, but a referral program is not usually the same as an affiliate program. The difference is the audience a brand or business is targeting.
With Referral Programs, a brand is targeting (and rewarding) current customers. With Affiliate Programs, a brand is working with brand affiliates (think brand advocates, brand ambassadors, etc.) who get compensated for the sales they drive to that brand in the form of a commission % on those sales.
To learn more about the differences between Referral Programs and Affiliate programs, read this post.
If you’re a business thinking about launching an Affiliate Program, you’re probably already aware of the potential value and additional revenue an affiliate program can drive for your brand. Maybe you’re even at the point where you’re ready to go, as long as someone points you in the right direction!
However, there are a lot of things to consider before launching an affiliate program if you want to ensure that you are prepared and will have a successful launch. Below are some of the questions you’ll want to ask, before getting started.
1. What are the Financial Costs of Running an Affiliate Program?
The costs of running an affiliate program are more than just the commission you payout to affiliates on sales. There are also platform/network fees (if you choose to host your program on a public affiliate ad network), the cost of set-up (any developer hours or ad agency/designer hours needed, etc.), and the cost of any product samples you may provide to key affiliates.
Based on your margins, can you afford to pay out x% of commission + platform costs + program management costs?
Note: I encourage brands to think about affiliate sales not as sales they make a lower margin on (this is how a lot of small businesses see it at first) but as sales that they wouldn’t have gotten otherwise. So instead of simply asking the question ‘Can we afford to pay x% for each sale?’ instead consider the following:
‘How much are sales that we don’t have to make ourselves, and that are made to customers we wouldn’t otherwise be reaching, worth to us?’.
‘How much would we pay for ‘exposure’ to qualified audiences, and per sale, if we were paying to run ads on Paid Media channels?’ Remember, that running paid ad campaigns costs money whether you make sales or not. Whereas, with affiliate marketing, you don’t pay unless you make sales.
‘How much would we pay influencers or PR companies to get us listed in x# of publications, post x# of times about our brand, or to drive traffic to our site (without any guaranteed sales included in the fees we pay for these services)?’
When you consider the above, the costs associated with running an affiliate program seem very reasonable.
2. Time and Resources Required
Beyond the obvious financial costs, there are other costs in the form of time and resources that are associated with launching and managing an affiliate program. One question you’ll want to answer is ‘Is there someone on our team/at our company who can manage the affiliate program or will we need to hire someone?’
Outreach and Communications/Program Management
Launching an affiliate program isn’t an ‘if you build it they will come’ type of situation. Managing an affiliate program (and your affiliates) takes time and effort. Someone with experience doing outreach, communications, marketing and/or PR will be the most natural fit to do outreach to and be the main point of communication between your brand and its affiliates. Even better if that person has experience with online sales strategy/content strategy. The more active you are in your efforts to approve (those that apply), find, engage with (current affiliates), and motivate your affiliates (to promote your brand), the more sales you’ll make. The more passive/less hands-on you are, the fewer engaged affiliates and the fewer sales you will have.
Creative Assets
You will need to create some assets for your affiliate program such as banner ads, image ads of different sizes, text ads, etc. You’ll also want to have professional product and brand images available for affiliates to use (this is especially important when pitching to major media outlets, but is also important for individual publishers/affiliates as well). To create these ads, you can hire a graphic design agency or you can try a service such as Creatopy or Bannersnack to create your own.
3. Will You Launch Your Affiliate Program on a Public Network or Privately via Your Own Website?
The two main options when it comes to launching an affiliate program. You can launch a program on an existing affiliate advertising or affiliate/influencer marketing management platform or you can build your own program/host your program on your own website, more privately.
Pros and Cons of Launching a Private Affiliate Program/Launching on Your Own Site
Cons
-Your affiliate program won’t be visible to the tens of thousands of affiliate marketers, bloggers, and influencers out there who are looking for brands to become affiliates of. You also won’t be able to access those affiliates to reach out to them easily (like you can do from your brand account if on a major public affiliate advertising network).
-It will take more time to build up an affiliate base, since you will have to find potential affiliates and invite them to your program (versus searching for them on a major platform, where you can invite them more easily).
-Your program will be less attractive to affiliates who prefer the convenience of logging into just a few different affiliate accounts to easily access all of their affiliate assets and track their earnings. Private, single-brand affiliate programs mean logging into a separate account for just one brand’s program in order to track commissions, request payouts, etc.
Pros
-If you aren’t ready to publicize your affiliate program, launching your program on your own platform and your own terms can be a positive. Only those you invite or make your program known to, will know about your program and be able to apply for it.
-You won’t pay out a % to an affiliate network
-You won’t pay more or be penalized if you don’t reach a certain amount of sales per month (some affiliate platforms charge higher fees until monthly $ sales totals reach a certain minimum level)
[Public] Which Platform to Choose
Major public affiliate advertising networks include: Shareasale, Flexoffers, CJ Affiliates, Impact (newer, but growing fast), and a few others. To stay up to date on which food and wine brands are on each of these platforms, subscribe to my email list.
[Private] Affiliate Program Management and Tracking Applications
If you want to launch your own private affiliate program, there are now many good affiliate program management and tracking tools available. Which will be best for your brand depends on what website and eCommerce system/platform you are on as well as your needs.
For example, a few good options for brands on Shopify sites include Refersion, Tapfiliates, and Affiliate Marketing and Referral Apps. For those on WordPress/Woocommerce the following are good options: AffiliateWP and Ultimate Affiliate Pro.