In SECTION 2, we move from data to analysis, from theory to practical application. Here is a distillation of more than ten months of research…
Section 2 addresses five questions:
- Why do some programs achieve stellar results, while others are a disappointment? What is the critical difference? (2 Interviews)
- What can we learn from the MEC case studies and tests that will help us develop a more effective program? (21 hard-won principles)
- What software should I use to build my affiliate program? (8 summary reviews)
- How can you set up your own affiliate program? (25-step executive summary and a 5-part, 25-step detailed blueprint)
- What can you glean from all of this data? (The 10 most important lessons from this report)
+++ We also offer and rate 108 additional resources, gathered in our literature review.
Why do some programs achieve stellar results, while others are a disappointment? What is the critical difference? (2 Interviews)
Brian Alt recently interviewed Tim Ferriss from BrainQuicken. Tim provided some very useful lessons he learned in his disappointing first affiliate program effort. Here is the transcription of that interview:
Q: If you had to set up your affiliate program again, are there things you would do differently?
Yes. We would use a higher commission rate. This would incentivize the good affiliates, who are looking for near-wholesale pricing. We would use a commission of 30-40%.
We would incorporate more strategic planning before the program was launched.
We would reevaluate using MyAffiliateProgram.com. Their customer service and performance have not been as good as we hoped. We paid extra to have a recruiter on their end. They promised very great things from this recruiter and haven’t delivered.
We would still use their software, but we wouldn’t necessarily buy their premium services. That said, we simply don’t have someone to fill the recruiter function, so we’re currently opting for mediocre performance in place of no program at all. It is a lesser of two evils, perhaps, but certainly not optimal. Running a very successful affiliate program can take a LOT of time. It is overly optimistic to assume you will identify your top five affiliates and sign up three of them. It’s a numbers game in many cases, and to get your number of contacts up takes the scarcest resources of all: time.
We are currently only doing $3000 a month or less with our program. It has not been worth the investment in the premium services (human support), which cost us $595 a month. The software is good at supporting this type of affiliate, but our recruiter has primarily signed up people who contacted us directly.
The software itself is very strong, although it does lack clear documentation in some areas, such as how to specify alternate landing pages other than your site’s home page. Affiliates don’t want to send customers away from their site to close a sale, so allowing them to send users directly to your order page is important.
Q: What elements of your affiliate program have been successful?
Using list brokers and offering the recipients of those mailings high commissions has been effective.
It’s also important to have examples of deal structures in place for your new affiliates. Being able to show a high conversion rate is important. Affiliates want a big bang up front; they are not as concerned with cookies that track returning visitors.
Q: How successful are your affiliates? Do they market your program exclusively or alongside others?
90% of people that sign up do not follow through and put any affiliate info on their site. Almost all affiliates who do well are professional affiliates and market the program alongside others.
Q: What are you doing to help your affiliate succeed?
We have developed a variety of different marketing materials to meet their needs. However, it is important to note that you will never be able to please 100% of your affiliates with the marketing materials that you provide, and you will waste a lot of time trying to do so.
Q: How much do your affiliates contribute to the success of your enterprise?
Less than 1%, with a lot of time wasted in the process.
Q: What percentage of commissions do you offer? Why did you choose this? Have you ever experimented with changing your payout? If so, what did you learn?
We offered 10% initially. Professional affiliates look for higher commissions, and low commissions will attract the wrong affiliates.
The more you pay, the harder affiliates work to close sales and promote your product. We are completely re-launching our program with higher payout.
Brian Alt also interviewed Nick Chunias of MuscleMaster.com about the success of his affiliate/partner program. Here is that interview:
Q: What elements of your partner program have been successful?
Our strategic partnership program has provided a means for our partners to earn a substantial amount of income while minimizing their investment risk and allowing them to spend all of their time focusing on marketing their web sites.
Our technology platform is top notch and allows our strategic partners to have a complete outsourced solution completely branded in their web site’s name.
Our program works very well for strategic partners that solely focus on selling health products as well as those who have been successful in other product channels that want to expand into the health products channel.
