When I talk to potential clients about starting an affiliate program for them I have a core set of criteria I look at before proceeding. These are the keys to success I find over and over again. Without them affiliate programs start slowly or fail altogether. So, I have created this list as a primer for any site or person that thinks they want to start an affiliate program. I have also divided this into 2 parts. The first being the core set of numbers you will need to know about your website before proceeding and the second is the evaluation of the numbers and the competition that leads to pulling the trigger to get started.
The Numbers
1. Know the number of visitors that come to your website. I know this seems like a no-brainer, but without this information you can’t make even the most basic determination as to how your affiliate program will succeed.
2. You need to know the source (origin) of all of your site traffic. Do the visits come from Google, Yahoo and other natural search sources? Are you buying Pay-Per-Click (PPC) traffic from Google, Yahoo!, MSN or Looksmart? Do you get referral links from your product distributors? If not, you need to have some simple tracking tools added to your site before proceeding further and then give it a couple of months to better know your site metrics before proceeding.
3. You must know how many visitors to your site convert into buyers. This conversion rate will tell you many things about your current online marketing efforts as well as to the efficiency of your shopping cart. This is the #1 piece of information affiliates want.
4. You must know the average sale amount for your site. If your sales are much lower that $60 a sale, getting affiliates interested is hard. If lower than $60 what can you do to package your product more effectively to drive up the average price. This is good for you as well as for the affiliate.
5. You must determine your site’s Customer Acquisition Cost. The easiest area to determine this is from a PPC campaign. Run a campaign for a period of time, track the sales (and conversion rate) and then divide the number of sales into your marketing costs. If you did 100 sales and it cost you $3,500 in PPC campaign buys, then you now have a basic Customer Acquisition Cost of $35 per customer. Are you able to make money at this cost or whatever your cost came out to be? Don’t look at affiliate programs to be any less expensive than other means of online marketing.
6. You must know what the Lifetime Value of the Customer. Does your product only sell once? Does your product have upsell possibilities? Knowing this is key in setting the affiliate payouts. If your product line leads to additional sales through email marketing past the original sale, then you may be able to payout a higher amount to affiliate (which they really like to see) in order to get the client. I have one client who as been clipping away for almost 6 years with an affiliate program I manage. They get 200-300 new clients a month from our affiliate efforts, and they have been doing that for 6 years… what a list! They do an incredible job with their email program which far exceeds the affiliate income they receive. As a result of knowing this they continue to have a very high affiliate payout and everyone is very happy with the program.
The Evaluation
7. You must know what your competitors are doing. Like Homer Simpson says: “Doh”. There is competition in every category and every affiliate software application. Don’t ignore it, learn from it. Find out what the other guys are doing. Have someone sign up for their affiliate programs and check it out.
8. You must know which of your competitors have affiliate programs. Find out what they are paying out, how long the program has been running. Check the message boards to see if they have any problems or if they are well thought of. And if none of them have affiliate programs… don’t run out and think you’ve found the promised land… maybe there is a reason they don’t have an affiliate program.
9. Know what competitors are paying out to their affiliates. Simple research can tell you what they are paying out. Most affiliate programs have marketing information readily available, do the research and know what you are up against.
10. You must know what you are willing to pay for someone (an affiliate) to sell your product. The competition is telling you something, your own numbers are telling something, now you must decide what your affiliate program payout should be. Or maybe the numbers and evaluation is telling you that you aren’t quite ready to start. Either way you now have enough information to decide whether to proceed now or in the future.
So how did you do? Do you still have a lot to learn? Do you still have some things to fix? Most of these are fixable… so fix them. If it can’t be fixed then you may want to get a second opinion or look for alternative ways to drive traffic to your site. If you came through this article feeling good about how you are positioned then you can do well with an affiliate program if you execute it right.
Durk Price is a professional affiliate manager. He has managed large retailers like LimitedToo, Beauty Trends, WeShipBabyGifts.com and others. He has launched affiliate programs and had affiliate sales account for 27% of total online sales within 90 days of launch. His primary focus is managing affiliate programs for retail companies. To learn more about his services of putting top level affiliates together with top quality merchants visit affgoo.com affgoo.com or email him at mailto:stick@affgoo.com stick@affgoo.com.
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