In This Chapter

Imagine having a worldwide army of salespeople enthusiastically promoting your website products. They work hard for you, spreading the word about your offerings on their own websites as well as pitching your products in their newsletters and blogs. The best part is, you don’t have to pay them a salary or even hire them as employees. You simply reward them with a percentage of the money they make for you. Straight commission.

Sound too good to be true? Actually, this model is commonplace among web-based business owners. It’s called an affiliate program and it can substantially increase your website revenues and profits.

In fact, these days it’s very difficult, if not impossible, to build a successful web-based business without one. And frankly, you’d be foolish to ignore the additional exposure and sales that just a handful of loyal affiliates can generate for you.

In this chapter, we take a closer look at affiliate programs and learn how to set one up.

Before you can understand what an affiliate program is, you first need to know the definition of affiliate.

In the world of online business, an affiliate is someone who agrees to promote your website products for a fee or commission. Although some specialize in advertising the affiliate products they represent on search engines and other online venues, most affiliates own a website, e-mail newsletter, blog, or other online property from which they can tout your website offerings.

Here’s a typical example.

When I created my pricing manual for writers called, unoriginally, Pricing Your Writing Services, I sent a copy to my friend Nick. He publishes a popular e-mail newsletter for online copywriters—an ideal market for my new product. Nick reviewed the manual, raved about it, and offered to be an affiliate. That meant I would pay him a commission for every sale he made.

Over the following weeks, Nick published a review of the manual on his website and mentioned it regularly in his newsletter. Dozens of sales were generated as a result. At the end of the month, I cheerfully wrote him a check for his commission.

Now that you know what an affiliate is, what’s an affiliate program? That’s simply a program that you set up for recruiting affiliates, tracking their sales, paying the commissions they earn, and managing the entire process.

If you were to take a bird’s-eye view of a typical affiliate program, it would look something like this:

Of course, there are variations to this scenario. You may have contacted the affiliate to sign him up rather than the other way around, or the affiliate may have a blog instead of a website. But that is essentially what an affiliate program looks like.

To launch a successful affiliate program, there are three things you need to know:

The rest of this chapter will help you answer those questions.

Setting up an affiliate program is a little like planning a dinner party: you prepare the room, send out the invitations, get the food ready, and greet your guests at the door. Once the party gets started, you’re going to have a good time!

When I first started my affiliate program years ago, I admit it was a clumsy effort. My first affiliate was a colleague who agreed to pitch my product in his blog. I used a separate product number to track his sales and did everything else manually, from counting the orders to providing him with a sales report to calculating his commission.

It was a lot of work.

Fortunately, these days, there are plenty of software products and online services available that will handle most of the administrative drudgery for you. There’s no reason to duct tape a program together like I did!

Ideally, you want a solution that automates affiliate program management as much as possible. The affiliate service I use today handles all of the following tasks for me. It automatically:

I suggest you use this as a checklist. Make sure that the solution you ultimately select for your affiliate management does all of these items, at the very least. There are so many nitty-gritty details to managing an affiliate program that it is just too time-consuming—and ultimately unprofitable—to try to handle them all manually.

There are basically three types of affiliate management solutions you can use.

There are many good affiliate software products available. The best way to find them is to simply type “affiliate software” into your favorite search engine.

Affiliate software installs on your computer and communicates with your website server and shopping cart system to track sales and generate reports.

The disadvantage of affiliate software is that you have to install it. And we all know that installation of any software doesn’t always go smoothly. You also need to be diligent and regularly download updates and new versions. And that can be a hassle.

What’s the advantage? Well, you own it! Once you purchase an affiliate software package, that’s it. No further payments. All the other options discussed in this section require some sort of monthly, quarterly, or annual fee.

That being said, the majority of web-based business owners I know prefer using a hosted software solution for their affiliate programs, which is a techie way of saying that the software is provided as an online service.

Don’t like the idea of installing software? Then sign up for an online, or hosted, software service for affiliate program management.

Technically, an online service is software. But instead of being installed on your computer, the program resides on the software company’s website. You simply subscribe to the service, get a username and password, log in to set things up and, voilà, your affiliate program is ready to go.

Did you notice I said “subscribe”? Yes, you have to pay a regular fee for this type of affiliate management system and that fee can be hefty—upward of $100 per month. The advantage is that you don’t install software and maintain it.

One of the most popular options among web-based business owners just starting out is to select a shopping cart system that includes an affiliate management module. This makes a lot of sense because your affiliate program has to work with your shopping cart system anyway. Why not get them both in the same package and avoid any compatibility issues?

These days, virtually all major shopping cart systems include an affiliate program plug-in of some kind. (Although you often have to pay extra for it.) But just because it has some affiliate management tools doesn’t mean they will meet all your requirements. Review the features carefully and make sure you’re getting everything you need.

In some ways, affiliates are like salespeople. You have to pay them enough to keep them motivated and selling for you.

How much is enough?

Be careful. You may be tempted to provide your affiliates with just a small cut. After all, you did all the work creating your product line and building your website. Why should they get more than, say, 5 percent or so? I can understand how you might feel. The reality is, however, you won’t attract very many affiliates—especially the top sellers—unless you offer an attractive commission rate.

