How to start affiliate program for your business in 5 easy steps

Are you curious about the ins and outs of launching your very own affiliate program? In this comprehensive guide, I’ll take you through the entire process, providing a detailed step-by-step roadmap. Furthermore, I’ll share a real-life case study featuring an affiliate program we developed for one of our clients.

Even in the face of various challenges, our efforts bore fruit with an astounding 21.4% surge in total merchant sales in just the first 30 days after the program’s launch. This remarkable success vividly illustrates the untapped potential of a meticulously executed affiliate program.

Let me walk you through the essential steps required to set up and run a successful affiliate program. Check strategies I used to create an affiliate program for a client in the highly competitive market of food supplements and “As seen on TV” products.

How Does Affiliate Marketing Work?

Before I inform you of all the details about the affiliate program I did for my client let me explain to you how affiliate marketing works.

At its core, affiliate marketing is a collaborative partnership between a company and affiliates. Picture it as a team effort, where each member has a specific role.

The company, often referred to as the merchant or advertiser, offers products or services that they want to promote and sell. However, instead of relying solely on their own marketing efforts, they invite affiliates to join in.

Affiliates are essentially independent marketers or publishers who have an audience or a platform of their own. They can be bloggers, social media influencers, website owners, or anyone with the ability to reach and engage an audience.

Here’s where the magic happens: The company provides unique tracking links to each affiliate. These links are used to identify which sales or leads are generated by each affiliate. When someone clicks on an affiliate’s unique tracking link and makes a purchase or performs a desired action (like signing up for a newsletter or filling out a form), the company knows that it was the affiliate’s effort that led to that sale or lead.

In return for this valuable contribution, the company compensates the affiliate with a commission or a predetermined percentage of the sale’s value. This commission serves as the affiliate’s reward for driving potential customers to the company’s products or services.

What makes affiliate marketing appealing is its win-win nature. Companies benefit from expanded marketing efforts without upfront costs, and affiliates have the opportunity to earn income by promoting products or services they believe in. It’s a dynamic, performance-based model where success is measured by actual results.

How to start an affiliate program for your business

Whether you’re new to affiliate marketing or seeking to optimize an existing program, these five fundamental steps will guide you toward building a thriving affiliate program tailored to your unique needs and goals.

Check them out, but keep in mind some details can be different for your case. However, the basics are more or less the same for everyone.

1. Choose your affiliate tracking solution

Maybe you’re wondering if should you go with an affiliate network or with an in-house affiliate program.

Both setups have their pros and cons. Which one is the best choice for you, depends on your needs and capabilities.

Affiliate network

Affiliate networks (CJ, Shareasale, etc) company acts as an intermediary between affiliates (publishers) and merchants (you).  They make it simple for a merchant to have their affiliate program without any need for technical knowledge or additional time investment (well, almost no time investment).

They take care of tracking, and affiliate management, and they already have an army of affiliates waiting to promote your product. Sounds great, right? Well, all that comes with a price tag.

PROS:

• Minimal Effort Required
• Streamlined Process
• Ideal for Big Brands
• Avoidance of Technical Complexity
• No Direct Affiliate Interaction With Affiliates If Not Desired

CONS:

• Setup Fees (Possibly Significant)
• Additional Affiliate Network Fees (25-30%)
• Reduced Profit Margins Due to Fees
• Risk of Limited Affiliate Promotion
• Potential Competition With Other Programs

Hosted or self-hosted affiliate tracking software

When it comes to an in-house affiliate program, you can choose between the hosted and self-hosted affiliate tracking software.

With self-hosted software, you need to install it on your server, which takes a little bit of technical knowledge (or leave it to your tech person). You can choose between stand-alone software or module/plugin if you use popular eCommerce CMS.

Some eCommerce CMSs already have built-in affiliate tracking, so you only need to activate it and make a few settings.

Hosted solutions are a bit easier to use. Service providers take care of hosting and upgrades and you only need to insert tracking code to your website and you’re all set up to go.

It’s a bit easier to use and you don’t have to worry about the technical part. While self-hosted solutions usually have a bit higher upfront cost, you’ll only pay a small monthly fee for a hosted solution.

PROS:

• Complete Control
• Selective Affiliate Access
• Increased Affiliate Payouts
• Customized Offers

CONS:

• Regular Updates and Security Responsibility
• Potential Server Slowdown If Hosted with the Website
• Need for Dedicated Personnel If Not Managing Affiliates Directly
• Affiliate Support and Payment Responsibility
• Challenges in Finding Quality Affiliates

Our Choice of Affiliate Tracking

In this case, I went with the affiliate tracking module for Magento. This is not something I would normally use, but in this case, the client’s store already had it built in.

