Affiliate programs and the pros and cons of starting one for your business

An affiliate program is a form of indirect marketing, and it can help catapult your business's growth. However, it's also important not to jump on the bandwagon without knowing the details. An affiliate program is an agreement between two parties—the manufacturer/seller and the affiliate marketer. As a manufacturer or seller of goods and services, you partner with an external marketer to help promote your products and increase your sales. Based on the marketer's performance, you pay them a commission for the sales they bring you.

Sounds simple, right? Well...

Intermediaries

An affiliate marketer is considered an intermediary between you and your customer.

Sometimes, you'll have another, unknown intermediary—an affiliate network like the Commission Factory or Click Bank. A network is a marketplace for sellers and affiliate marketers. You can register your products on the network, and affiliates registered on the same network can start promoting your products. The network also gives you a portal to manage communication and payments with your affiliates. It's a quick and easy way to find ideal affiliates for your program. At the same time, the affiliate marketplace is yet another step in your selling process. Even though it doesn't directly intervene in your customer's journey, you still pay a fee to access the network's services.

An affiliate network can be beneficial if you're a smaller business with a limited budget. However, you can also ditch the network approach completely, directly promoting your brand and encouraging affiliates to partner with you. This eliminates the intermediary, but you may also incur additional expenses for marketing campaigns.

Who should run an affiliate program?

The best known affiliate programs are for the retail industry. Amazon's global affiliate community promotes products through their blogs, websites, emails, and other channels. Affiliate programs also work well for the hospitality and tourism industry. If you run a hotel or restaurant, you can incentivise your affiliates to bring in customers.

Nowadays, technology companies also have affiliate programs. The difference, however, is in how they structure and promote their programs. For example, Zoho's affiliate program has a review process for every applicant. We rely on internal references for affiliates to make sure the people promoting us share our values. We believe it's important to have affiliates who are natural fans of our products so their enthusiasm and support stems from a genuine place.

Not every affiliate program needs a stringent vetting process. Look at Amazon, for example. Their program is open to anyone—you can register as an affiliate anytime and start selling right away. This is largely because Amazon offers millions of products that cater to a wide range of audiences.

Benefits of having an affiliate program for your business

• When you run an affiliate program, you let someone else do the talking. It's akin to word-of-mouth marketing, and it tends to be less aggressive than direct selling.

• Your affiliates are well-trusted individuals in their respective communities. Having them vouch for your brand increases your credibility.

• Affiliates promote your brand through various channels such as their blogs, social media accounts, and email newsletters. This diversifies your traffic sources and helps optimise your performance in search results.

• Affiliates introduce your brand to new audiences you wouldn't reach otherwise.

Challenges of running an affiliate program

• Affiliate programs don't give you results overnight. Once you set up your program, you have to review your processes periodically, recruit affiliates, and offer comprehensive support before you see returns.

• If you set up an open affiliate system where anyone can join, you might quickly lose control of the messaging and your process. Affiliates may try to game the system, affecting your reputation.

• Affiliate marketers negotiate for the best deal. Unless you're an established brand like Amazon with fixed rules and payment policies, you may not have the budget for certain affiliate services.

What makes a successful affiliate program?

Success varies based on your goals and industry. That said, having an amiable relationship with your affiliates is essential for maintaining a successful program in the long run. Establish a strong support community for your affiliates and cater to their needs.

Sometimes, 20% of your affiliates may bring most of your revenue. As a brand, you could do a clean-up and prioritise only on those 20%, or you could spend more effort into training the other 80% to ramp up their efforts.

It's important to find the right compromise with your affiliates. Though it's ideal for a brand to pay for each sale, it's more beneficial for affiliates to earn for every impression. To avoid conflict, collaborate with your top affiliates and choose a payment structure that can benefit both of you.

How to start an affiliate program

1. Design the rules

Just like with any business activity, start by analysing your competition. Do they have affiliate programs? Understand how they run their programs and why their affiliates chose to do business with them. Knowing this can help you formulate policies and guidelines for your own program.

2. Set up the technicalities

Add a tracking program to your registration and purchase processes so that when a customer buys from you, you can trace the affiliate who referred them. Once you set this up, your affiliates can register and start using their unique referral codes.

3. Plan for marketing

An affiliate program is a marketing activity. As you would plan campaigns for your customers, you also need to focus on attracting and retaining affiliates. Treat this as part of your marketing strategy.

4. Generate content

As a brand, you can decide how your affiliates should promote you. Not all affiliates will need content from you, but consider providing a base outline of your message, including creatives and copy to ensure brand consistency.

5. Manage relationships

An essential part of affiliate marketing comes after you launch your program. Make sure that you establish a regular point of contact with your affiliates and respond to their concerns as soon as possible. Happy affiliates bring in more business.

Well, there you go! We hope this post helps you get an understanding of the many variables that define a successful affiliate program. Do you already run an affiliate program? Tell us how you're going!

Read next: Types of indirect marketing