Affiliate Marketing is a tremendous channel for online merchants and lead generators to grow and make prosper, but it definitely isn’t without its share of issues. Here are some of the biggest and more important issues in affiliate marketing you may face:
Affiliate tax legislation – these are taxes, state sales taxes, that have been levied by huge states like New York, that will then tax merchants with affiliates that produce sales out of that state. It’s been a huge problem in the affiliate industry. The Performance Marketing Association is something that everyone in the affiliate industry should join and be a member of. Go to their site, performancemarketingassociation.com and you can get all the latest affiliate tax updates and how it possibly affects you as an affiliate or merchant.
Fraudulent sales – “Fraud sales”, or placing bogus sales or leads through affiliate links, is kind of the dirty little secret of the affiliate marketing world because there are a lot of shenanigans that go on in the industry behind the scenes. You have to have a really good fraud prevention process in place to stop if from happening, whether you have to call every order that comes in or every lead that comes in…you may have to do that in order to verify the quality on the different traffic sources that you’re running on a performance basis. Especially when you’ve opened it up to numerous CPA networks and large affiliate networks. When you have 5,000 or 10,000 affiliates, you have to look into individual traffic sources on a per affiliate/partner basis and make sure the quality is there, if it’s not quality then the source has to be addressed. Check out FraudLogix.com for fraud monitoring services, mention Evan sent you.
Same order ID and multiple referrers – This can happen when you are an Advertiser/Merchant multiple networks, you can have the same order ID credited across various networks because various pixels are showing up on the conformation page and this is definitely going to happen if you’re running at a lot of affiliate networks. So at the end of every month you have to look at all the orders in your internal database and compare them against the different networks’ reporting systems. Make sure all the numbers match-up, so you know you’re not overpaying or underpaying for that month’s worth of sales or leads. Make sure to get set-up as a “gateway” advertiser so you can control when the affiliate network is displayed on the thank you page to eliminate the issue.
TradeMark Infringement – Some companies allow affiliates to bid on their trademark (company name) via paid search…some don’t. It can be very lucrative for affiliates or it can be very troubling for merchants. It just depends on your philosophy. I usually advocate for an open search policy, but it really depends on the merchant and how much of their own paid search they are spending money on. If you don’t want to sacrifice any ROI on your paid search, you probably should have strict trademark restrictions with your affiliates. If you don’t mind affiliates bidding on your company name, or company name + coupon code, you can achieve a nice amount of saturation on the search results page and increase click thru rates and conversions.
Who will manage your affiliates? Don’t just let anyone manage you affiliates and partners. Don’t let some intern manage it or kid that just graduated from college who knows nothing about the search engines or HTML or affiliate marketing. Don’t allow an outsourced affiliate manager without proven experience and strategy manage it because it will be wasted time and I’ve even seen poor agencies kill a program. Because if you do either of these things, you’re going to get exactly what you put into it, a whole lot of nothing. So you have to use very, very competent, experienced, pro-active affiliate managers handle it, whether they be in-house or outsourced. Outsourced affiliate managers can be good, because outsource companies have a lot of contacts already, they already have a large affiliate database that they can prospect from. So outsourcing it can actually get you further quicker in my opinion.
Who will do your business development? Business development should be done internally as far as I’m concerned. You should have somebody that is reaching out to companies and approaching them on a rev-share basis saying we’d love to work with your company, maybe we can send you to our newsletter, you can send us to your newsletter…things like that. Find equally large companies and web properties to you own and propose some kind of ad inventory swap or newsletter placement swap and pay each other on whatever sold. You can do that with 50 or 100 companies a year and really broaden out your reach and that’s all performance marketing, everything is on a performance basis.
What’s your strategy to grow this channel? Strategize on growing your performance marketing channel and then execute on it, don’t just strategize and then turn it over to someone and do nothing because then what’s the point. So you really have to execute after you strategize. Be aggressive with your strategy to grow the channel and don’t be weak with it or it will go nowhere.
How are we motivating affiliates and partners? You have to always think about how to motivate people to participate more and produce more. Affiliates and partners can be divided into different groups and buckets and then you can take the smaller buckets and graduate them to larger and take people who never produce and turn them into producers through various strategies and that’s how you maximized your participation level, which then maximizes the sales levels which go up as you have more people sending traffic.
So how much money should we invest in this channel? Don’t be cheap! You can do it with nothing or you can do it with quite a bit of money. Probably $40,000 or $50,000 can be invested in the first year to grow an affiliate program, if not more to really building out a good affiliate channel (and that’s not even including the labor and whoever you’re bringing on board to handle this for you or if you’re outsourcing it). So you really should talk to someone qualified to advise you on how much to spend, and where to spend it, and then if you’re willing to spend you can get a great result by spending a little bit of money through affiliate recruiting and through advertising in the right venues. If you are cheap with affiliates and partners you won’t get the growth you want.
How long should it take to grow a performance marketing or affiliate program? This depends on a few factors. This is the number one questions I have to answer in my agency and just talking to people on a daily basis. It depends on the website, it depends on the niche, it depends on how much traffic is out there in the niche, depends on your conversion rate and your payout. So there are many factors, but you have to be very realistic as to the time frame that it takes to grow a channel like this. It could take six months to a year to even really start being really happy with how much performance you’re getting out of this channel. But if you stick to it and really grind it hard every month and every year, it will grow year over year exponentially. You just have to take it really seriously and put the right strategy and resources behind it.
These are some of the issue you will face in the affiliate marketing channel. Most companies think launching and growing a large, productive affiliate channel happens over-night and is easy, but that couldn’t be further from the true. You need to account for all of these issues if you want to grow an affiliate program properly and to profitability. Make sure to use a good affiliate management company (like ours) to ensure you have a great strategy in place from day one and you will be on your way to growing your affiliate channel bigger and bigger every year! Thanks for reading and let me know your comments!