Starting an Affiliate Program?
An affiliate program is a very powerful tool for online marketing, here are just a few brief pointers for merchants thinking of starting an affiliate program. For more please contact us to discuss your requirements
Network VS Inhouse Program.
Major considerations:
In House Software: Affiliate software can be very affordable IDevAffiliate sells affiliate tracking software, that is very easy to use, if a bit limited for around £50 / $99.99. This is a fantastic price when you consider that affiliate networks charge between £500 and £5000 for a sign up (plus ongoing fees, plus override commission).
It is very much worth noting that when you sign up to an affiliate network, you are not just using their affiliate tracking software, but their user base, hosting for banners and payment infrastructure, to name a few features of their service.
Either way you are going to need an Affiliate Manager
It is my firm founded belief that affiliate programs require an affiliate manager. An affiliate manager oversees the smooth running of the program, recruits affiliates, pushes the current affiliates to keep their promotions up to date, answers the day to day enquires from affiliates and mediates between network, merchant and affiliate.
Other factors in working out costs for your affiliate program include:
- Commission
- Network Override
- Network ongoing fees
- Affiliate Management costs
Commission Structure.
This is the crux of affiliate marketing, the affiliates are not going to be interested by a poor paying affiliate program. The affiliate is going to want to see an attractive percentage commission.
Looking at similar affiliate programs on various networks I would recommend starting with a high commission rate but if you can afford it and still be competitive with other programs, hold back a little to allow for ‘bonuses’, special promotions or just a big push at a later date. It is worth considering a sliding scale, offering a range of commissions depending on sales volume, many programs offer a sliding performance related scale.
What Exactly Do You Pay Commission On?
This is up to you, there are several ways of calculating this.
- Basket Value
- Basket Value Inc VAT
- Basket Value including VAT and Postage.
I would recommend that you go with the second option. This makes things more transparent for the affiliate, ie if they sell £100 worth of goods and you were paying commission on the basket value minus VAT the affiliate may wonder why they are seemingly getting less than 8% commission.
In my experience the majority of merchants calculate commissions on the VAT inclusive value.
There is no sense in paying commission on postage, unless you make a profit on this and want to use it as a selling point for your affiliate program.
Network Override
Unfortunatly this is non negotiable in most cases, the network is there to make money and this is the most effective way to do it for them, also it is a % based fee (usually 30% of the affiliate commission) so you need to factor this in when you are calculating your % commission to affiliates, ie if you want to pay 8% commission, you will actually be forking out 10.4% commission, in total, to the network.
Network Fees
Word of advice, if you have a program that will really perform, or you have a track record with lots of stats (basket value, conversion rates etc) you may wish to present this to the network as you may be in a position to negotiate on these fees.
Affiliate Management Costs.
No matter what you do, whether inhouse affiliate program or via a network, you really need an affiliate manager. Either outsourced or inhouse, you need one person whos job it is to look after the affiliate program.