We also help our strategic partners achieve top service ratings, as our order processing time and fulfillment accuracy are outstanding. Virtually all of the Yahoo Stores that we service are 5-star rated stores. This helps our partners to convert sales at a higher rate and gain a greater amount of repeat sales from their customers.
At the end of the day, our focus on allowing our strategic partners to create a business with long-term residual value has made the program successful.
Q: How successful are your partners? Do they market your program exclusively?
Most of our strategic partners do very well and range in annual sales anywhere from $100,000 per year to well over $1.0 million per year.
They normally market their website exclusively focused on the products we offer. About 80% of the partners that join our full e-commerce partnership are successful and profitable.
Q: What are you doing to help these partners succeed?
We have made an extraordinary investment in our technology platform which allows us to process all orders in a highly automated fashion and to provide outstanding customer service to our strategic partners and their customers.
We also help our strategic partners with website development and enhancement, with our email marketing program, with our call center, and with the overall strategic consulting we provide.
We allow our strategic partners to completely outsource all of the operational aspects of their business and focus all of their attention on marketing their web sites.
We maintain their product database, we keep them informed of health/fitness and Internet trends, we process all credit cards if they desire us to, we manage all daily orders, we maintain a call center/800-number for them, and we flier orders to help create up-sells.
We also developed a custom Yahoo Store manager that completely automates the Yahoo Stores of our partners.
Q: How do you qualify new affiliates/partners?
This document covers most of that:
We do maintain flexibility within these categories depending on the unique situation of each potential partner.
We expect a minimum of 10-15 orders per day to qualify for top level (full e-commerce partnership).
We do take on some newcomers or people who have success in other areas of e-commerce. People with good business plans or those with a business philosophy similar to our own are given extra consideration.
Q: How much do your partners contribute to the success of your enterprise?
We derive about 40% of our sales volume through our strategic partnership program. The rest of it comes from our own website.
Q: What percentage of commissions do you offer?
Our full e-commerce partnership allows our strategic partners to earn approximately a 20-25% gross margin on the products that they sell which leaves enough room for them to cover all of their expenses and marketing costs and still be left with a net profit of 10-12% on their sales.
We also offer a commission-based program for those that do not want to have their own credit card merchant account which pays on average a 15% commission rate. We take the approach of trying to maximize the payout to our strategic partners because we realize that if they are not profitable in the long term, they will not be able to survive.
Q: What vendor/provider are you using for your more traditional affiliate program approach?
We do still offer a traditional affiliate marketing program through Commission Junction for our website www.musclesurf.com. This program makes sense for many expert affiliate marketers and also for those just getting started who want to test their business plan. This affiliate program does produce a substantial amount of monthly sales for us.
Some affiliates through MuscleSurf.com have done so well that they have upgraded to a full e-commerce partnership.
Q: Does including the partner company name and logo on shipped orders help attract more (and better) partners?
At the core of our strategic partner program is our view that customers belong to our partners. Therefore, all of the shipments and communications that we make on behalf of our strategic partners are done in their website’s name.
This customization and branding that we are able to offer is very motivating to our strategic partners as they are able to build a long-term brand and long-term value for their business. This results in us being able to recruit higher level strategic partners who share our long-term vision of growth and building the value of their business.
What can we learn from the MEC case studies and tests that will help us develop a more effective program? (21 hard-won principles)
From each interviewee above, we solicited the top lessons they had learned when running an affiliate/partner program.
Tim Ferriss offered 10 key points:
- People work for their highest-margin/commission products.
- You have to provide support to affiliates. Allow them to integrate the affiliate program into their business. Consider using articles or other content, and then include “For the complete report, click here.” This link would be an affiliate link that would take affiliates to your site.
- Email works. With the right opt-in list companies, you will have very few spam complaints and can recruit some effective affiliates.
- An affiliate program is a lot harder to set up than you think it is. Don’t underestimate the amount of time it will take to do properly. It will take at least as long as setting up a thorough search engine optimization campaign. Utilizing graphic designers, coders, and people who understand the affiliate software can also get expensive very quickly.
- Differentiate your offer from others. Offer big payouts. Provide your affiliates with your conversion percentage to encourage them to promote your products.