Modul already had everything I needed and I could add additional modules for any function I might need. All settings were super easy and I was ready to test it in less than a day.

One of the reasons I didn’t choose the affiliate network, in this case, was that there are no affiliate networks in Slovenia. I could join any of the numerous affiliate networks in Europe, but they usually have very few Slovenian affiliates, and it is very unlikely other affiliates would promote it (language barriers).

2. Determine appropriate affiliate commissions

This is usually the part where most people have problems. How much to pay? What is enough? Which type of commissions to use? CPL, CPS, CPA…?

This depends a lot on what type of sites you have:

• If you’re selling multiple products (eCommerce) go with CPS.
• If you’re collecting leads, go with CPL.
• If you’re in customer acquisition, go with CPA.

Of course, there are some exceptions. If you’re in doubt, just check which model your competition is using.

The simplest way to set your commissions is to calculate what are your margins and how much of it you can spend on affiliates. Just make sure you include any cost you might have with program management (network or affiliate manager fees).

In our customer situation, I decided to go with the CPS model. Because the customer had a different type of product (some had low margins, some quite high), they decided to pay 10 to 30% commissions.

Which commission will be paid to the affiliate based on the category that the product was from. They could have the same commission sitewide, but they wouldn’t be competitive in the food supplement vertical where commissions are quite high.

3. Prepare marketing creatives to aid affiliates

You would be surprised how much more willing affiliates are to promote your program if you prepare creatives (marketing materials) for them.

So prepare banners, email creative, press releases, promotional coupons, or any other creatives that might be handy for them. If they can quickly grab them, they are much more likely to use them.

That’s why I prepared enough promotional material (email templates, banners, discount codes, etc.) for affiliates, so they could use them. And I made sure I added fresh ones regularly.

4. Thoroughly test your program before launching

Before you have a grand opening, it’s a good idea to test everything. You can do it yourself, but you can also ask a few affiliates to test for you. That way you can cover more ground than you could do it yourself.

In our case, I posted on the affiliate forum that we’re looking for a couple of beta testers and asked anyone interested in promoting this affiliate program to sign up for the early bird list.

After our beta tester drove enough traffic to make sure everything worked as it should, I sent out an email to everyone who signed up for the early bird list that we’re open.

Besides that, I also reposted on the original forum topic that the program was launched and that everyone is welcome to sign up.

That alone resulted in 76 affiliates signing up in the first 24 hours and 121 affiliates in the first 48 hours. I was very glad about the results, especially since this is not something you would typically see.

The reason for this great turnout is that I did a good pre-promotion and the market itself was lacking this type of program. Keep your eyes and ears open to see what type of program affiliates are looking for.

This program offered high payouts and a wide variety of products they could promote. And that filled the hole in the market and sparked the interest of a lot of affiliates.

5. Actively recruit affiliates through various channels for a successful program

Your affiliate program is all set up, tested, and launched, but it’s not time to rest on the laurels just yet. Just because you got the first affiliates, that doesn’t mean they’ll bring sales and that new affiliates will just keep coming.

It’s very unlikely that new affiliates will keep knocking on your doors, so you’ll have to invite them. This task can be very time-consuming, so you might want to consider hiring a V.A. or affiliate manager service (someone like us) that will do that for you.

There are a lot of different ways you can do this. I started this by simply posting about it on different affiliate communities (FB groups, forums, etc.) where we were already active.

Since they already knew us, they were much more likely to work with us. This is the fastest and usually one of the most effective ways to get the first affiliates.

For the second round of affiliate scouting, I did massive outreach to site owners. I was targeting mainly affiliate sites in related verticals and content websites that might be interested in promoting our websites. While this didn’t yield a lot of new affiliates, I did find some of the biggest affiliates this way.

NOTE: Choosing an affiliate network route might save you some time since they already have a lot of affiliates. However, if their affiliates don’t promote your type of product or you’re just one of many that offer the same thing and you don’t stand out, they won’t have any incentive to promote you.

If this happens in your case, talk to your (affiliate network) account manager to see if there is anything you or they can do to bump up sales. And even if your program runs over a network, you can still scout for willing affiliates and ask them to promote you via an affiliate network.

What kind of results can you expect?

One of the most common questions we get is “How many sales can we expect to get with our affiliate program?”. There are no typical results. Some programs have huge success, while some barely make any sales.

It usually comes down to how much time (and money) you invest in promoting the program and also what type of products or services you’re selling.

In our case, the client sold a lot of products that have a very wide appeal and good margins. This type of product almost always sells great through affiliate programs. Mainly because it’s easy to target buyers and it also appeals to a wide number of affiliates.

