If you are a merchant, deciding when it’s the right time to launch an affiliate program can be a tricky proposition. Launch too soon after starting your business and you will not attract quality affiliates and the program will likely go no-where, but launch too late and you are potentially missing out on what can be an extremely profitable, additional revenue stream.
As the image below illustrates, it takes time to get a new affiliate program off the ground, recruit affiliates, and get them productive. If you are an ecommerce store selling consumer goods, you will want to give yourself time to build the program prior to the holidays – again as the graphic below illustrates.
What is Affiliate Marketing?
First of all, understanding what affiliate marketing is and what it is not is crucial. At its most basic definition, affiliate marketing is simply a partnership between a marketer and a merchant (company).
The merchant pays the marketer (usually through an affiliate marketing platform like ShareASale) when the marketer refers customers to the merchant. This payout can two different ways.
- Based on a per-lead basis – the marketer refers customers who sign-up for a free trial, for example
- Based on a per-sale basis – the marketer refers a customer who actually purchases product. Or it can be a combination of the two.
The best thing about affiliate marketing is that if it is set up correctly, it is a win/win/win situation:
- There is little financial risk to the merchant because the merchant only pays out money to affiliates who produce results – new customers for the merchant.
- The merchant gains new customers that they may not have normally been visible to.
- The marketer earns money by offering new, relevant products to their audience.
- The customers win because they learn about and purchase products they may not have known about.
Questions to Ask Yourself Before You Launch an Affiliate Program
Is Affiliate Marketing Right for Your Business ?
Before we discuss whether now is the right time to launch an affiliate program for your business, you need to explore whether you are comfortable with the idea of an affiliate program.
To some extent you must be comfortable with the idea of relinquishing some control over your branding and messaging. Once you have other people promoting your products/services, controlling their messaging with regards to your brand can become extremely difficult – not to mention time-consuming.
However, this is where recruiting the right affiliates to your program comes into play. You need to insure that you recruit high quality affiliates who will convey a message and branding consistent with your own. But this involves a considerable amount of time – both recruiting the right affiliates and monitoring affiliates for compliance.
This is why we research and manually approve every affiliate who applies to the programs we manage. We also will go through an extensive cleanup process on existing programs we take over the management of. Making sure you only have affiliates who align with your goals and messaging is crucial.
Is Now a Good Time to Launch My Affiliate Program?
That’s the million dollar question isn’t it? 🙂
Only you can determine if now is the right time, but here are some things to consider:
Do you have a professional looking e-commerce site with a great user interface?
- Is your site easy to navigate?
- Can your visitors easily find what they want to buy? is it organized and searchable?
- Is your checkout process easy, straightforward and will your visitors be confident placing an order? (safe, professional, and error free)
- Does your website look like a “real” store? Ask yourself “If I landed on my site, would I feel confident placing an order and giving me money?”
Do you have a good grasp of your numbers?
In order to setup a competitive commission structure, without paying out more than you can afford, you need to know the following:
- Cost per acquisition (CPA) – this is the cost of acquiring a new customer. Marketing Spend/Customers = CPA.
- Return on Ad Spend (ROAS) – A healthy return on ad spend is in the 3:1 range. So if you are going to spend $100 on affiliates you should make $300 in gross revenue.
- Conversion Rate (CR) – Average e-commerce conversion rates are 1% – 2%. A 2%+ conversion rate should be your goal. If you are below that, you should work on CR optimization before implementing an affiliate program.
Know what your competitors are doing.
- What is their network(s) of choice?
- What is their cost-per-action?
- How does their commission rate/structure look?
- What bonuses or incentives are they offering?
Have specific, measurable goals for your affiliate program (some examples might be):
- Increase site traffic by 12%
- To increase gross revenue by $10,000/month by the end of the year.
- Increase your average order value by $10 within 3 months.
- Conversion rate to increase by 20% year over year.
Be able to set up specific KPI’s that will measure your progress towards your goals.
KPI examples might be:
- Gross Orders – total sales from the affiliate program
- Net Orders – total sales minus voided orders.
- Commissions – what did you pay your affiliates
- Top Affiliates – Who are your top affiliates and what % of total sales do they bring in
- Top Categories of affiliates – which categories of affiliates are driving most of the sales (coupon, content, loyalty, etc.)
- Percentage of active affiliates – those affiliates sending clicks to your site
- Percentage of productive affiliates – those affiliates who are sending clicks and actually making sales
- EPC – earnings per 100 clicks. Because this is the earnings an affiliate receives per click to your site, you will want to keep this number in a healthy range, in order to insure affiliates keep working with you.
If you are interested in exploring options with regards to whether or not you should launch an affiliate program, and if now might be the right time, contact us via the form below. We will get back to you right away to chat about where you are, where you are going, and some options.
We promise, no hard sell tactics and no obligations what-so-ever to hire us! We’ll just chat and hopefully give you some useful feedback.
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