- Pay attention to how you qualify your affiliates. Stop developing new solutions for each new affiliate. It is a much better situation to have 100 affiliates each making $1000 per month than 1000 affiliates each making $100 per month. You will save time and money from a management standpoint if you focus on the affiliates who are the most effective. Also, working with fewer people allows you to correct and modify as you go along.
- Approach site owners who have related services and products and offer them high commissions to promote your program.
- An affiliate program is not something you can just slap on top of your existing offer. Make sure there are no conflicts with current resellers of your products. Be careful not to undercut them with your affiliate program.
- If you don’t have the time and personnel to recruit affiliates, don’t bother starting one. Don’t expect anyone outside of company to recruit affiliates for you.
- You must have a very good idea of what your outcome should be before you launch your program. Identify the ideal affiliate program and work from there.
Nick Chunias contributed an additional 6 key points:
- You must create a win-win program that allows your affiliates to benefit over the long term.
- You must educate your affiliates about your program and how to maximize it. Education is essential. We keep our partners educated on the industry, on new products we might be rolling out, and we even train them on some of the new products we add to our offering.
- You must constantly communicate with your affiliates. You should be there for your partners as an advisor.
- You have to be creative and think outside the box and experiment.
- You must listen to your affiliates and learn from them as well.
- You should automate as much as possible in all aspects of the operation. Make the process run seamlessly.
Jalali Hartman from Infopia.com offered five primary obstacles to avoid when launching a new affiliate program:
- PROBLEM: The partner has the wrong type of customers.SOLUTION: Make sure your partnerships are with companies that have complementary products or services. The rule of quality vs. quantity applies here.
- PROBLEM: There is no real incentive for the partner to fulfill their side of the agreement.SOLUTION: When negotiating a co-marketing partnership it is standard practice for each party to commit to certain marketing activities. Since the goal of any business is to make money, marketing someone else’s business can become a low priority. Partners should be well compensated, paid on time, and have enough financial incentive to make sure you succeed.
- PROBLEM: The partner has control over marketing activities around promoting your business.SOLUTION: Effective marketing of any product or service requires consistent, persistent marketing efforts. Be sure you have complete control over your content, including logos, pricing and messaging.
- PROBLEM: There is a flaw in your business process or model that limits revenue growth.SOLUTION: Prior to starting an affiliate marketing campaign, be sure to have a mechanism and business model in place that attracts customers, gives them something valuable enough that they will pay for it, scales, and keeps the customers coming back for more. Be sure your business model is sound and that YOU know how to market and sell it BEFORE advertising it through partners.
- PROBLEM: You compete with your partner.SOLUTION: Be sure that your products and services do not overlap with your partner’s. Look for partners who complement your business offering. For example if you sell baby clothes, find someone who sells books on pregnancy. If you sell payment processing services, find a partner that will increase your customers’ transaction volume AND give you new customers.
When shopping for an affiliate management solution, keep in mind that there are two types of solutions available:
- Affiliate Service Provider – A service provider maintains groups of both affiliates and merchants. They act as the go-between in most business transactions. (Payments are usually to and from the provider rather than directly between the affiliate and merchant.)The advantage to this set-up is that both merchants and affiliates have a readily available large list of partners, payments are consolidated, and disputes are mediated by the provider. The disadvantage is that they usually take a portion of the commission and control the affiliate lists completely. This may be the way to go for companies who do not have the time, manpower, or desire to manage their own affiliate program.
- Affiliate Software – In-house management software. Often hosted on remote servers for a small monthly fee, they give the merchant complete control over every aspect of their program.However, with control comes responsibility. Significant effort must be made to recruit quality affiliates and maintain timely payment of individual affiliates. While ultimately the best way to go, this may not be the option for companies that cannot handle the increased workload.
Jeremy Brookins, one of our researchers, reviewed the following affiliate management solutions:
http://www.myaffiliateprogram.com/ – This is the solution we are currently using at MEC. Although Tim Ferriss from BrainQuicken has expressed some reservations about using the MyAffiliateProgram solution, we have found the software itself to be quite good.
