Starting your own affiliate program - a guide for merchants

Starting your own affiliate program - a guide for merchants

Affiliate marketing is one of the largest channels of marketing online. Many merchants generate millions of dollars every year only through their affiliate partners. When launching and managing an affiliate program, the merchant has to take many factors into account. Outlined below are some of these factors and some strategies to get the best out of this channel.

Types of affiliate programs

You will have to consider whether you want your affiliate program to be pay per click, pay per lead or pay per sale.

Pay per click affiliate programs

Pay per click affiliate programs can be abused and really need to be monitored well. This can be a nightmare if you're not choosy about your affiliates. Even if you pay a penny a click, there are many unscrupulous webmasters who will use multiple computers and proxies and send you automated clicks driving up your bill. You will spend your time disputing fraudulent clicks instead of focusing on your core business. This area has become very competitive after Google Adsense especially where many webmasters are earning as much $2 per click routinely and something as much as $10 per click. Quality of traffic is extremely important for a pay per click affiliate program to work.

Pay per sale affiliate programs

Pay per sale entails paying a percentage of the sale amount (excluding shipping) or a flat fee on each sale or both. Many merchants pay a flat fee for every new customer, also known as a bounty apart from the per sale commission. This is because a customer is worth a lot of money in the long run. Some hosting companies in fact pay as much as $80 for a single web hosting customer who brings in only $7.95 a month. This is of course subject to the customer staying with them for at least 60 days, sometimes longer. Yet they pay out more. Matchmaking sites such as Match.com also pay generous commissions. It is a good idea to check out the existing trends in your industry. Generally anything that is a very easy sell will pay less commission. E-books, intangible products such as software and services such as psychic readings pay higher.

Pay per lead affiliate programs also know as CPA (cost per action) programs

Pay per lead affiliate programs are best suited for companies which cannot deliver the product or service online. This includes Real Estate, legal consultation, debt consolidation, autos, any type of loans. These are not immediately provided and need offline follow ups. As long as you receive a legitimate application you pay a certain flat fee per lead. You can always specify the criterion for this. Let's say you offer payday loans. You can specify qualifying leads as those earning above $1,000 a month, employed for 3 months with US citizenship and a checking account. Based on your own conversion rate you can determine how many of these will be approved and thereby determine the commission for every lead you can pay. Here again you can see existing benchmarks by going through affiliate programs of your competitors to see how much they're paying.

Some affiliate programs also pay on the second tier or beyond that. SO an affiliate who brings in another affiliate gets some commission for ever sale the second affiliate brings in, too. This can work for some industries. Allow affiliates to deep link to specific products on your web site so they can send traffic to a page within your site rather than to the home page. This will improve conversions.

Try to create win-win situations for yourself and your affiliates. They can't look for new merchants all the time and you can't keep scouting for affiliates. Long term stable partnerships work better.

Should the tracking be handled in house or outsourced to a network?

You can opt for an in-house solution with software sourced from a company. Alternatively you can have affiliate network handle your tracking and commission payouts. Affiliate networks include

Commission Junction & BeFree (Owned by the same company)
Linkshare
Performics.com
Darkblue.com
Clickxchange
ShareASale
Clickbank, which also offers a payment solution is typically for small merchants selling intangibles.

Generally in house tracking doesn't have the same credibility which tracking with a major affiliate network does. They provide real time stats and support to all these affiliates. Besides they have a ready pool of affiliates, tens of thousands of webmasters. Another advantage is that you don't have the headache of sending small checks.

Yet, these networks charge 25-30 % of the payouts as their fee. Start up costs can also be quite high when dealing with these networks. Commission Junction charges as much as $2250 setup plus $3,000 as reserve for commissions. Linkshare startup costs are quite high too at about $5,000 and Linkshare also requires an exclusive contract. Clickbank costs virtually nothing at $50 but is only for small merchants selling services.

- By Vikram Chandiramani, Affiliate Mantra. All rights reserved. This article may not be copied or reproduced in any form without prior permission.

Starting your own affiliate program - a guide for merchants