How to start an affiliate program

Affiliate program is a great way to build own marketing channels and develop a network of advertising partners. It is wise to use affiliate marketing along with other internet marketing methods and thus diversify risk.

If you want to build your own network of affiliates, that bring you more sales, you have 2 basic options: Either you join an affiliate network (such as CJ,Linkshare ) or run your own in-house affiliate program. This article favours the in-house option for the following reasons:

Advantages of independent affiliate programs

Costs – networks charge thousands of dollars monthly + rather high setup fees
Higher commissions – networks take their cut e.g. 20% from affiliate commissions. With inhouse program you can give these commissions to affiliates and start an affiliate program that is more competitive
Affiliates are yours – with in-house software you recruit affiliates for yourself, not for the network. Networks have multiple advertisers whose offers are promoted to affiliates in that network. You do the job to recruit affiliates, network makes profit

Direct relationship with affiliates – networks typically restrict your access to affiliates contact information. They don't want you to make deal with affiliates outside network – because that way they can't charge you.
Dependent on 3^rd party – if network fees increase, your only option is to pay or stop your affiliate program.

Network advantages

Affiliate payouts – networks usually take care of paying affiliates
Initial exposure – your affiliate offer is promoted within the network
Aggressive promotion – if your affiliate campaigns are be a bit “spamy”, networks can be a good middleman you can (try to) blame for it

From now on, this article is focused on in-house / independent affiliate programs

Before you start

These are basic considerations before starting an affiliate program

Does your website convert? – if you have problems to sell products yourself, affiliate program won't help you. Affiliates will recommend your product, send you traffic. It is still your website that must convert this traffic into buyers.
Affiliate scheme – research your competition. Higher commissions are more attractive, anyway you don't have to pay highest commission per sale in your niche. Conversion rate is just as important as rate you pay for sale.

Setting up affiliate tracking

To start an affiliate program, you need to have affiliate tracking in place. Affiliate tracking is done by affiliate tracking software, and it ensures that affiliates get commissions on sales (or leads, clicks, CPM ) they deliver.

This illustration shows how affiliate tracking works.

Once installed on your website, affiliate software integrates with your website and payment processor (or shopping cart, subscription system). Integration is very easy also for non-technical person, it is done by including short piece of HTML code to your website and thank you page (page that shows after the sale is done). Installation and integration can be also outsourced completely.

Minimum requirements on affiliate software

Affiliate tracking software will take care of your business partnerships. This is basic list of tasks that affiliate software should do for you (and automate them to the max).

track affiliate-referred sales / leads / clicks / impressions / subaffiliates
support your affiliate scheme
handle new affiliate signups
calculate commissions for affiliates
notify you and affiliates about major events (sale, new affiliate signup etc)
distribute affiliate code (promotional tools) affiliates
compatible with your shopping cart / payment processor
24 / 7 real-time reports for you and affiliates
possibility to customize and brand design of affiliate panel and affiliate sign up form
keep track of affiliate payouts
refund / chargeback management

Settings you should not forget about

Besides your affiliate scheme, there are other important settings that significantly affect how your program works. These are top settings that your affiliates will care about and should be considered before affiliate program launch:

Cookie lifetime – how long is affiliate cookie valid? Do you offer lifetime commissions?
Overwrite cookies? - if buyer comes through several affiliates – which one gets the sale? You can either overwrite cookies (last affiliate gets the commission) or not overwrite cookies (first affiliate gets the commission)
Payout level – what is minimum amount affiliates must reach to get their payout?

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