Tim’s complaints were primarily with the added human management, which we have not tested firsthand. We do, however, recommend that the role of “Affiliate Manager” be kept in-house if at all possible. No one will care as much about your business as you do. By outsourcing something as important as affiliate recruitment, you may waste much of your time and effort spent setting up the affiliate program in the first place.
We will be reporting on our experiments with MyAffiliateProgram in our upcoming web conference.
http://www.darkblue.com/ – This affiliate network boasts 1 billion impressions per month with over 12,000 affiliates. It requires a $500 initial deposit as an advertiser, and you must meet the requirements outlined on the website.
It comes highly recommended on a few affiliate forums and seems to have a fairly solid advertiser base. It is probably a decent avenue for smaller affiliate programs with little starting capital.
http://www.AssocTrac.com/ – This is considered one of the top affiliate management programs in the industry. The mind behind it is Corey Rudl, purportedly one of the best in the field. My initial thoughts though are that finding information about the program is quite difficult.
Their website is not clear. It is basically a one-page ad with buried links and navigation and it’s extremely difficult to get decent data. They have a link to a screenshot page buried in the text, and the first thing I noticed was that the date in the visible field is May 1999. This doesn’t bode well for support or future software updates.
http://www.affiliatewiz.com/ – They have a fully functional mock-up for each aspect of their software. The interface isn’t pretty by any stretch of the imagination, but it is fairly intuitive and they have some interesting features. It doesn’t appear to have quite the flexibility as MyAP, and it requires your own server. Prices are $549-$649, for Windows systems only.
http://www.directtrack.com/ – Backed by DirectLeads, one of the top affiliate providers, this solution is extremely robust. The drawback is the price: $995 licensing fee plus a minimum of $50/month. Advantages include optional access to a 15.3K+ affiliate network ($50/month or 10% of commissions), geo-targeting, email announcement to its list, and ownership of affiliate records.
http://www.cj.com/ – Commission Junction is one of the largest Affiliate Networks. There is a $2250+ setup fee and they take 30% of all commissions. They’re well-known, highly successful, and dependable.
However, you have no control over the affiliate records, as all of your affiliates are — in actuality — their affiliates. Exclusivity agreement and non-refundable escrow deposit are required.
http://home1.fusionquest.biz – This is web-based affiliate tracking software. There is a $595 one-time fee, with no monthly fee under 50K clicks ($15 per block of 25K over; max $75). Option 2 is a $295 one-time fee; $24.95/month for 10K clicks ($10 per 25K block over; max $64.95). There is no demo (15-day free trial) and the website is somewhat undesirable in appearance and organization.
http://www.groundbreak.com/ – This solution has very unattractive interfaces: they are cluttered, there is no left navigation, and there are many buttons and fields. It does have a functional demo version.
It is potentially a good program, and the low cost may be helpful: $200/year or $400/lifetime. It is currently set up for Unix-based servers, but can be tweaked to work with Windows servers. It requires technical savvy to install and run.
How can you set up your own affiliate program? (25-step executive summary and a 5-part, 25-step detailed blueprint)
This action plan was developed by our affiliate program manager, Jeff Sellers. Remember, there is a printer friendly version of this report. Just click on the link the top of the page.
- Determine your affiliate program objectives.
- Choose your Affiliate Manager.
- Choose your affiliate software solution.
- Purchase and set up your software solution.
- Determine your commission structure.
- Create the affiliate offer page for your site.
- Create the Affiliate Agreement page.
- Create promotional links and branding options.
- Create entry page for program or use your existing home page.
- Draft auto-generated emails to welcome new affiliates.
- Determine your methods of communication with affiliates.
- Create affiliate incentives and promotions.
- Promote your launch date.
- Upload all newly drafted pages to website.
- Activate program on launch day.
- Periodically test the program when live, using test accounts.
- Test affiliate software solution provider’s support services.
- Promote new program with links, email campaigns, web conferences, etc.
- Consider listing affiliate program in Affiliate Directories.
- Promote ezine, subscription and member referrals.
- Provide affiliates with sample promotional links to view.
- Email new affiliates active affiliate URLs to add credibility.
- Use testimonials effectively.