Keep in mind that many affiliates have worked hard building their own successful websites, e-mail newsletters, or blogs. They may have a large audience of readers or subscribers that has taken them years to cultivate. If you want an affiliate to recommend or advertise your product to all those potential buyers, you’re going to have to make it financially worth his or her while.

When setting your commission rate, you’ll need to pick a percentage that appeals to affiliates while still making it profitable for you. A good formula is to subtract your product cost (including shipping) from your selling price, take a look at what you have left over, then consider offering affiliates up to 25 percent of the remainder.

For example, if your website sells specialty coffee beans for $15 per bag and your product cost is $5, then you have $10 to work with. You could probably offer a 15 percent affiliate commission, or about $2.25 per bag, and still have plenty of profit left over to keep your banker happy.

If your website sells downloadable products, such as e-books or software, then you don’t have to worry about manufacturing or shipping costs. You’re selling electrons! You can offer a more tantalizing commission, say 25 percent.

In some cases, it might make sense to offer a flat-rate commission rather than a percentage. That simply means that you pay a specific dollar amount for a sale. In our coffee example, you could offer a flat-rate commission of $2 and promote your affiliate program with the slogan: Earn 2 bucks per bag!

Here’s where it gets a little more complicated! You can offer affiliates tier one and tier two commissions, which may motivate them to recommend not only your products but your website as well.

Here’s how it works.

Say your website sells custom embroidered socks. Your affiliate, a blogger with a site called Crazy About Socks, recommends your product to her readers. With me so far? Now, what if a buyer she sends to you places an order for socks—and also for one of your embroidered sweaters?

In a simple affiliate program, your affiliate will only earn money on the sock sales. But with a tier one/tier two program, she would earn full commission for the socks (tier one) and a smaller commission on the sweater (tier two)—even though she didn’t specifically refer the buyer to your sweater products.

A tier one/tier two affiliate program provides an affiliate with a further incentive to promote your products. They make more money. However, it is more complex for you to manage. If you decide to go this route, make sure the affiliate software or service you select supports tier two commissions.

Now that you have your affiliate program set up, all you need to do is find a large network of eager affiliates who will promote your products on their websites and in their blogs and e-mail newsletters. Right? Then the sales will just roll in while you’re sipping margaritas on a beach in the Caribbean.

Well, it’s not quite that easy.

While it is true that a robust affiliate network can help you grow your web-based business, it can take a lot of time and effort to attract the right affiliates and build those relationships.

It’s important to have a plan in place for identifying the right affiliates and attracting them to your program. Here are some ideas for doing just that:

Perhaps the best way to find affiliates is to keep your eyes open for opportunities. A few years ago, I was a speaker at a writers’ conference in New York. After my presentation, a woman came up and asked if she could interview me for her website. I soon learned that her site was popular among mom-preneurs (moms who are also home-based business owners). A light went on in my head. Could mom-preneurs be a good target market for my online courses and e-books for copywriters? I invited the woman to be an affiliate and she agreed. She went on to promote many of my products and did very well. I’m glad I met her!

As I said earlier, unless your website products are hugely popular, don’t expect the best affiliates to come knocking on your door. You’re going to have to make the first move.

How do you do that?

Say you’ve launched a website that sells training programs for serious bodybuilders. In your market, there is a hugely popular blog that is visited by thousands of brawny readers every day—all potential customers for your products. Obviously, that blogger is an ideal candidate for your affiliate program. You definitely want him selling for you!

So you send him the following e-mail:

Chances are, the owner of the blog is going to respond positively to your message. You’ve done it right by respecting that he cares about the quality of products he recommends to his readers and by offering him a generous commission.

What will likely happen next is that the blogger will reply to your e-mail, or call you, with questions about your affiliate program. Expect him to visit your website and check you out. He may also take you up on your offer to send him a product sample to review. If that happens, ship it right away along with a friendly note. Then follow up in a couple of weeks.

It may take weeks or even months to court a potential affiliate who has a popular website, e-mail newsletter, or blog. Don’t give up. When you do get one of these power affiliates on your side, they can give your website sales a giant boost.

You’ve signed up a few great affiliates. You’re done! Now you can relax, knowing that these guys are going to continuously promote your products and generate a steady flow of sales for your web-based business.

If something tells you that’s not quite true, you’re right. In order to build a loyal base of affiliates, you have to nurture those relationships. Don’t make the mistake of taking these people for granted. If you do, you’ll risk losing their interest—and their sales.

My rule of thumb is that you should treat affiliates as you would your very best customers. Stay in touch. Show your appreciation for their efforts. Say “thank you” when they promote your product in their e-mail newsletter or blog. It’s worth the effort. In my experience, it’s much easier to keep an affiliate than it is to get a new one.

Here are some ideas for building loyal affiliate relationships.

You can probably think of many other ways to make your affiliates delighted with your program and products. The best affiliates are those that stay with you long term, learn your products inside and out, and understand how best to promote your offerings to their particular audiences.

Top-selling affiliates are gold. Keep them happy!

The Least You Need to Know