December 01, 2009
Whether you’re just starting out in affiliate marketing, or looking for better results from your current program, see the strategies used by one affiliate marketing team who lifted their company’s annual sales more than 400% in three years.
The advice includes recommendations for:
o Choosing networks
o Providing incentives
o Preventing fraud
Mike Zaya, CEO, PrintRunner, purchased the printing company three years ago. He and his team have since quintupled annual revenue to $13.5 million, almost entirely through online affiliates.
"Affiliate marketing lends itself very well to a small company because you’re able to extend your offer far beyond where you could on your own budget," he says.
Zaya and his team have managed up to 60,000 affiliates at once. The team focuses on affiliates because they provide concrete results, allowing them to adequately reward those who help the company.
We spoke with Zaya to better understand his approach to affiliate marketing, and to learn how his team has been so successful with affiliate networks. Here are his five tips:
Tip #1. Choose networks carefully
Zaya markets through affiliate networks such as Commission Junction, LinkShare and others. Three factors he considers most important when choosing an affiliate network are:
Zaya looks for networks with a large number of affiliates. If he spends time tweaking offers and analyzing reports, he wants his efforts to pay off in volume.
- Affiliate quality
Size is not everything. Zaya looks for networks that have affiliates capable of generating high sales numbers. One accepted rule of thumb is that 20% of your affiliates will generate 80% of your revenue, but Zaya disagrees.
"I’d say it’s more like 5% and 95%."
The system through which you interact with affiliates is important to managing campaigns. Everything should be streamlined and simple to use.
More importantly, Zaya says he needs metrics and analysis tools, such as the ability to calculate earnings-per-click, and to pool affiliates of similar size.
"I really am a numbers guy. I like to break down what the affiliates are doing, set benchmarks, run tracking. Tracking is everything in affiliate marketing."
Tip #2. Test small and scale higher
Zaya uses what he calls a "formulaic approach" to affiliate marketing. He tests a commission and offer until he finds the right formula. He looks to set a commission that will maintain his profit margins, attract affiliate interest and generate high sales numbers.
"I don’t like to say this is a good offering until I’ve tested it many times," he says.
Once he notices that affiliates are focusing on the offer and are able to achieve a high level of sales, his team reaches out to known affiliates, and sometimes work with a network to advertise the offer.
Tip #3. Create mutually beneficial campaigns
Zaya has two primary types of partners in this channel: affiliates and the network operators. He works with each to forge mutually beneficial relationships.
- Sales bonus programs
At times, Zaya’s team will offer higher commissions to affiliates who generate higher levels of sales. For example, if the team’s normal commission is 20% of sales, they will set up a bonus program with the following sales and commission tiers:
o $5,000 / 22%
o $10,000 / 24%
o $15,000+ / 26%
- Vanity coupon codes
"Vanity codes or exclusive coupons are huge incentives for affiliates," says Zaya.
The team offers vanity coupon codes for affiliates to give to customers as sales incentives. Zaya also says a good test of an affiliate is whether they negotiate for customer benefits, and not just their own.
- Network promotion
To spread the word, Zaya will often turn to the affiliate network for assistance. The networks can advertise offers in their websites or email newsletter -- but they won’t advertise just any offer. Several networks require an offer to qualify as a good deal for their affiliates. They often look for additional incentives, such as exclusive coupons, and look for a high earnings-per-click ratio, Zaya says.
- Network account management
Once an account reaches a certain size, some networks will provide an account rep to help manage the campaign. Zaya’s team has one of these reps, but they also pay one network for additional help in managing the account.
"I’ve found [this] easier and more cost-friendly than hiring someone else to manage the program," he says.
Tip #4. Be a good partner
Be as honest as possible with your affiliates, and they will continue to sell your products for months, or even years to come. This includes giving affiliates credit for generated sales, even if they come in through offline channels, such as phone calls.
"A lot of merchants try to get away with [not giving commissions on these sales]. And they think they’re getting away with it, but in the long term, they’re hurting themselves by not taking care of their affiliates," Zaya says.
Zaya makes sure that his team gives affiliates every dollar they’ve earned by providing custom phone numbers to track offline sales. This boosts loyalty, and it helps improve his team’s metrics, such as earnings-per-click.
"About 20% of the commissions I pay out are commissions that the affiliate doesn’t even know about," he says.
- Offer a data feed
A direct feed supplies affiliates your product information, including inventory, prices, details, etc. The feed automatically sends updates to affiliates so they don’t have to scour your website looking for changes.
"We’ve done a lot of surveys of our affiliates in terms of what they look for in good partners," Zaya says. "The number one piece of feedback I’ve gotten is [that they want] a good data feed."
Tip #5. Watch for fraud
"Affiliates could destroy a business as fast as they could make a business," Zaya says.
You must vigilantly monitor affiliates for unscrupulous practices that could negatively affect customers and damage your brand. Here are a few areas to watch:
- Branded search marketing
Some affiliates will bid on branded search PPC keywords -- or their misspellings -- to generate easy commissions, Zaya says. You need to clearly state that they cannot bid on your brand name.
- Credit card fraud
Zaya has seen affiliates use fake credit cards to buy products and then receive commission for the sales. The credit card payment never arrives, and "it’s fraud from the get go," he says.
- Click fraud
Although a lesser concern since the adoption of cost-per-acquisition pay structures, click fraud is still an issue, Zaya says. Look for any sudden spike in clicks, traffic or sales and investigate the cause.
Most networks have fraud-detection departments that allow you to freeze an affiliate in your network while red flags are investigated.
Useful links related to this article
New Chart: How Merchants Manage the Affiliate Search Marketing Dilemma
New Commissions, Landing Page Tests Power Affiliate Success: 5 Steps to Triple Digits