Five short years online merchants had few options when it came to effectively implementing, developing and promoting an affiliate program. Some merchants weren’t even sure what an affiliate program was or what value it could provide them. Today alternatives abound. Merchants who have already implemented affiliate programs now seek out ways to improve upon their processes and, with luck, gain a competitive edge. Those who have yet to tap into the powerful and potentially lucrative affiliate marketing channel are, or at least should be, considering their available options.
Most merchants use an affiliate network to get the process started (instead of creating an internal affiliate program right off the bat). For companies that do not have the experience or resources to market and obtain their own affiliate base -- or who, perhaps, want an easy-to-implement solution -- this is the best direction to go.
The primary value an affiliate network provides to a new affiliate marketer is to introduce the newcomer to its existing group of network affiliates. This jump-starts the program and helps the merchant drive traffic immediately. The question then becomes “which affiliate network or networks should I work with?” Unfortunately there is not always an easy answer since typically there is not one single network that will suit every merchant's needs.
The general consensus among both affiliates and merchants in regards to most networks is that there is no consensus. Points of view and opinions can be as different as those of opposing political candidates. If you tap into and follow some of the industry affiliate message boards and blogs you will see both positive and negative comments about every network posted on a daily basis. So be careful about placing too much value on the spin. You never know the source or motivation behind the commentary.
All affiliate networks do, however, share a few characteristics in their core business model. They serve as the intermediary between their affiliates and merchant clients. They make money based on bringing these parties together for mutual financial gain. However, every network has unique traits or approaches towards their business in order to separate them from the competition. You will see variations in the following:
- Cost to the merchant
- Number of active affiliates
- Specific industries a network focuses on or has success in
- The services and support provided to the merchant
- The acceptable methods of promotions by affiliates
- The types of programs they specialize in (i.e. Pay Per Lead, Pay Per Sale, Co-Registration).
Considering these variables, the differences between networks and the potential impact on an affiliate program, merchants looking to start working with an affiliate network should do their homework and not rush in with a “must have it today” mentality.
The following are a few of my guidelines. New merchants looking to choose an affiliate network should find them helpful:
Pricing Structure: It’s typically the first thing a consumer looks at so I’ll do the same. Some of the larger affiliate networks have the luxury of actually being able to charge a setup fee just for you to get started. If you are a large merchant or you have a cutting edge program, some networks will occasionally waive or reduce this fee -- remember everything is negotiable. Other networks will require you to place a deposit to ensure that they will be able to pay their affiliates for your commissions owed. In either scenario, all networks charge a percentage of sales or affiliates commissions that they pocket for themselves. Some organizations will even charge a minimum monthly amount. It’s important to know about pricing ahead of time when you are negotiating with each network. At that point, you will also begin discussing what your payout is going to be. If this is your first affiliate program, keep in mind that the higher your payout, the more the network earns. Outside of knowing your own margins and what you can afford to pay, you should conduct a comprehensive competitive analysis and see what your competition or industry payout is. Be sure to always leave some room to offer your top performers a higher payout than the average.
Don’t Buy the Hype: Too often a sales person from an affiliate network will attempt to sell you on how great your affiliate program will be and how much money it will do in their network. Don’t fall for it. A good network and a responsive affiliate manager will teach you and show you how to improve your offer before ever taking it out to affiliates. For a new program, a good network should be the one conducting the interview to decide whether to accept your program in to their network. Remember, if your program does not succeed for a network, they don’t make any money either. The better networks should be more difficult to get started with. Remember the old adage, “If it sounds too good to be true, it probably is.”
In addition, you must also realize that the number of affiliates in a network is not nearly as important as the quality. Many new merchants place too high a value on how many affiliates a network claims to have. It is well known that a relatively small percentage of affiliates produce the majority of all sales activity. You should attempt to clarify how many of the networks affiliates are earning commissions on a monthly basis, as well as the average commission earned.
Support and Service: Some networks are nearly 100 percent full-service; others are all self-serve. It is important for you to find out what level of service you will be getting to help your program succeed. Find out if the network will help you with creative and make recommendations regarding your Web site. How will the network get your name out to their affiliates and promote your offers? Some networks will simply list you with a several dozen other merchants. A good network will at a minimum have a weekly newsletter to announce your program.
Your Competition: Having your competition listed next to you in a network can be both positive and negative. The positive is that they already have affiliates carrying their program, so your program may be a viable alternative for these affiliates. The negative is that these competitors can drive up the commissions on each other to obtain new or maintain their existing affiliates, thus cutting into their margins. If there are ten other companies similar to you in a network, the competition and fight for recognition will get messy. Some networks have wisely begun to limit the number of programs they will allow for a specific product group or industry. In general it’s typically not a problem to have a couple of competitors in the network you are working with, however, if there are more than a few you should consider other network alternatives.
Affiliate Promotion: Learn exactly how your company will be promoted. Your brand and reputation are at stake and could be severely damaged if someone starts spamming with your logo in an email. Find out what acceptable promotion methods each network allows their affiliates to use. In particular, you should be extremely cautious with any network that allows affiliates to use Adware (or, worse yet, spyware) and/or mass email as their main methods of promotion. Generally a network will do their best to hide these practices because the industry, legitimate affiliates and consumers all frown upon them. If a network does allow for email promotion, find out how they monitor this activity. Check to make sure they have information about and enforce the CAN-SPAM Act. Also find out if they provide a suppression list of your opt-out subscribers to affiliates.
There are literally hundreds of networks you can review. Most people know about the Big Three affiliate networks, but there are in fact several dozen I have worked with and have seen grow considerably. These networks are smaller in size but are top-tier operations that provide a practical option.
Once you have conducted your research, you may want to consider working with multiple networks to test them out. However, limit the number. Do not work with every network possible. Doing so will easily turn into a tracking nightmare. It is also more difficult for you to monitor the activities of all of these programs. Unfortunately, you can’t always rely on the network to do what is in your best interest.
Affiliates tend to sign up for many different networks to see what offers are available. Working with a few networks to start with should cover a large majority of potential affiliates that you are reaching or attempting to reach. Many networks will try to get you to give them exclusive rights to your program preventing other networks from running it. If you are considering this option it is best to either first test out several networks to see how they stack up, or put in predefined performance benchmarks that the network must achieve to maintain exclusivity rights.
The bottom line: there are so many choices that it is not wise to jump into a relationship with one or more affiliate networks without doing your due diligence. Take the time to ensure you are making a wise decision and that you have an exit plan if things don’t work.
Affiliate marketing can be a terrific sales channel for your business, but working with the wrong partner can cause you a major headache.
Mark Romanelli is the Director of Business Development for DirectTrack™, a division of Direct Response Technologies, Inc. His primary responsibility is to work with the 50+ affiliate networks powered by the DirectTrack™ platform.