- Actively recruit with your affiliates by co-branding and co-marketing.
- Actively pursue a continuous 5-Month Evaluation.
The following blueprint was also developed by Jeff Sellers:
- Establish your affiliate program objectives.
- Create initial six-month task/goal list, including:
- Number of affiliates in program
- Amount of traffic generated by program
- Sales revenue generated through program
- Activation rate of affiliates (affiliates with active affiliate links)
- Create initial six-month task/goal list, including:
- Set up your affiliate management system.
- Choose your affiliate manager
- Must have personality, organization, and communication skills
- Choose your affiliate software solution
- Flexible, cost-efficient, easy to manage, with email affiliate module included
- Domain name control or flexibility
- Choose your affiliate manager
- Set your commission structure
- Percentages, payout levels, minimums, maximums
- Create your affiliate offer web page
- Explains your entire program with a value proposition, incentive(s), and credibility indicators
- Create your affiliate agreement web page
- Includes acceptance agreement and legal notice
- Create promotional links and options
- Creativity is key
- Offer links, banners, subscription forms, shared content and co-branding options
- Make graphics inviting, professional, and simple
- Create affiliate entry page (or determine to use your existing home page)
- Draft welcome emails for new affiliates
- You should be able to automatically configure this within your affiliate software
- Emails should greet affiliate by name and include their pertinent affiliate information
- Determine communication channels used by your affiliate manager
- Email notes
- Personal phone calls
- Create your special affiliate promotions
- Higher commissions for a determined time frame
- Higher 2nd-tier incentives for referring others
- Additional commissions offered
- Promote the launch of your program
- Existing lists, ezines, subscribers, members, customers
- New visitors to your site
- Web conference participants
- Activate your affiliate software
- Offer numerous options, which are active and available on day one
- Determine if an affiliate manager is available for support
- Create multiple test accounts
- Test all promotions, auto-generated emails, etc. while live
- Test commission data and functionality of administrative panel in software
- Use affiliate software support and customer service
- Use these to enhance your program and to get total value of the product
- Email campaign to existing list, subscribers, and customers
- Serve existing relationships and offer more value to them
- Use current member incentives to promote program
- Utilize current credibility and influence
- Email sample links of affiliate promotions
- Visual impact of promotions is very helpful
- Email active affiliate URLs to others
- Websites that currently host affiliate promotions builds belief and credibility in potential affiliates
- Include testimonials on your site, on affiliate offer page, and in email campaigns
- Apply active recruiting efforts with your affiliates
- Co-branding content within their site
- Affiliate recommendations taken and implemented
- Co-marketing to affiliate lists, ezines, and newsletters already in their publishing cycles
- Month 1: Are we meeting objectives and six-month tasks?
- Month 2: Is the current affiliate structure meeting expectations?
- Month 3: How successful was the launch and resulting sales?
- Month 4: Is our affiliate promotion the best it can be, can we change anything?
- Month 5: How do we focus our effort on Super Affiliates (top revenue generators)
So what have we learned from all of this research? What you concentrate on grows. That is true in many endeavors, but it is especially true in affiliate marketing.
- Don’t think affiliates; think partners.
- Focus. Focus. Focus. Forget the scattergun approach. Discover the profile of an effective affiliate, search for that profile, and concentrate your resources on helping them.
- Five relationships that work are better than fifty that don’t.
- Serving affiliate requires more than sending a link. Give them multiple ways to maximize your opportunity.
- Communicate with your affiliates often. Help to educate them.
- A poor affiliate program is worse than no affiliate program. A weak affiliate program diminishes your reputation in the marketplace.
- Sometimes your most demanding affiliates are your best affiliates. Balance potential against aggravation.
- You don’t want an Army. You want a Special Forces Unit.
- If you can’t make money with your offering, don’t expect them to… Don’t promise more than you can deliver.
- In a space where value propositions define market dominance, ask yourself how 1000 people selling the same product can differentiate their offering.
