How to Build a Truly Incremental Affiliate Marketing Strategy
January 19, 2023
January 19, 2023
Right Side Up (RSU) recently hosted a webinar on affiliate marketing strategy, hosted by Amy Scanlon, head of affiliate marketing at RSU. The webinar captured insights from Amy’s 15+ years of experience leading growth initiatives for early-stage startups and well-established companies like Joyus, AT&T, and Rakuten. Today, Amy’s work at RSU helps brands like Stitch Fix, Zenefits, Modern Fertility, and Houzz launch, manage, and scale affiliate programs that fill marketing gaps and drive incremental revenue. Watch the full webinar for expert advice on building an incremental affiliate program.
Anyone who’s tried their hand at growth marketing knows that eventually, you'll most likely max out your efficiencies or headroom with your core performance channels. And it's at this point many marketers start to test into new marketing channels to open the door to greater scale and growth. A great candidate for diversification? Affiliate marketing. A strong affiliate program can supercharge your business, bolstering brand awareness and driving incremental revenue by filling gaps that you can’t or don’t want to fill internally. But what is affiliate marketing? And how do you know if it’s a viable channel for your brand? Once you’re ready to jump in, what do you need to know to build a successful, responsible program?
What is Affiliate Marketing?
Affiliate marketing is a partner relationship management (PRM) and monetization framework based on a pay-per-performance model where affiliates are paid based on previously agreed upon actions (e.g. sales, leads, etc.). Essentially, partners sell your product or service and get a commission based on the sales they drive. Here’s how it works:
- Recruit affiliate partners
- Agree on payment
- Provide unique tracking links and creative within a PRM platform
- The affiliate promotes your product or service in their marketing materials through reviews, blogs, podcasts, social, editorial, and other channels
- Affiliate partners receive monthly commission payments based on agreed upon terms, such as new customers, sales, leads, MQLs, SQLs, etc.
Because there are external partners involved, careful consideration must be given to the structure of your affiliate marketing strategy and each individual partner agreement. But we’ll dive into that later.
Benefits of creating an affiliate marketing strategy
Affiliate marketing can help introduce your brand to new audiences by tapping into your partners’ unique platforms and audiences. This exposure can also build brand credibility—especially when partners with high domain authority use their voice to promote and endorse your brand in a way that resonates, increases brand awareness, drives conversions, and boosts SEO rankings.
Another benefit is the level of control you have over your costs and risks. Affiliate marketing offers both flexibility and control of your CPA since you’re paying based on outcome. You control the cost, enforce value, and have a predictable CPA regardless of scale. And when it comes to risk, you’re totally in control of who you partner with and how long you retain that partnership.
And finally, this channel can help increase the stability of your growth portfolio. When utilized strategically, affiliates fill marketing gaps and mitigate risk in a marketing environment that’s often at the mercy of Google and Meta CPM spikes and privacy-related targeting challenges. In fact, affiliate often has the lowest CPAs of all channels in most marketing mixes.
Potential risks of affiliate marketing
Although there is a wide range of benefits associated with running an affiliate program, there are also a few risks to keep in mind:
- You have less control over the branding that users see, particularly with coupon and deal sites.
- Historically, the space was primarily focused on deals and coupons, but there’s been a recent explosion in content, social, media, and review partners that build brand equity and feel more legitimate.
- Without clear risk mitigation and audits, there are many opportunities for fraudulent activity.
- Ever-changing marketing standards make it challenging to stay up to date with the latest regulatory issues (FTC, state tax nexus, etc.).
What your ideal affiliate marketing strategy should do and how long it takes to work
When set up and maintained in alignment with your business strategy and industry best practices, your affiliate program should fill the gaps in your marketing mix that you can’t or don’t want to fill internally. It should enhance your overall business goals, serve as a new customer acquisition tool, drive incremental revenue, and lower your blended CAC.
