In the U.S. alone, affiliate marketing spend is projected to reach $8.2 billion in 2022, up from $5.4 billion in 2017.
Hearing a stat like that, it makes sense why so many ecommerce brands are considering starting their own affiliate programs — in fact, 81% of brands use affiliate marketing programs.
That said, what is an affiliate program? And how can you start your own?
This step-by-step beginner’s guide will walk you through how to launch your affiliate marketing program as well as what challenges and benefits you can expect.
What is an Affiliate Marketing Program?
An affiliate program, also known as an associate program, is a monetization model in which affiliates earn a commission for marketing a company’s products. It’s a simple relationship between two parties: an advertiser and a publisher.
An advertiser (the online store owner) has products they want to sell, and a publisher (the affiliate) promotes these products on their own site and earns a commission on every sale or action.
The advertiser can leverage the affiliate’s influence, traffic and expertise to generate sales for their business and only pay after the sale is complete, while the advertiser publisher uses their influence to make money from the advertiser and increase traffic on their own site — so it’s a win-win for both parties.
If you’re an ecommerce business looking to launch your own affiliate program, you’ll need to first consider what channels your customers are using the most. For example, does your audience frequently make purchases through Instagram or Facebook? Do they spend a lot of time reading blog posts or watching YouTube videos?
Once you can answer these questions, it’s time to decide what type of affiliate program is best for your business.
Search affiliates.
Often freelancers and entrepreneurs, search affiliates pay their own money to promote your product or service, leveraging search engines such as Google and Yahoo to drive traffic to your website. Especially if the affiliate has experience with SEO and A/B testing, this is a great opportunity to see which ads are bringing the most traffic to your site and have the most ROI for the affiliate — just make sure that they’re following search and advertising guidelines.
Bloggers and influencers.
With the ability to rank organically in search engine queries, bloggers excel at increasing a seller’s conversions through content marketing. The blogger samples the product or service and then writes a comprehensive review that promotes the brand in a compelling way, driving traffic back to the seller’s site.
Similarly, an influencer is a content creator who holds the power to impact the purchasing decisions of a large segment of the population. Since they already boast an impressive following, it's easy for influencers to direct consumers to the seller’s products through social media posts, blogs and other interactions with their followers.
The best bloggers and social media influencers to partner with are those who engage with your target buyer persona on a regular basis. For example, if you sell digital products, such as design templates or online courses, look for publishers who have a background in design or education. Or, if you sell beauty products, reach out to influencers who regularly post makeup tutorials and reviews.
Coupon sites.
Although this may not be the right partnership for every ecommerce brand, coupon sites have great potential to drive incremental sales and add value to your affiliate program. In fact, 85% of U.S. shoppers look for coupons prior to shopping and 53% use daily-deal sites like Groupon.
If one of your products or online services isn’t as popular in the marketplace, try partnering with a coupon site to offer discounts and deals for a limited time. While selling your products at a discount may seem like you’re losing money, think of it instead as an opportunity to get your products in front of potential customers and enhance brand awareness.
Email marketing.
The beauty of email marketing is that every subscriber on your list has seen your content and voluntarily gave you their email address — which means they hold some amount of interest in your business. As a result, you have the opportunity to drive a conversation and actively engage your audience through personalized, targeted content.
However, just because a customer signed up for your email newsletter doesn’t mean they want five emails a day — especially if you’re promoting products that aren’t relevant to them.
Make sure your affiliate partner is mindful of who is receiving the email and whether the content is relevant to them. For example, if you’re a fashion retailer that sells men’s and women’s clothing, and a female customer signs up for your newsletter, make sure that the content you’re sending them aligns with their gender, as well as any other demographics, engagement level and purchase behavior.
Affiliate Program Payouts
So how do affiliate marketers actually make money?
Each time the publisher promotes a product on their own platform and makes a sale or gets a customer to perform a specific action (such as clicks or filling out a form), the business pays an affiliate commission to the publisher. This can be a high-paying revenue stream for the affiliate (without the hassle of actually selling a product), as well as an opportunity for the advertiser to increase traffic and sales — a win-win for both parties.
Depending on the program, the affiliate’s contribution to the seller’s sales will be measured differently. Let’s look at three different types of affiliate program payouts.
Direct sales.
In this payout program, the merchant pays the affiliate a percentage of the sale price of the product after the consumer purchases the product as a result of affiliate marketing strategies. In other words, the affiliate must actually get the customer to buy the affiliate product before they are compensated.
Leads.
