Is An Affiliate Program Right For You?
Successfully developing an affiliate program requires strong commitment – both in terms of time and money. If you cannot make a commitment, the results of your program will be hindered. For instance, do you consider your affiliates long-term partners? The value that you place on your affiliates will most likely extend into the fees you pay them. If you pay them low, they will not work as hard as they would for someone who valued them as partners and provided fees that were higher. If you do not intend to treat your affiliates as business partners then it is probably not wise to develop an affiliate program.
It is also useful to consider the products or services you sell. Products and services that do not have a high margin to work with are not suitable for an affiliate program. For instance, if you are only making 8 percent profit on a product, it is difficult to give affiliates a reasonable fee. You need to be able to offer a reasonable fee to your affiliates so they will be motivated to promote your products and services.
Identify Your Program Objective
In most cases, the primary objective behind an affiliate program is to obtain a particular sales level. Other common objectives include increasing awareness and gaining new customers.
The objective that you choose will depend on a number of factors. For example, your objective may depend on how established your company is. If you are a new business, then you will most likely focus on increasing awareness and gaining new customers. If you are an older company with a solid customer base you will most likely focus on sales growth through your affiliates.
Determine The Payout
Payouts are the most significant factor evaluated by affiliates when choosing which merchants to promote. Therefore, they are an important consideration when developing an affiliate program.
There are basically three payment structures to consider for an affiliate program – pay-per-click, pay-per-lead and pay-per-sale.
Pay-Per-Click - Each time someone clicks into your site through a banner ad, text link, graphic or other access point from the affiliate’s site, you pay the affiliate a fee between $0.02 and $1.00.
Pay-Per-Lead - When a potential customer clicks on a banner ad, text link, graphic or other access point from the affiliate’s site, a form comes up, which asks the customer to complete and send. Each time a completed form is sent to you, the affiliate is paid a fee – usually a flat rate.
Pay-Per-Sale - Also called a revenue sharing program, the affiliate is provided with a percentage of the profits when they make a sale – usually between 10 percent and 25 percent. Larger companies may pay more.
The payment structure you use will depend on a number of factors including your objectives, the level of risk, the product or service you sell, and the value of your customers.
Objectives - If it is your objective to increase awareness of your site and bring in more sales, then it makes sense to pay your affiliates with a combination of the pay-per-click and pay-per-sale commission structures.
Level of Risk - The least risky of the payment structures is pay-per-sale since you only pay out when you make a sale. The other payment methods offer no guarantee that you are gaining viable customers who will ultimately bring sales to your business. As a result, you could end up paying out more money than you are making. There is also a high risk of fraud with the other payment structures. For instance, many customers prefer not to share their personal information and may not correctly fill out a ‘lead’ form. Consequently, you may end up paying out on false ‘leads’.
Product or Service - Usually, if you are selling a product, then the most common payment structure is pay-per-sale. On the other hand, advertising sales based sites typically use a pay-per-click payment structure. Subscription based sites will usually charge a flat pay-per-lead fee.
Customer Value - The value that you place on your customers can impact the fees you pay your affiliates. For instance, if you have an objective to maintain your most valuable customers, you may increase the percentage you pay your affiliates each time a customer returns to your site or buys your product or service more than once.
Affiliate payouts are the biggest cost in an affiliate program and can have a large impact on the success of your program. Structure your affiliates’ payouts to reflect your program objectives and the outcomes you want to drive forward.
Successfully developing an affiliate program requires strong commitment – both in terms of time and money. If you cannot make a commitment, the results of your program will be hindered. For instance, do you consider your affiliates long-term partners? The value that you place on your affiliates will most likely extend into the fees you pay them. If you pay them low, they will not work as hard as they would for someone who valued them as partners and provided fees that were higher. If you do not intend to treat your affiliates as business partners then it is probably not wise to develop an affiliate program.
It is also useful to consider the products or services you sell. Products and services that do not have a high margin to work with are not suitable for an affiliate program. For instance, if you are only making 8 percent profit on a product, it is difficult to give affiliates a reasonable fee. You need to be able to offer a reasonable fee to your affiliates so they will be motivated to promote your products and services.
Identify Your Program Objective
In most cases, the primary objective behind an affiliate program is to obtain a particular sales level. Other common objectives include increasing awareness and gaining new customers.
The objective that you choose will depend on a number of factors. For example, your objective may depend on how established your company is. If you are a new business, then you will most likely focus on increasing awareness and gaining new customers. If you are an older company with a solid customer base you will most likely focus on sales growth through your affiliates.
Determine The Payout
Payouts are the most significant factor evaluated by affiliates when choosing which merchants to promote. Therefore, they are an important consideration when developing an affiliate program.
There are basically three payment structures to consider for an affiliate program – pay-per-click, pay-per-lead and pay-per-sale.
Pay-Per-Click - Each time someone clicks into your site through a banner ad, text link, graphic or other access point from the affiliate’s site, you pay the affiliate a fee between $0.02 and $1.00.
Pay-Per-Lead - When a potential customer clicks on a banner ad, text link, graphic or other access point from the affiliate’s site, a form comes up, which asks the customer to complete and send. Each time a completed form is sent to you, the affiliate is paid a fee – usually a flat rate.
Pay-Per-Sale - Also called a revenue sharing program, the affiliate is provided with a percentage of the profits when they make a sale – usually between 10 percent and 25 percent. Larger companies may pay more.
The payment structure you use will depend on a number of factors including your objectives, the level of risk, the product or service you sell, and the value of your customers.
Objectives - If it is your objective to increase awareness of your site and bring in more sales, then it makes sense to pay your affiliates with a combination of the pay-per-click and pay-per-sale commission structures.
Level of Risk - The least risky of the payment structures is pay-per-sale since you only pay out when you make a sale. The other payment methods offer no guarantee that you are gaining viable customers who will ultimately bring sales to your business. As a result, you could end up paying out more money than you are making. There is also a high risk of fraud with the other payment structures. For instance, many customers prefer not to share their personal information and may not correctly fill out a ‘lead’ form. Consequently, you may end up paying out on false ‘leads’.
Product or Service - Usually, if you are selling a product, then the most common payment structure is pay-per-sale. On the other hand, advertising sales based sites typically use a pay-per-click payment structure. Subscription based sites will usually charge a flat pay-per-lead fee.
Customer Value - The value that you place on your customers can impact the fees you pay your affiliates. For instance, if you have an objective to maintain your most valuable customers, you may increase the percentage you pay your affiliates each time a customer returns to your site or buys your product or service more than once.
Affiliate payouts are the biggest cost in an affiliate program and can have a large impact on the success of your program. Structure your affiliates’ payouts to reflect your program objectives and the outcomes you want to drive forward.
