Many businesses miss out on the true benefits of affiliate marketing. As an advertiser (the business looking to obtain affiliates) you really need to understand the extremely delicate balance that needs to be achieved in order to hit that sweet spot of unbelievable business success.
So, What is This Sweet Spot Exactly?
First, this depends on the goal of your affiliate marketing campaign. For most companies there are 2 main targets that are zeroed in on:
1. Building Your Brand
2. Making a Ton of Profits
However, many businesses forget about old #3, Making a Ton of Profits for your Affiliates.
Hitting the sweet spot involves all three of these targets. I’ve seen a lot of companies start an affiliate babythingsonline program and generate a bunch of leads, and just dump their affiliates without even a care. If you do this you will miss out on a ton of money that could have been made.
You have to understand what affiliate marketing is really all about, and having been on both sides of the table (meaning I have ran affiliate programs for my business, and have also been a publisher selling affiliate products) I know exactly what needs to be achieved for both to have success.
You see, affiliate marketing is about much more than just you (the advertiser) making a great business decision to pay for only advertising that results in sales and therefore profits, it’s also about building your company brand while building strategic partnerships with individuals who can literally make your business explode.
It’s fine and dandy to use affiliate programs to have individuals throw up a few banner ads to make some extra money and generate leads for your business, but that’s what most companies do, so why stop there? You don’t want to be like everyone else, you want to be better than them. You do want to be better than them don’t you? I sure hope your answer is yes, because if not you can stop reading now. You don’t have to know these strategies if you don’t want to, but for those who do, pay extremely close attention to the rest of this article.
Your goal with your affiliate program from this point on should be to aim for the 3 targets I mentioned earlier: Building your brand, Making a ton of profits for yourself, and Making a ton of profits for your affiliates. Helping your affiliates will help you, I can guarantee that, and this will come down to how you ultimately structure your affiliate program.
So How Do You Structure an Affiliate Program?
First, it’s all about the commission. You have to give people a great incentive to advertise for you. Your goal is not just about making that quick sale (quick sales are good, but there is a lot more to this), it’s about the lifetime value of the customer and building that strong brand image with them. If you don’t know what the average lifetime value of your customer is, you’re going to have to go through your records, do some research, and probably do a little math. You at the very least want to know how much they spend, and for how long they remain an active customer.
Typically a good commission to start with for physical products is 6-8%, and once an affiliate shows good sales volume you can increase the commission amount to 12% or even 15% if it is feasible. Keep in mind at this point, whatever commission you decide on, make sure you’re still making a profit. I know that sounds like common sense to you, but later on after you’ve tested your campaign for a while you make actually find it more affordable to take a loss up front on the first sale. Don’t worry, I’m going to cover this in a little bit, so just keep reading, but first I want to cover informational / digital product affiliate commissions.
For informational / digital download affiliate programs, you want to at least offer a 50% commission. Statistics show that programs that don’t offer 50% or higher do pretty miserably. There have been a few exceptions with products I worked with that did well, but that was only because they had extremely high conversion rates. So use this as your baseline, test it, and see if you can afford to go higher. With downloadable products it’s usually not the first sale that will make your business, but it’s the backend products and the upsells that come later on. So just like with physical products, you want to know what the average lifetime value of a customer is, and from there, you can assess how much of a commission you can afford to give out.
Second, is cookie duration. This is very important to your affiliates because most sales do not occur on the first visit. Studies show customers on average come back between 4-7 times before a sale is actually made depending on the product that is being sold. I advise companies to use at least a 60 day cookie. Why 60? because everyone else uses 30, 30 days is the standard. Even though most sales do occur within that time period, you’ll attract a ton of more affiliates with a 60 day (or greater) cookie duration.
Third, besides the cookie duration, something for you to consider is the attribution of the sale. Attribution basically means deciding on who to credit the sale to. If you have a customer who goes to one affiliate, and then doesn’t buy, but a day or 2 later manages to land on a different site and then buys, who do you want to credit the sale to? Most companies prefer a last click attribute, meaning the last site to get the click that results in the sale gets the credit. This is the most common method, but there are other companies that prefer the opposite which is a first click attribute, which means even if someone bought from the second site in the above example, the site that got that first click will get the sale. Choose which rationale works for you, for me I tend to favor the last click attribute as well.
Fourth, pay your commissions on time. If you do not pay your affiliates on time they will venture somewhere else, even if it’s for a lower %. Your affiliates are working hard for you and many times are paying to send traffic to their sites for the possibility of making commissions for advertising your products, and most of the time those advertising bills come in way before they get paid, and I know because I’ve been there. Nothing would get me more ticked off than the affiliate company not paying on time, and even worse than that, some will even wait till the next paying cycle. You need to feel your affiliates pain and know what they go through. There’s nothing more agitating then spending a few hundred or thousand dollars on advertising and having to wait 2 months to get paid on it.