Even though all these factors pay in favor of our client, we were still surprised when we saw that all affiliate sales brought in 21.4% of the store’s total sales just 30 days after we launched an in-house affiliate program.

Managing affiliates

In the world of affiliate marketing, success isn’t just about signing up affiliates and hoping for the best.

It’s about managing these valuable partnerships effectively. Here’s a closer look at some key aspects of affiliate management, explained in a way that feels like second nature.

• Affiliate Management:

Managing an affiliate program involves overseeing the recruitment of affiliates, ensuring they have the necessary resources, tracking their performance, and processing payments.

An affiliate manager plays a pivotal role in handling these responsibilities, from onboarding new affiliates to addressing their queries and concerns.

• Affiliate Support:

Affiliate support is akin to customer service but tailored to the needs of your affiliates. Providing various support channels like email, forums, or support ticket systems helps affiliates get quick answers to their questions or resolve issues.

Effective support fosters a positive relationship and encourages affiliates to promote your products or services more effectively.

• Timely Payments:

Timely payments are crucial in affiliate marketing. Affiliates rely on these payments as their reward for driving sales or leads to your business.

Delayed payments can erode trust and discourage affiliates from continuing to promote your offers. Consistency in paying affiliates on the agreed-upon schedule is vital for maintaining a healthy affiliate program.

• Fraud Prevention:

Affiliate marketing can be susceptible to fraudulent activities, such as fake leads or sales made with stolen identities. Regular monitoring of affiliate-generated traffic helps you detect and prevent such issues.

This vigilance protects your program from fraudulent affiliates and maintains the integrity of your affiliate marketing efforts.

• Affiliate Relationships:

Building strong relationships with your affiliates is essential. Treat them as valuable partners rather than just associates.

Show respect, provide clear communication, and offer support to help them succeed. A positive relationship with affiliates can lead to increased loyalty and higher-quality traffic and conversions.

• Top Performer Focus:

Your top-performing affiliates can have a substantial impact on your program’s success. Prioritize supporting them by offering incentives like higher payouts, custom marketing materials, or personalized resources.

Focusing on your best affiliates ensures they remain motivated and continue delivering exceptional results.

• Appreciation and Loyalty:

Expressing your appreciation for your affiliates goes a long way in fostering loyalty. Consider offering bonuses or gifts as a token of your gratitude, especially during special occasions or milestones.

In return, loyal affiliates are more likely to remain committed to your program and continue driving valuable traffic and conversions.

What are the biggest mistakes affiliate programs make?

While starting an in-house affiliate is not that difficult, creating a successful program that will bring sales for years is much more difficult.

Ever heard of the saying “If you build it, they will come”? While this already rarely works in internet marketing, it rarely works in affiliate marketing.

Just because you have an affiliate program set up, that doesn’t mean that sales will just start pouring in (at least in most cases). Not working actively on getting affiliates is one of the most common reasons affiliate programs fail. Let’s see which other mistakes you should avoid.

These are some of the most common mistakes in-house affiliate programs make:

• Lack of communication and support

Besides offering them support, you must communicate with your biggest affiliates (or those that you know that can grow) at a minimum.

They are those that can bring the most sales, so work with them to figure out what they need to make that happen.

• Too small commissions:

Affiliates are business owners just like you and they will only promote you if their ROI is good enough.

If you’re not sure how much you should pay them, check how much your competition is paying their affiliates. If you won’t pay them as much as your competition, why would they even join? Some will still join, just not as many as you want.

• Too big commissions:

Weirdly enough, this can also be a problem. If you don’t do your calculations correctly, you might be paying too much. If they cut too deeply in your margins, you might be losing money with every sale they make. This is a partnership, so both parties must make enough money.

• Not paying on time:

This is a horrible mistake, it’s a mistake that can destroy your affiliate program and reputation as a business owner. Paying them on time should be one of your highest priorities. And you end up paying them late, let them know why don’t keep them in the dark.

• Lack of creatives:

Creatives (banners, email templates, link generators, etc.) are tools for affiliates, so make sure they something to use. Don’t forget to update them regularly.

Now that you know how to avoid most of the mistakes, you shouldn’t have any problem running a successful in-house affiliate program.

In a nutshell

Setting up an in-house affiliate program is quite simple. There are plenty of solutions available on the market, you only need to find the one that will work for you. The biggest challenge is to find active affiliates that will promote your offers.

But if you ever find yourself feeling uncertain or simply prefer a helping hand along the way, don’t hesitate to reach out. Consider bringing in some of our experienced affiliate program managers who can accelerate your affiliate program’s growth, allowing you to focus on what you do best.

So, if you’re ready to dive into the world of affiliate marketing and would like some guidance, you’re welcome to check out our affiliate marketing consulting service. We’re eager to hear from you!