A more complex system, PPL (pay per lead) affiliate programs compensate the affiliate based on the conversion of leads. The affiliate must persuade the consumer to visit the merchant’s website and complete a desired action — whether it’s filling out a contact form, subscribing to a newsletter, following the brand on social media, downloading content, etc.
Clicks.
An advertiser looking to generate a large amount of traffic might pay an affiliate on a PPC (pay per click) basis. This incentivizes the affiliate to redirect consumers from their marketing platform to the merchant’s website. The affiliate is then paid based on the increase in web traffic.
Benefits of Affiliate Programs
As the internet becomes an increasingly collaborative environment with numerous websites to work with, affiliate marketing offers huge potential to expand your reach and potential website visitors.
While the growth of the affiliate marketing industry is already a good indicator of success, let’s look at some of the key benefits you’ll reap if you launch your own affiliate program.
Everything is easily trackable.
You can view data on impressions, clicks, leads and sales in real-time all in simple affiliate dashboards. Often, an affiliate will receive a unique link (aka an "affiliate link"), which uses cookies with a specific cookie life (or length) to track clicks. Then, the cookie tracks whether the customer makes a purchase, and if so, then the affiliate will earn a payout.
Strong return on investment.
Rather than depending on an advertising team or purchasing ad space, you depend solely on the affiliate to create marketing content and drive sales.
And since affiliate marketing is performance-based, you only have to pay the affiliate once a sale has been made, so you’re never paying for “potential sales” or impressions. This means low startup costs and high return on investment.
Ability to scale.
In unison with your other digital marketing efforts, recruiting affiliates into your program will allow you to scale traffic faster. While your affiliates work to generate revenue on existing products and services, you’ll be able to focus on creating new products, building new revenue streams and reaching new customers in the meantime.
Third-party validation and social proof.
By partnering with trusted influencers and high-authority websites, you can improve your reputation and build consumer confidence. Since your target audience likely already feels connected to the influencers and websites they follow, this is a great opportunity to gain pre-qualified leads and improve SEO.
Focus on selling specific products that have a high-value.
When creating affiliate offers, online business owners can have affiliates promote all of their products or just a select few. It’s a good idea to have affiliates promote your high-value products with strong profit margins. Plus, if you have a low turnover rate on certain products, you can use inventory management strategies to promote your excess inventory, improving your sell-through rate.
What to Consider when Building your Affiliate Program
If you’d like to start your own affiliate program, you’ll first need to consider some key business aspects:
Do competitor research.
Make a list of your competitors and find their affiliate programs. You can create a spreadsheet to keep track of their affiliate network of choice, commission structures, incentives or bonuses, cost-per-action and cost-per-lead. You can even join their partner program to see what kind of emails, incentives and bonuses they’re offering their affiliates.
For instance, if your competitor pays a recurring commission of 10% per sale and you see his or her business on prominent review websites, try matching the commission and target those sites.
If you have a limited budget, you can experiment with affiliates in different verticals, find affiliates that your competition does not have a relationship with or maximize ROI with a few select affiliate partners.
Know objectives and KPIs.
To help determine the type of affiliates in your program and your commission payouts, you’ll need to determine your objectives, whether it be to increase site traffic, increase revenue, increase average order value or achieve high conversion rates year-over-year. Then, think of metrics to evaluate your progress toward achieving your goals.
Some common KPIs include:
Click traffic.
Gross orders.
Net orders.
Commission.
Top affiliates and their share of total sales.
Performance from each category of affiliate – This includes the percentage of sales from coupon and loyalty affiliates, review sites, WordPress blogs, etc.
Total affiliates.
Percentage of active affiliates.
Percentage of productive affiliates.
ARPU (average revenue per order).
EPC (earnings per 100 clicks).
Defined commission strategy.
The best affiliate marketing programs often have a well-defined commission structure and are able to pay out high commissions to their affiliates.
In order to calculate your budget and build out your commission strategy, you’ll first need to figure out your cost per acquisition (CPA), which is the cost of acquiring a new customer.
Coupling this data with your average order value (AOV), you can create a commission strategy in your affiliate program that takes into account cost per acquisition, conversion rates, cost of goods sold (COGS) and gross margin in order to come up with a percentage you can afford to spend.
After all that, there are some final factors you need to consider when calculating commissions, including customer retention.
Know customer retention rate.
Your customer retention strategy will play an important factor in the commission rates you can offer.
With a high retention rate, you can afford to spend more on your affiliate program, because the customers you gain will come back to purchase more. In contrast, a low retention rate means that you need to constantly acquire more customers to stay profitable in the long run.
