Affiliate Marketing 101: How to Set Up a Successful Affiliate Program

Looking for a quick and easy way to boost sales with minimal effort or investment? Affiliate marketing might be the perfect answer for your business.

It’s a low risk, and high-reward venture that can be extremely lucrative.

But it starts with setting up and structuring your program the right way, which is exactly what I’ll teach you in this comprehensive guide.

What is Affiliate Marketing?

Affiliate marketing is a pay-for-performance model where a business pays commissions to a third-party to sell or promote your product. The third party, also known as the affiliate partner, essentially do all the marketing work for the business.

It’s a win-win for everybody.

Affiliate partners are rewarded for driving traffic, leads, or sales, and the business providing the goods or services gets new customers without having to deal with the promotional aspect.

How Does Affiliate Marketing Work?

Here’s a simple breakdown of how affiliate marketing typically works:

1. The business creates a program and sets a reward structure.
2. Affiliates sign up for the program and receive unique codes or tracking links.
3. Affiliates promote products and services through their own channels.
4. When a customer clicks an affiliate link or makes a purchase, the business gets paid and the sale is traced to a specific partner.
5. The business pays a commission to the partner based on the program’s terms.

The business selling the product has a lower profit margin (since they pay out commissions to partners). However, that cost is often a wash because the business may be spending less money on other promotional activities, like paid ads.

Benefits of Running an Affiliate Marketing Program

There are tons of advantages of starting an affiliate program. Examples include:

• Highly cost effective marketing model
• Only pay for results
• Easy to scale without hiring additional staff or increasing spending
• Increase brand awareness through third-party channels
• You get targeted traffic from customers in your niche (if you pick the right affiliate partners)
• It’s a low-risk venture and great way to explore new markets
• Generate passive income, even when you’re not actively marketing on your own

How to Set Up Your Affiliate Marketing Program in 5 Steps

Setting up an affiliate program doesn’t need to be complicated. In fact, you do it in just five simple steps:

Step 1 – Determine Who Will Market and Sell Your Products or Services

Think about your ideal partner. You’ll want to leverage a variety of different channels for maximum exposure, such as social media influencers, niche websites, and newsletters.

Ideally, you want to focus on quality, not quantity. There is no limit to how many partners you can have, but the most effective affiliate marketing campaigns involve recruiting a handful of affiliates that do great work and can generate a lot of traffic through their channels, rather than hundreds of affiliates who do mediocre work.

Step 2 – Figure Out Your Affiliate Model and Commissions Rate

Next, you need to come up with a structure for your affiliate program.

How exactly are you going to reward your partners?

Common options include:

• Revenue Sharing: Partners earn a percentage of all revenue generated from customers they refer.
• Pay Per Click (PPC): Partners a commission each time their unique affiliate link gets clicked.
• Pay Per Lead (PPL): Partners are paid each time a lead gets generated (typically a form submission or registration).
• Flat Fee: Fixed pay out for each action (like a sponsored blog post).
• Cost Per Acquisition (CPA): Commissions are paid when a new user signs up.
• Tiered Commissions: Multiple commission rates based on volume (typically, the more someone sells, the more they make).
• Cost Per Mile (CPM): Paid based on how many impressions of sponsored content.
• Hybrid: Any combination of these models (such as PPL and Revenue Sharing).

Some commissions are 3%. Some are 90%. Most are around 15-20%. It depends on the volume of products expected to move and the cost of them. If you are selling a low-end, high-volume product, your rate will be lower. The commission rate you are willing to give up will determine the quality of affiliates you can expect.

Your industry will also have a significant impact here. For example, if you’re in the B2B SaaS space, your affiliate program will look a lot different from a low-ticket consumer ecommerce product.

Step 3 – Establish Program Rules

Don’t let your affiliate program become the Wild West. Take a moment to establish some ground rules.

For example, you may include a list of acceptable promotional methods (blogs, social media, etc.), but prohibit partners from spamming people via email.

You should also include a cookie duration clause. Are you still going to pay commissions if someone clicks an affiliate link but doesn’t buy something for an entire year?

Will you allow your affiliates to promote competing products on the same page as yours?

These are just a few examples of what you should include in your rules. But there’s a ton more. I’d look some existing affiliate contracts as a starting point to help you out here. Consulting with an attorney is also a good idea for establishing legality and what’s actually enforceable.

Step 4 – Recruit Affiliates

This is really the only marketing you need to do. Rather than marketing your products or services, you need to shift your focus to making your affiliate program appealing for potential partners.

Aside from commissions, you should also offer other value-added options to make your program stand out. For example, maybe you want to let your affiliates choose the structure or you want to offer weekly payouts instead of quarterly.

I also recommend that you try to build relationships with potential affiliates first.

Nothing is more annoying to a high-end affiliate than a spammy email asking for their help. Offer value first, then approach them later with the affiliate offer – and be prepared to offer a good rate!

Step 5 – Track Revenue From Affiliate Goals

This part is really easy.

You can have software installed in-house to track them, or you can do it through a third-party.

Either way, you need a sophisticated method to track sales and how many of them are coming from which affiliates. Even if your program is small, go with software from day one because it’s impossible to track this stuff manually at scale.

If you choose a third-party method, be prepared to pay them a percentage of the sales as well for their efforts.

Pro Tips For Affiliate Marketing

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• Watch Out For Fraud. Some affiliates may try to run a scam where they buy products themselves, pocket commissions, and then return them. Others may drive illegitimate traffic to affiliate links as a way to juke the stats and inflate numbers.
• Research and Vet Your Affiliates. Your brand’s perception can potentially be shaped by how your partners deliver products and services. So don’t just let anyone join your program.
• Provide Excellent Support For Your Partners. Remember, your affiliate partners are ultimately selling your products and services. Be there when they need your help, even if it’s just giving them a dedicated phone line or email address.
• Offer Competitive Rates. Do some research in your industry to see what other people are paying. If your rates aren’t competitive, your affiliates won’t have as much incentive to promote you ahead of your competitors (which is really tricky if they’re promoting multiple brands on a single page).
• Analyze Performance. Find out which affiliates are doing best and how they’re doing it. For example, you might learn that you generate better results from blogs compared to social media.

Final Thoughts

Affiliate marketing can ultimately help businesses increase sales and expand brand awareness.

It works really well for both physical products as well as digital services. B2B subscriptions might be the best candidate for affiliate marketing, but it can honestly work for any industry.

Just make sure you take the time to clearly outline your program before you dive in head first. Taking these steps early on can define your success with affiliate marketing over the long run.