Recently I made this post How to make money from affiliate programs, for those website owners and blog publishers wanting to leverage income through promoting products through affiliate programs.

Of course publishers (or site owners) form only part of the equation – merchants are needed to be promoted. So if you have an ecommerce site (or want to get newsletter subscriptions etc) then you may consider setting up an affiliate program.

Why set up an affiliate program?

For many, an affiliate program is a way of increasing the exposure of a site with the reward being that those who actively promote the site will earn commissions.

For others, having an affiliate program is more of a branding exercise – an easy way to get the brand into the marketplace without having to pay, unless in the rare instance a sale is made. These operatives use more traditional means to get traffic to a website to make sales, but use affiliate for branding.

But for switched on website owners an affiliate program can lead to greater turnover with the reward paid to affiliates more than worthwhile.

First some considerations on setting up an affiliate program

  1. An affiliate program takes time
    One thing that is important to remember about an affiliate program is that is should represent a major business element. An affiliate program is not something that can be quickly set up and forgotten about.
  2. Affiliates need support
    This simple fact is lost on most websites that have an affiliate program. Affiliates need information and promotional collateral that they can use to help you. In other words, imagine yourself as a manufacturer or wholesaler and your affiliates are bricks and mortar resellers. In real life reseller tend to be well supported. The same should apply in the on-line situation. Dedicate a certain part of your business thinking to the fact that they are the people who sell your products – you just happen to have a warehouse outlet that fills the orders.
  3. Paperwork
    An affiliate program will generate more paperwork for you. Even just keeping up with payments, tax treatment of affiliates depending on their tax registration status, but also what country they are in can make a difference. While there are many good affiliate management software programs available, they still need to be administered.
  4. Most affiliates are a waste of time
    Yes, it is a sad fact – from my experience and from others who run an affiliate program, somewhere between 89-95% of affiliate either won’t generate a sale, or if they do, they will be so slow as to be and administrative anchor through having small affiliate payments clogging up your system. To make an affiliate program work, you need to spend time and money locating and recruiting good affiliates who are prepared to put in the work. These ‘super affiliates’ do exist, and some of them are making a quarter of a million dollars per year.
  5. Can you afford the margins?
    This might seem an obvious one – but do your sums! You might well end up earning less that your affiliates. Take into account all cost aspects of your business. Include affiliate program administrative time as well.
  6. Legal aspects
    Don’t be caught out at the other end of a legal action for something one of your affiliates does. Even though you may have all the stipulations clearly laid out in your Terms, you could end up wearing a legal action, or having to initiate a legal action against an errant affiliate.
  7. Implementation
    Implementation should not just be grabbing some affiliate management software and creating a few banners and crossing your fingers. The first stage of implementation MUST be making sure your website converts visitors to sales. If leads don’t convert you will lose your top affiliates very quickly (simply because good affiliates check their stats and dump poorly performing merchants). Good affiliates are hard to find. Learn from them – if they are good at what they do it is because they work at it, and likely deal with other merchants who do things right. They have knowledge to share. Remember, this is a business partnership!
  8. Ongoing
    While affiliates can be ruthless with merchants – dumping poorly performing ones – so you should be ruthless with poorly performing (and especially with non-performing) affiliates. This is not to say you should dump them out of hand. At least make an approach to offer assistance to increase their earnings. Some average affiliates can become well-performing affiliates with just a little support and guidance. The bottom line, however, is that you are better of with 5-10 good affiliates than 100 poor affiliates.

Are affiliate networks the answer?

One possible way of reducing some of the points above is to go through an affiliate network. There are a number of advantages and disadvantages:

Advantages

  • Fast access to large numbers of eager affiliates
  • Payments to individual affiliates is taken care of
  • Reliable affiliate software provided
  • Accountable results (though these are there for an in-house program with the right software)
  • Hopefully access to free advice to improve performance

Disadvantages

  • Often a high entry cost
  • A percentage of every sale goes to the network – this either comes off what you pay affiliates, or comes off your profits
  • Little or no support, especially if you have taken advantage of a lower cost entry option
  • Often you have restricted or no direct access to your affiliates, and they to you
  • Often, the eager affiliates do not have a clue – they have been sold promises of income (though this is unfortunately all-too evident on any affiliate blurb – “Just place our banner and start earning money” sorry, just ain’t’ true, no matter how good the product.

Have a story to tell about your affiliate program, or experience as an affiliate? Tell us about them in Comments
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