How to Start an Affiliate Program, Step by Step

One question that always comes up at tradeshows or with a new client is “How do I start an Affiliate Program?”.  Whether you are starting an in-house Affiliate Program or using a network, the process and set up is virtually the same.  Because most people charge you for this information, I decided to give it away for free since you found my blog.  Here are step by step instructions to get you ready to launch an Affiliate program.

1. What is the Goal of the Affiliate Program
2. What Types of Affiliates Do You Want to Work With
3. Terms and Conditions
4. Commissions and Cookies
5. In house management or Outsourced Affiliate Management.
6. Affiliate Sections of Your Website
7. Creatives
8. Network or Software Selection
9. Fraud Detection
10. Datafeeds
11. Videos
12. Testing Everything and Launching

How to launch an Affiliate Marketing Program

1.  What is the Goal of the Program

Ask yourself, what is the goal of launching an Affiliate program?  Is the purpose a value adding program that will bring you new customers or is it to just drive sales and it doesn’t matter if they are new customers or old customers.  This is the first thing you need to decide.

Not only will it help you decide on how to write your terms and conditions, but it will let you know what types of Affiliates you should be working with.

Value Adding Programs – In this type of program you work with content sites, non trademark PPC Affiliates, no sites ranking for your url + coupons, etc…  The goal is to have a sales force out there that can bring in their own audiences and build you new customers.  Sales are coming from new sources that discover you or re-discover you because of the affiliate.  (i.e. a coupon site ranking for your url + coupon code will only be poaching your shopping cart which can be financially damaging for your company.)

With that said, you may get some cross over from past customers as well since the sites do have the same audience as your customer base.  You may want to figure out what percentage of past customers are ok since the content site is reminding them of you and sending them back to you when they may not have remembered you existed at all.  If a loyalty site has a user that shopped with you a few years ago, then they bring them back through a promotion, this still adds value and is a good partner, as long as the majority of sales are value adding and only occur because they are doing active promotions and not using your trademark.

Sales Focused Program – These programs are designed to generate sales just like the above program, but they allow poaching of customers, sites that show up for your domain or trademark as well as your domain + coupons in the search engines, etc…  This does not always add value and can easily be shown to cause financial damage to your company.

What you need to consider for each sale is that you have numerous costs including coupons, network fees, affiliate commissions, Affiliate Managers’ salaries or outsourced manager fees, bonuses, the loss of margin, PPC costs, shipping and warehouse fees as well as the loss of revenue returns which eliminates all marketing spend for a pure financial loss.

This is unfortunately 99% of the programs that I am asked to review.  If you have one, whether managed in house or outsourced, check for active affiliates ranking for your url + coupons.  If you have them, we should talk.  On a side note, coupon sites are not all bad, you just have to have a strategy where they don’t poach your trademark.

2.  What Types of Affiliates Do You Want to Work With

This is an important thing to ask yourself.  There are numerous types and good and bad with each.  Here are some of them and posts I did about them.

• Coupon Affiliates
• Loyalty Affiliates
• Adware Affiliates
• Self Shoppers
• PPC – Bidding on general terms, not trademarks and modifiers like your domain + coupons or your trademarks
• Trademark Bidding Affiliates
• SEO Affiliates

3.  Terms and Conditions

Now that you know what type of program you want and the types of Affiliates that will help you reach that goal, it is time to create your terms and conditions.  You need to be very clear and concise with what the goal of your program is and with the wording you use.  You need to clearly say if you paying out on repeat customers, do you allow adware or trademark bidding, if you work with certain types of sites what types of extra promotions are required, etc…

You also need to define how they can represent your brand, if they can or cannot modify or create their own banners and you’ll also want to include information on which states you can and cannot work with due to Nexus Tax Laws.  A last thing to have in your terms and conditions is some language about making sure that your Affiliates know they have to disclose their relationship with you if they are doing reviews, blogging or running social media campaigns and you’ll have to check to make sure it is compliant with the FTC advertising guidelines.

4.  Commissions and Cookies

Now that you have your terms and conditions set up, and you know the types of Affiliates you are going to work with, it’s time to figure out what commission to give and what cookie life to use for your Affiliate Program.  This can be tricky.

One thing you should do is look at your competition and see what they are doing.  Now you can mix and match and try to beat them with a better combination.  That doesn’t always mean higher commissions and longer cookie lives.

• You can use commission tiers to make your Affiliate Program look better the more they get involved.
• Try mentioning that you do not work with adware, you have separate tracking for Coupon Affiliates or that you use leap frogging for people who see coupon code boxes and question that.
• Talk about having a better sales funnel and if you have higher conversion rates for content sites.
• Higher conversions and higher AOVs can be better than the highest commission or payout.
• One huge selling point is a better sales funnel so that your Affiliates can hopefully convert more sales making more money and giving you the better Affiliate Program.

Flat percentage commissions

Many Affiliate Programs offer a flat percentage of the price of the sale.  They usually do not include shipping in the commissions.  This is good for sales based programs.

Part of your margin

This is for programs that allow commissions on repeat customers.  They give a percentage of the margin that is opened after all costs have been counted for.  You can run it store wide or by category.

100% commissions

These are more common for continuity programs and pure value adding programs.  Because the program is set up to attract new customers, merchants will pay 100% of the sale because they are getting a customer for life.

Tiered structures

These are appealing because they can motivate Affiliates to do more.  They can also have some Affiliates start to write to you to figure out how to get to the next tier which opens your line of communication.