Building a successful affiliate program isn’t an overnight effort and generally requires several phases to reach its full potential. A typical timeline might look like:
- Beginning Stages (0–6 months)—Set up tracking and onboarding tools, begin to recruit and activate partners, build relationships
- Early Stage (6–12 months)—Build mass affiliate recruitment, test creative, offers, and placements, and integrate the program into your overall marketing mix
- Growth Stage (1 year)—Program begins to contribute meaningful revenue to your business, explore how to recruit more affiliate types, optimize existing affiliates, and adjust commissions to value driven
- Mature Stage (2 year)—Program contributes ~8–10% of incremental revenue, shift to develop comprehensive criteria for partner recruitment, automate a process for recruiting and onboarding partners
- More Mature Stage (3 year)—Program contributes 10+% of incremental revenue and drives partnerships at scale, expand your breadth of publisher types and streamline workflows
Every program and its success will be different because every business is different. But in general, the following benchmarks indicate a healthy affiliate channel:
Are You Ready to Explore Affiliate Marketing?
We’ve covered the basics of affiliate marketing and how it can benefit your business. But how do you know whether it’s time to consider it? And what potential deal breakers should be on your radar?
You’re probably ready to dive into affiliate if you can check the following boxes:
- You have a product market fit
- The business is generating $1M+ in annual revenue
- There’s a need to diversify outside of your core channels
- You want increased brand recognition, are willing to invest in PR, and have started conversations internally about affiliate
- Affiliate aligns with your overall business strategy
- You have the marketing budget to support affiliate
But if you check any of the below boxes, it might be worth reconsidering whether you're ready to test into the channel:
- Single product SKU limitations
- Limited affiliate availability or connections to partners
- Conflicts within your sales channels
- Operational resource deficiencies
- Regulated industries that make affiliate too difficult
Setting Up Your Affiliate Marketing Program
To get the most out of your affiliate marketing strategy, you need to set up a program with a strong foundation that’s aligned with your business objectives. No matter what your goals are, your affiliate marketing strategy should be broken out into efforts that focus on recruitment, activation and optimization, and building brand awareness. From there, you can determine specific KPIs for each category to ensure your program is delivering the results you need.
The first things you’ll want to lock in to achieve your goals are your positioning and resourcing.
- Your positioning should establish the roles of affiliates and then build a plan to commission, recruit, activate, and optimize to that role.
- Your marketing team resourcing should allow you to manage the program in-house, working shoulder-to-shoulder with your performance marketing team. Focus on thinking holistically and collaborating together on cross channel interaction.
There will, of course, be tweaks, changes, and even pivots as your affiliate program matures, but setting up your program strategically from the start will help maximize your potential from the channel and avoid frustrating and costly mistakes in the future.
Tools to scale your affiliate program
This is also the time to think big about how you want to scale and determine what infrastructure is necessary to get there. With the right tooling and data flow, you can automate commission payout to value being driven in the customer journey and de-dupe against other channels to reduce cost and maximize ROI.
You should also implement advanced tracking and solidify your crediting methodology to gain insights into incremental value and quality of affiliate referrals. And to create operational efficiencies, always adopt partner management best practices, and implement workflows to recruit, onboard, and activate affiliates. This will give you more time to focus on building relationships.
Selecting the right tracking tool is essential for building a solid partnership framework that effectively leverages technology and processes for scale. When it comes to tracking, there are two options: networks and SaaS platforms. Networks tend to have great support and resources, extensive marketplaces of affiliates available for recruitment, and somewhat decent tracking. But they also come with a higher price tag, old technology, and limitations on what types of tracking insights are offered. SaaS platforms are more cost effective, have robust attribution technology, better fraud controls, and a range of customizable technology solutions. However, they often lack support, resources, and useful affiliate marketplaces.
Affiliate Partnerships and Commissions
Your affiliate program is only as good as the partners you collaborate with, so understanding the different types of partnerships (and how to structure your agreements) is crucial for success. You’ll most likely want to recruit a wide breadth of partners. Once you identify your marketing gaps, you can then build and source a pipeline of partners to address them. This process involves several key elements, including:
- Network tools you can leverage to identify and recruit affiliates
- Developing a dedicated affiliate signup page to make it easier for affiliates to partner with you
- A pipeline that features personalized outreach for your top 50 targets and mass recruitment campaigns for second- and third-tier targets
- Maintaining SEO best practices to ensure you appear in top ranking articles for related keywords
- Incentives, like a first-month join + activation bonus, to get partner excited about working with you
Types of affiliate partnerships
There are four main types of affiliate partnerships to consider: content creators (like influencers, bloggers, digital publications, sub-affiliates, and forums), review sites and buying guides, rewards (including loyalty points or miles and cashback), and deals/coupons. Each of these offers distinct benefits and will require specific program alignments to run efficiently.
