Blog

5 Things to Consider When Launching An Affiliate Program

Launching an affiliate program is a great way to get the word out on your company and find new customers. Except for an initial investment and potential monthly program management fees, there are really no other exceptional costs to consider. No huge overhead. No huge risks.

If your program’s not working, you can simply pull the plug and shut it down. And unlike traditional marketing, you’re not just tossing out tens of thousands of dollars simply for “branding.” Instead, if you’re paying out tens of thousands of dollars to affiliates, it is to pay commissions for new customers affiliates are referring to your business. If your affiliate program is structured around a revenue-share, affiliates create a new revenue stream for the business where your marketing spend is tied to revenue performance–all of which makes a powerful and compelling business case.

So you’re ready to embrace the performance marketing industry and set up your own affiliate program. That’s great! While there are plenty of details to work out, we’ve put together a list of 5 Main Things to Consider When Launching An Affiliate Program.

1. Know What You’re Getting Into
Like any new business venture, you need to really do your homework. Read up on the latest trends in affiliate marketing. Take the industry’s temperature to see what’s hot at the moment, as well as what’s so last year. Most importantly, find a number of competitors with affiliate programs and see what they’re doing. How is their affiliate program set up? What sort of commissions do they offer? What creatives do they use? How do they message their affiliates regularly? What Affiliate Management Agency or OPM do they use to manage their program? Or do they run it all internally? Do your research and even join their program to get the answer to most of these. Then decide what pieces would work for your business as well as how you can tailor your program to be different.

2. Decide How to Run Your Program
There’s basically two choices in terms of running an affiliate program: do it yourself in-house or run it completely through an affiliate network. There’s plenty of software out there that can work with your website to let you run your own internal affiliate program. The upside? You have complete control over everything and don’t have to pay any additional fees to be part of a network. The downside? You have to run everything and you don’t get the added reach that many of these big networks have at their disposal.

Take a hard look at your company and your brand. Is it strong enough to go on its own or do you need help? Look into the types of affiliates you want to work with as well, as that can be determined based on the network you choose. Don’t forget to consider how scalable a platform or network is if you think you’ll need some flexibility as your program grows over time.

3. Setting the Price
Deciding on your commission rate is the biggie. Sure you can give out a 95% commission on sales and watch affiliates promote your products like mad. Probably not the smartest business model, though. It’s time to crunch the numbers and figure out your margin and cost of goods sold. Calculate the value of a new customer versus an existing one. You can certainly offer variable rates on commissions based on total volume, but you should also consider different commission rates for specific product categories if your site offers a large variety.

4. Plan Ahead
You may want to test the waters and see what happens immediately after launching an affiliate program before making any changes. In this super organic space, that’s definitely a good move. But even better would be to plan out your overall affiliate marketing strategy for the initial 12 months. Decide on various goals (revenue, number of affiliates, outsourcing to an agency, etc.) and plot them out for your first year. Keep coming back to your list of expectations as you pass each milestone and adjust when necessary.

5. Be Resourceful
Every company is different. As is every affiliate program’s needs. Figure out exactly what resources you’ll need to not only get your affiliate program off the ground, but keep it running month after month. Do you have designers or will you be outsourcing creative? Can someone manage your affiliate program internally, dealing with running the numbers, overseeing the creative, sending out payment, managing the affiliates, etc.? Or are you better suited just tossing some or all of those responsibilities to an Affiliate Management Agency? Continue to ask these questions as your program grows, because your needs may quickly change.

There’s certainly a lot to consider when launching your affiliate program. But just like any successful marketing plan, the more homework and preparation you do beforehand, the more you improve your chance of success. Good luck!