These sites were rated for usefulness and clarity, but alas, the rating is purely subjective.
|* = Decent||** = Good||*** = Excellent||**** = Indispensable|
Affiliate Handbook ****
Associate Programs Forum **
ClickZ Affiliate Marketing Archives ****
How Affiliate Programs Work ***
Finding and Attracting Affiliates **
Dr. Wilson’s Report on Affiliate Management Software **
A Point and Click Sales Force **
Affiliate Manager’s Guide to Running an Affiliate Program **
How to Inspire Loyalty and Increase Affiliates’ Sales **
How Do I Start an Affiliate Program? **
Regulating Chaos, Part 1: Adware and the Affiliate Code of Conduct **
Regulating Chaos, Part 2: The Affiliate Networks’ Dividing Line **
Regulating Chaos, Part 3: Adware, Merchants, and Affiliates Speak Out **
Regulating Chaos, Part 4: Affiliate Markets Adapt Standard s **
Fewer Leads, Better Quality ***
Commonsense Web Design for Affiliates **
The Four Myths of Affiliate Marketing **
When’s an Affiliate Program Not an Affiliate Program? **
Reports of Affiliate Programs’ Death Are Greatly Exaggerated **
Coping With SSS: Seven Seconds to Seducing Affiliates **
Are You Writing Enough Checks? **
Affiliate Marketing Comes of Age **
The Ten Affiliate Commandments *
Reboot Your Affiliate Program for Greater Success **
Affiliate Programs: Getting More for Less *
Experience the Field of Dreams in Your Affiliate Program *
Ensure the Success of Your Affiliate Program *
Super Affiliate Handbook *
Affiliate Guide **
Affiliate Knowledge **
Customer Acquisition: Affiliate Programs-Evolution of the Performance Marketing Landscape **
The Practical Guide to Creating and Managing a Profitable Affiliate Program **
Successful Affiliate Marketing for Merchants ***
The Complete Insiders Guide to Associate & Affiliate Programs **
Winning the Affiliate Game **
Affiliate Selling: Building Revenue on the Web **
Affiliate Handbook List of Directories **
2-Tier Affiliate Program Directory ***
Click Affiliate **
Affiliate Programs Directory *
Affiliates Directory *
100 Best Affiliate Programs *
Affiliate Programs Guide *
Internet Affiliate Programs *
AffiliateWorld Directory **
Top 5: The Affiliate Program Source **
Money Making Index **
Affiliate Summit **
eTail 2003 **
Casino Affiliate Convention *
CJU 2003 *
AD:TECH 2003 **
Affiliate Handbook Directory of Conferences **
Outsourced Affiliate Management ***
Affiliate Network Providers ***
CGI Resources Overview of Affiliate Program Management Solutions ***
My Affiliate Program ***
Kowabunga Technologies ***
Vedor Spotlight: My Affiliate Program **
Be Free, Inc. **
Commission Junction **
Active Marketplace (Declan Dunn) ***
Fusion Quest **
Interneka Affiliate Program Tracking Software **
Managed Affiliate Program Software *
Super Affiliate Generator **
Affiliate Traction **
Affiliate Tracking Network **
ProTrack Affiliate Tracking Software *
CyberAffiliates (DGM Australia) **
Groundbreak – Ultimate Affiliate **
PHP Affiliate Pro **
WebGenie Site*Sponsor **
PDG Software **
Commercial Networks **
i Carnegie, Dale. How to Win Friends and Influence People. Publisher: Pocket Books; Reissue edition (May 1990). ISBN: 0671723650
ii These metrics were provided by Nick Chunias. We have not independently verified them.
iii This group is reviewed in Section 2. They are the group that MEC has selected for the software component of its own affiliate program. The software is proving to be quite reliable. But Tim Ferriss did not have a good experience using this group’s promotional component. In the end, if you want to gather affiliates, you will have to concentrate on the marketing.
iv These metrics were gathered by MEC, directly from the affiliate program control panel.
v These metrics were gathered from the affiliate program control panel, and they were tracked independently to verify accuracy.
vi It is important to stress, once again, that these ratings are quite subjective. They are offered in hopes of giving you some way to filter through the overwhelming number of resources. Also, please note that we have NOT reviewed all of the services listed under “Vendors”; we simply rated the vendors’ websites for apparent usefulness and clarity of communication.