How to Design an Affiliate Program

A successful affiliate program is a very effective way to build your online sales. Conversely though, a badly designed program could destroy your business. So how do you design a program that works? Ken Evoy explains.

In 1997, Amazon.com launched the first associate program. Since then the number of associate (or affiliate) programs on the ‘Net has grown at an enormous rate and for a very good reason. Quite simply, a well-designed associate program is the best and fastest way to grow an online business.

However, the Amazon program has, at the time of this writing, some serious disadvantages for its specialized bookseller-associates. For one thing, customers referred from an affiliate’s site probably won’t buy right off the bat. And if they return, they return directly to Amazon, not through the affiliate’s site. Guess what? No commission for that!

Just think what you could achieve with an associate program that offered a genuine partnership!

Is an affiliate program right for you?

Setting up an affiliate program is not easy. Here are the major issues:

There are many complicated technical and legal aspects that have to be executed properly.
You will need to figure out a way to screen applicants, or have a clean and easy way to weed out troublesome, poor performing or potentially embarrassing affiliates.
You’ll have to distribute html code, graphics, logos, a “how to” manual… everything your associates need to set up their stores.
You’ll need to develop a training program to help them maximize sales.
An accounting system to track sales commissions must be established. Set it up online so your affiliates can check their commission status at any time.
You should e-mail a weekly or monthly newsletter, which includes the commission report.
Checks must be cut and mailed every month.
You’ll need to develop a marketing plan to build up your associate list.
Tech support for your associates has to be in place. You’ll be amazed at the mistakes they make.

In short, setting up an affiliate program is a lot of hard work!

Since it is a major commitment of your resources, make sure that the benefits of this sales strategy more than outweighs its costs. Consider three important factors when weighing the two:

The nature of your product(s) — Does it make sense for affiliates to “sell” your products?
The quality and quantity of your resources — Do you have the people and money necessary to start it, and to maintain it?
The existence of high-traffic sites relevant to your products — Are there high-traffic sites that “fit” with your product and that would participate in your program?

Once you have the answers to these three questions, answer the following…

Would you be better off deploying that time and money elsewhere?

Three important thoughts…

While building your affiliate program, keep these important points firmly in mind:

Your prospective affiliate will first of all assess your product. Do you sell a great product at a good price? If not, your affiliate program is doomed — most people won’t sell stuff that they don’t believe in.
Make it easy to join. Make it easy to stay up-to-date as an affiliate. A powerful backend should transparently support your partner-affiliates. Of course, you should know that by now!
Affiliates will constantly measure you and your program against others. Execute.

How to build, and keep, your affiliate sales force

Affiliates are becoming more and more sophisticated. They will try many different programs. You have to be competitive.

Here are the issues dear to the hearts of prospective affiliates, in the approximate order of importance (at least, to any smart affiliate).

Treat your associates as true partners. Think of them as partners — feel it. Everything you do, not just say, should reflect this thinking.
Recognize the lifetime value of each referred customer by paying accordingly. Pay your partner whenever his referral comes back to your store and buys. Pay on every purchase, not just the first. This residual income is concrete proof that you consider your affiliate as a partner, not just as a cheap referring machine.
Commission levels must be fair to both partners. When paying lifetime commissions, the best structure is a higher percentage for the initial sale, and a reduced percentage for later ones.
If you cannot come up with a percent commission (based on lifetime customer sales) that makes sense for both you and your associate, don’t bother proceeding.
Develop fair payment policies. A weekly payment program is too expensive for you to maintain. A quarterly payment program will not satisfy your affiliates. Pay monthly, but only on amounts exceeding a reasonable minimum.
Address issues of trust and credibility ahead of time. Prove that you’re honest and financially stable. One of the most important ways to prove your honesty is in how you handle commission reporting…
Commission reporting must be rock-solid and verifiable. Include a complete commission statement in your regular “Partners Newsletter” and provide commission tracking online, too, so your affiliate can check it anytime.
Offer a drill-down capability for the current period’s sales. Each product’s itemised line entry should be a link. When the affiliate clicks on the link, he gets a Web page detailing individual sales for that product. In this way, you make the whole process verifiable by your affiliate. He can ask a friend to make a small order occasionally, and then verify that it shows up in the drill-down. This random spot-check keeps you honest, but more importantly, the fact that you even provide such a capability allows your partner to sleep like a baby.
Build community. Your partner is part of a team. Make him feel like it…
- A “Partners Newsletter” is a must.
- Provide a forum or chat room or a mailing list for affiliates, so they can “talk” with each other online.
- Get creative. Build team spirit any way you can!
Never really take your affiliate’s customer off your affiliate’s Web site. Provide an easy return to your affiliate’s site. Actually, if you have instituted a partnership-oriented program, your partner should not mind totally losing that visitor to your site during this session. Long-term, it’s in his best interest, because his interest is your interest.
The vendor’s product must fit with the affiliate’s site. Recommend this strongly to prospective affiliates. Tell them that if the fit is poor, they’ll just end up wasting their time.
Don’t institute any stupid policies. Why do some vendors charge a membership fee to join their program? And why do others require customers to enter the name of the affiliate when ordering?

Simple. They are either overly greedy, or incompetent, or both.

The high reward, low risk answer

Naturally, a true partnership runs both ways. You must not only take care of your partner; you must take care of yourself. And your partner should take care of you, too! So turn this into a high reward-low risk effort by doing the following…

First and most important, let me repeat — make sure that your business makes sense for this model. If you don’t see an immediate and obvious fit, it’s probably not worth the time, money, and effort.
Ninety percent of the benefit will come from 10% of your associates. Develop a program that encourages only the best entrepreneurs and the 90-percentile-volume sites to apply. Weed out those who just cost you time and money.
Automate to the max. In a password-protected affiliates part of the Web site provide every conceivable piece of information that your partners could possibly want. It not only meets their needs; it cuts down your “maintenance time” by heading off questions and requests.
Start slow, with a test period to ramp up and check all systems. Once all is running bug-free, build it.
If branding is important, make the presence of your logos on your associates’ sites mandatory. Depending on how attractive your program is, you could require a substantial presence on your partners’ sites.
Require exclusivity in your product category in return for the “lifetime customer” commission. By instituting a true partnership with lifetime and residual income, you are making a serious commitment. It’s fair to ask for this commitment in return.

One final thought

Building an affiliate program can get extremely complicated, very fast. So as always, no matter what…K-I-S-S…

Offer a great product at a great price.
Make it easy to join! (But keep only the best.)
Support the heck out of your partner.
Execute.

Ken Evoy is the author of Make Your Site SELL! (MYSS!). MYSS! will show you how to sell on line like no other book or program ever has before. Ken has kindly offered to make MYSS! available for FREE download for all Sell It! readers.

January 30th, 1999

How to Design an Affiliate Program

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