Beginning a new venture can be exciting, and slightly overwhelming at the same time. This definitely applies to launching an affiliate marketing program. And as affiliate marketing continuously proves to be resilient, the value of this performance-driven, cost-effective channel is especially relevant now when many are looking for strategies to increase revenue. So, what is the best approach to start an affiliate marketing program?
As the largest source of software for performance marketing professionals and affiliate networks, CAKE has partnered with hundreds of companies worldwide over the past decade.
Based on our unmatched collective knowledge, we can expertly guide you on how to start an affiliate marketing program by sharing these five tried-and-true tips for finding affiliates, setting commissions, combatting fraud, understanding data security and consumer privacy, and continually optimizing your program for maximum profitability.
The key is to take things one step at a time. That said, let’s get going …
Find and manage affiliates (in-house vs. outsource vs. hybrid)
One of the first decisions to make when starting an affiliate marketing program is how to find and manage your affiliates. The three main choices are:
- Create and manage your own program in-house. This route provides greater transparency, control, and real-time insight into campaign performance, plus it allows marketers to develop direct relationships with affiliates, though marketers must find those affiliates themselves. This approach also opens the door to custom campaigns and flexible commission structures that would not be available when working with a middleman.
If you decide to go the in-house route, leverage resources that offer marketing advice such as industry trade outlet, PerformanceIN. Events such as Affiliate Summit and LeadsCon are also great conferences to keep you up to date on the affiliate marketing industry and offer opportunities to meet potential affiliate partners.
- Select an outsourced affiliate network and management service to work with. This is an attractive option since it requires minimal effort to get up and running. You can simply sign up and the service finds established affiliates (or “publishers” as they are commonly referred to in the affiliate industry) and matches them to campaigns with participating advertisers. The drawback of outsourcing is that commissions are paid to the third-party service, in addition to the affiliate. Additionally, there can be a limited selection of affiliates or minimal control over where offers ultimately appear.
- Implement a hybrid approach. Savvy marketers often leverage the best of both approaches. They use a third-party service for reach and managing a larger volume of their affiliate partners while running an in-house program to cultivate top-performing affiliates.
As you can see, each option presents pros and cons. In summary, outsourcing can initially seem easier, but an in-house program delivers more flexibility, control, and a potentially higher payoff. It also enables you to foster long-term relationships directly with affiliates that are built on a foundation of trust and performance.
One of the most common questions we receive from those looking to start an affiliate marketing program is “How much should I pay out per click or conversion?” This is a crucial step as determining the best commission structure for campaigns is vital towards affiliate marketing success. Yet, getting this right takes time. Setting commissions is always a balancing act of attracting affiliate partners to work with you over the competition while managing a positive profit margin.
When identifying proper payouts and commissions, a great place to start is to research payouts based on verticals or types of products and services. You can also leverage websites such as Offervault, oDigger, and many others which aggregate existing affiliate offers that provide insights regarding payouts and verticals.
Within affiliate marketing, there are also a multitude of payment methods to consider, and based on your unique business goals, some methods might work better for you than others.
Pay-for-performance methods: These are the most widely used payment models for affiliate programs.
- Flat rate per action (CPA): This is the most popular payment method. In this scenario, the affiliate receives a fee by referring a prospective customer who fills out a form, downloads an app, purchases a product, or registers for a service. Depending on the product or service advertised, this payment method might also be commonly referred to as cost per install (CPI) for mobile app advertising, and cost per lead (CPL) for lead generation campaigns.
- Shopping cart percentage (RevShare): This approach shares revenue with affiliates based on a percentage of the total shopping cart purchased by a customer. Typically, this applies to e-commerce campaigns.
Pay-for-volume methods: These payment methods are typically used for very specific campaigns and it is important to leverage budget caps to avoid overspending.
- Cost per click (CPC): If one of your goals is to increase website traffic, drive individuals to a landing page, or measure click-through rates on email campaigns, this is a great payment method to use.
- Fixed: Typically, with this method, you are working with a publisher on a set price, for example buying ad space. Often times, this model is driven by the publisher and the traffic options available, such as display ad space.
- Cost per 1k impressions (CPM): If you are launching an awareness campaign this payment method could be a great fit. However, this method should be approached with caution. Why? Because if affiliates aren’t providing high-quality traffic, marketers still end up paying for clicks or ad views that never convert.
What’s the best approach for you?
This is where measurement and ongoing monitoring is of utmost importance. By carefully monitoring results and routinely testing various payment structures, marketers can analyze which types of campaigns are yielding good results and which are underperforming. This enables marketers to determine the most successful commission structure for their businesses.
Combat fraud and poor performing traffic
To identify potential fraud and low-quality traffic, marketers must capture, monitor, and analyze very granular data about the clicks and conversions themselves.
This makes it easier to identify potential red flags such as:
- Are conversion rates for certain affiliates surprisingly high? If so, it might be worth the time to monitor their traffic further to confirm its legitimacy.
- Are high click counts paired with low conversions? If yes, that could indicate poor traffic from an affiliate partner.
- Are referring URLs all coming from the same address? This could mean a marketer has either landed a great affiliate partner or could be dealing with a bot.
- Is traffic coming from a site that has been previously banned? Unfortunately, this could mean an affiliate has gone rogue with your brand guidelines.
Managing affiliate marketing programs and data with diligence, plus setting up safeguards (such as only paying for verified leads) will enable marketers to avoid poor-quality leads and shady affiliate partners.
Ensure data security and privacy
When launching an affiliate marketing program, you need to protect your business and integral affiliate partnerships regulations amidst ongoing data security and privacy regulations.
These include a number of privacy initiatives that were introduced in 2018, such as the EU’s General Data Protection Regulation (GDPR), Apple’s Safari Intelligent Tracking Prevention (ITP) settings, and Mozilla’s Enhanced Tracking Protection (ETP), followed by the more recently introduced, Google Chrome 80.
The influx of privacy-focused browser regulation changes can prove to be challenging for marketers to figure out how to accurately measure campaign performance. Now more than ever, affiliate marketers require powerful measurement tools that not only maintain accuracy for key performance indicators and campaign attribution, but that also to ensure the consumer’s right to privacy is not at risk.
Refine and optimize campaigns
A common mistake in affiliate marketing is “setting and forgetting.”
It’s crucial to continually test, measure, and refine your affiliate marketing campaigns. How can this be accomplished? First, learn as much as possible about how the affiliate industry works. It’s also important to dedicate resources to campaign execution and monitoring.
Most importantly, marketers must take action after discovering something significant – whether that means blocking a bad affiliate or incentivizing a good one with bonuses or higher payouts.
With affiliate marketing, a little can go a long way when starting a new program. Marketers that take the time to research, learn, and continually optimize will be the ones well-positioned to build a high-performing affiliate program that ultimately boosts revenue.
If you’re interested in how to start an affiliate program and want to learn more about next steps, reach out to us. Our team would be thrilled to help!
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