Content creators include influencers, bloggers, digital publications, sub-affiliates, and forums. This type of partnership offers valuable benefits and can help you access new or niche audiences, serve as a source of unique and reusable content, drive new customers to purchase, build a personal and authentic voice that enhances brand trust, funnel traffic from high domain authority sites, and boost your SEO impact. With this form of affiliate partnership, you'll want to focus on:
- Offering premium commission, free products, and audience promotions
- Consideration of hybrid flat fee + commission placements
- Product/service reviews
- Providing regular access to content
- Regular audits for FTC regulations
Review sites and buying guides
Review sites and buying guides offer a more authoritative source of promotion for your business. These partnerships lend brand credibility and drive high intent traffic, making them quite valuable for converting customers. With this type of partnership, plan to offer a premium commission rate, consider hybrid or flat fee placements, and conduct regular audits for FTC regulations.
Rewards-based affiliates, such as loyalty points or miles and cashback, are a great way to tap into highly engaged audiences. Often available only to specific employees or customers who have registered, partnering with these types of programs can drive high volume and high AOV. The built-in loyalty aspect often helps you close the sale over a competitor that does not feature a loyalty incentive. And because these audiences have typically opted in to these programs, there's much more information available about them, allowing for greater targeting ability. Another bonus is having more control over your brand messaging and specific offers compared to other affiliate partnership types. To make the most out of these arrangements, be sure to:
- Select top loyalty sites for partnerships
- Participate in cashback events or opportunities to increase commissions during peak seasons
- Provide exclusive offers for members
- Use targeting and testing to align compensation and value
Deals and coupons
Deals and coupons are one of the most common types of affiliate partnerships and offer good control over your brand messaging and offers, as well as useful targeting abilities. However, this sector is huge and filled with endless options, so to use this form of affiliate marketing efficiently, you should:
- Select top coupon sites to partner with
- Use targeting and testing to align compensation and value
- (Likely) reduce commissions
- Restrict and/or remove toolbar or browser extensions
Determining commission rates
Different partners deliver different values, so it only makes sense that they should receive different commissions—payouts should be customized for each partner. As you think through this component of your program, you’ll want to:
- Determine the maximum commission you can afford and ideally at each stage of the funnel.
- Decide the maximum amount you want to leave for bonuses and placements.
- Make sure your offering is competitive, understandable, and actionable by affiliates.
It’s important to get this step right to avoid overpaying for poor performance or underpaying great affiliates who could leave you for greener pastures.
Post-Launch Activation and Optimization
Once your affiliate marketing strategy is implemented and your program is up and running, you’re ready to experiment with ways to make it stronger and more effective. Test and optimize your activation campaigns and incentives with top affiliates through tactics like offering free products for editorial reviews. Build out onboarding resources to include a welcome kit, informational one-pager, FAQs, how-to guides, and approved content that’s easy for partners to use. And don’t forget to communicate with your partners—consider creating and sending customized monthly newsletter to each affiliate group type with tips, tricks, and suggestions on what to promote.
There are several other ways to optimize your program so you can scale faster:
- Drive and incentivize incremental revenue by increasing commission and bonuses based on the quality you’re looking for.
- Source better placements and seek opportunities for deeper integrations through site audits that explore newsletters, social media, offline, and co-branded or custom landing pages.
- Enhance sales enablement by making it easier to drive performance through customized content, product feeds, first promotion of new products, and promotions.
- Assess and audit affiliate performance (down to the partner level) frequently and on a regular basis to identify areas for improvement.
Finding Success with Affiliate Marketing
If launching an affiliate program aligns with your overall business strategy and you have the necessary resources and infrastructure to support it, it can be an excellent way to reach new audiences and scale, all at a fraction of the cost of other channels. And if you’re strategic about sourcing and recruiting the right partners, as well as investing in the time and resources to build those relationships, you’ll be able to plan, build, launch, and sustain a thriving affiliate program.