Challenges of Affiliate Programs
Now that you’ve set up your affiliate program, it’s time to address some common challenges and how to overcome them:
Do not hurt other marketing efforts.
Affiliate marketing is only one piece of the overall sales funnel.
Once potential customers reach your website, you have to maintain their interest through various marketing strategies:
**Create killer content.**Make your posts engaging with rich media content, using marketing tools like Facebook Ads and Outfy to promote your brand and reach more customers.
Spice up your social media profiles. Encourage first-time site visitors to follow you on Facebook, Twitter, Instagram or LinkedIn.
**Craft an email list.**If someone isn’t quite ready to buy a product on your site, make sure there is an easy way to let them opt-in to an email list.
**Create AdWords ads and target site visitors across various online channels.**You can even set up retargeting based on users that visited individual category or product pages and send them custom banner ads.
Conversion rate optimization. Make sure you’re providing your affiliates with the highest converting landing pages to send traffic to. The higher the conversion rate, the higher the earnings per click and revenue for your site.
Choose the right affiliate manager.
A successful affiliate manager needs to balance many different disciplines, such as digital marketing, sales, relationship building, contract negotiation and account management.
You can have either an in-house affiliate manager or an outsourced program manager — there are pros and cons to each approach.
An in-house affiliate manager is a member of your team who will understand your product inside and out. They are dedicated to the affiliate program full time and will handle the overall strategy, recruiting, onboarding, active affiliate management and more.
Consider the chart below when deciding between hiring in-house and outsourcing.
Find the right affiliate program software.
Most businesses use affiliate marketing software or platforms to manage hundreds of affiliate partners. The ideal platform should be able to aggregate orders from vendors, collate different offers for affiliate marketers, set up tracking links and banner ads and handle the administrative tasks.
There are lots of affiliate platforms to choose from, but a good tip is to select your platform based on its quality of service and online reputation.
You can check out our affiliate marketing integrations to jumpstart your search and also find other ecommerce tools to accelerate growth.
Recruit the right affiliates.
Just because a new blogger is building a new affiliate website and doesn’t have much traffic yet doesn’t mean they don’t have future revenue potential. Here are some factors to consider when looking into an affiliate’s potential:
Website traffic. Use tools like Similarweb, SEMRush or Ahrefs to see how much organic and paid traffic each site is generating monthly.
**Number of active campaigns.**With an affiliate marketing network, you can track the number of active campaigns an affiliate is running — the more, the better.
Consistency with your branding. Does the affiliate site look professional, polished and in line with your branding?
**Affiliate verticals.**If you’re a retailer selling housewares, look for affiliates in the home and lifestyle categories. If you’re selling travel gear, find travel bloggers who can easily incorporate your products into their posts.
Look for review and comparison sites. Affiliate websites that review products in your niche are a perfect target for affiliate recruiting. Comparison shopping engines can also bring in revenue by linking to your product pages.
**Domain Authority (DA).**Many affiliates focus on link building and writing high-quality guest posts to improve their search ranking.
Examples of Software to Manage your Affiliate Program
Many businesses opt for software with the functionality to easily manage and onboard affiliate marketers to their program.
Here are some of our top picks for affiliate software:
LeadDyno is an affiliate tracking and marketing automation software with a one-click plugin and easy setup on BigCommerce. Merchants can create their own commission plan to reward affiliates who send referrals as well as bulk pay affiliates commissions using Paypal, Coinbase or other payments integrations.
Affiliatly is an affiliate tracking software with a fully functional panel, where you can choose how affiliates earn money, manage affiliate earning percentages, pay affiliates quickly, view stats and upload marketing materials that affiliates can use to market your business.
Refersion is a powerful affiliate marketing platform that helps merchants recruit, track and pay affiliates through an intuitive, user-friendly platform.
Impact is a well known affiliate marketing platform featuring a fully-integrated suite of affiliate tracking and tag management options, media attribution, email marketing and powerful analytics.
The Final Word
Affiliate marketing can be one of the most cost-effective and scalable ways to make money for your ecommerce website. You’ll be able to leverage other websites and influencers in your niche to promote your products, grow quickly without investing a lot of money upfront and generate more sales while being viewed as a trusted brand on reputable third-party sites.
It’s a win-win-win.
To get inspired, check out the BigCommerce affiliate program and learn how our unique strategies can help you grow, increase your website’s visibility and drive more sales. You’ll be able to save time and money on content creation by linking to WordPress blogs, webinars and more with quality content developed by BigCommerce for your audience.