Sub-Affiliate commissions

One thing that is popular, but easy for people to take advantage of you with is a commission for an Affiliate who refers another Affiliate when that new Affiliate has a sale.  You may pay the Affiliate who referred the other one 2% on top of the Affiliate who had the sale as a way to get your Affiliates recruiting new partners for you.

Recurring commissions

These are mainly found on services instead of products and sales.  When some companies pay 50% or 100% on the first sale, other programs pay 10%, but they pay the 10% for the life of the customer or for the first couple of years the customer works with you.  Many Affiliates are starting to like recurring commissions better because they make less off of the first sale but more money in the long run.

30, 45, 60, 90 and 180 day cookies

These are probably the most common cookie lives.  They are the return days that someone who has clicked an Affiliate link can come back to make the purchase and the Affiliate will get credit.  The longer the cookie life the more appealing to many Affiliates.  With certain industries like weddings, people tend to find what they want and then share it with their friends and families before they buy which is why cookie life is extremely important.  If the life isn’t long enough, Affiliates may decide that it isn’t worth promoting you.

5.  In house management or Outsourced Affiliate Program Management

Now that you have everything set, you need to decide if you want to hire someone in house to manage your affiliate program or if you want to hire an Outsourced Affiliate Program Management Company (OPMs) like mine.  Both are good options, you just need to decide what is right for you.  Some OPMs will also help you launch and train your in house manager for a 3 or 6 month period if you want a combination or hire someone who hasn’t managed a program before.

The reason I put this as #5 is because it is important that your in house manager or OPM is in line with your goals and doesn’t talk you into working with things that will be good for their business but not yours.  They can also now help you with the cookies, commission levels, etc… and see if you are on par with what they feel the market is doing.  One thing to make sure of is that they don’t talk you into something you don’t feel comfortable with.

6.  Affiliate Sections of Your Website

Now that you have your manager hired, have them take everything you have decided on and create an Affiliate section for your website.  It should include everything from a program description to why Affiliates would want to join.  You should include tips on how to promote you, samples of your banners and creatives, an overview of your company and selling points about your product as well as give ideas on how your Affiliates can get started.  One important thing to not forget is to give your new Affiliates a way to reach you and a link to sign up for your program.

7.  Creatives

Each program will have different creative requirements.  The number of sizes you will need to launch will depend on the types of Affiliates you want to work with and your availability.  Comparison Shopping Affiliates use 88×31 banners and many blogs have ad space that only holds 125×125 banners.  I usually start with 8 standard sizes but other people use 6 and some use 12.  Think about the types of Affiliates you will want to have and make sure you are covered for them.  At a minimum have a 125×125, 468×60, 300×250 and 120×600.  You’ll also want to make sure that your banners are functional with short and to the point messaging with a strong call to action that matches the colors and fonts from your site.  You also don’t want to forget to upload at least 4 or 5 unique text links for your Affiliates to copy and paste into their site.

8.  Network or Software Selection

Now that you have a manager or OPM, let them recommend a network or software for you.  Some networks have great tools like video tools and storefronts while others make sense for having multiple single offers.  Networks can come at all price ranges and almost all of them have advantages and downsides.  Have your OPM or Manager recommend three networks and why they are a good or a bad fit for you.  My two top preferences are Share a Sale and Buy.at.

9.  Fraud Detection

Once you have your network selected, it is your Manager or OPMs job to explain to you the types of fraud and adware you can expect to find on the network.  Have them walk you through the issues with the network and give you a plan on how you can find it, detect it and help to reduce or eliminate it.  Some solutions cost money and others are free.  The one thing you will find is that every network has issues and each one will need to be handled differently.  If your OPM or Manager can’t walk you through this, you may want to look for another one.

10.  Datafeeds

Now that you have fraud controls in place, banners and text links ready to go and a Manager you can trust, it’s time to get advanced and provide a datafeed.  The word datafeed sounds intimidating, but in reality it is just a spreadsheet that you fill out or export from your shopping cart.  Affiliates use these to make stores, create product links as well as run shopping scripts, comparison scripts and generate single page storefronts.  What you need to be cautious of with a datafeed is to make sure that if you are exporting it from your shopping cart that you redo all of the descriptions and rename all of your images and alt tags.  One thing you don’t want to do is duplicate your copy all over the web.

11.  Videos

Videos are a great thing to offer your Affiliates.  Not only can they help to upsell and presell your products better, but Affiliates love having copy from the Merchants so they can make sure they get all of the benefits across more accurately.  Videos from Merchants also help to better demonstrate how to use a system or product than an Affiliate using screen shots.  They also make it so that the Affiliate doesn’t have to waste time shooting and editing videos all day and they can move onto getting other things done.  Videos are a great tool and you should figure out how to incorporate them into your program.

12.  Testing Everything and Launching

Now it’s time to launch.  Make sure you test your pixel so that it only fires once.  Click multiple affiliate links and make sure only one Affiliate gets credit.  Make sure tracking shows up correctly and pays the right commissions and also make sure that you test banners, text links and all types of creatives to make sure they show up correctly when you install them like an Affiliate would on their sites.

Once you’ve done those simple things you are ready to launch an Affiliate Program.  Affiliate programs, if run properly are one of your most profitable channels you can have.  They take about 6 to 12 months to become profitable and generate regular sales, and if you treat your Affiliates well, then your Affiliate Program will be a dependable and independent source of traffic and revenue for your company for many years.  If you have any questions or need any help with your program, please feel free to contact me through this blog or by leaving a comment below.

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