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Some affiliate networks have entry barriers such as amount of traffic, monthly revenue, etc. This discussion centers around how to structure a new affiliate program for a SaaS startup.

  • RT

    Rhys Taylor

    almost 5 years ago #

    Are you asking within the context of a specific business, or generally?

    Will you be rewarding with revenue share, or product/services (e.g. Dropbox—250Mb free)?

    Speaking generally, advice is harder to give—but ideally the sooner the better as you'll have less complex infrastructure around which to build/integrate your program, and you'll have the ability to build it out over the natural course of development of your platform and benefit from increased growth earlier. However, you'll also be forgoing a percentage of your revenue which may mean tightening your belt during the early days.

    On the other hand, attempting to introduce a program later down the track can prove difficult if you haven't developed with it in mind (e.g. user management may not be set up to handle the difference between account owners and account users—yet you want to encourage both to become affiliates and reward each appropriately) and have to redesign aspects of your (now more complex) database.

    A few questions worth asking before focusing on leveraging affiliates:

    - Is your platform ready for the anticipated growth?
    - Are provisioning systems (including billing, discounts and commission/reward payments) automated?
    - How will revenue sharing impact cash flow?
    - What is the opportunity cost of developing the program over other high priority features?

    I'd say if you can answer each of these positively, it's most likely a good time.

    • MI

      Milan Ilic

      almost 5 years ago #

      Thank you for such a great answer. I am asking in general because I saw some of the affiliate networks have entry barriers such as amount of traffic, monthly revenue and others.

      Regarding your second question, I prefer recurring commission rate. I think that will be the best fit for SaaS company and affiliates are motivated to bring more paying users, please correct me if I am wrong.

      I think questions at the bottom are really helpful, but can you please tell me more about last point. I know developing the affiliate program can distract focus from developing more important things, but what's your opinion on using 3rd party affiliate service/dashboard which can be integrated with my payment processor and then build up my own network of affiliates, or joining some existing networks like commission junction?

      • RT

        Rhys Taylor

        almost 5 years ago #

        WRT to barriers to entry—I think once you are eligible for the network(s) you have shortlisted you should get the ball rolling.

        Agreed that offering (cash) commission ensures maximum appeal—discounts or extending use, functionality or capacity of your product/service for the affiliate can be also an incentive, but only to those who actively use your offering.

        As I don't know your product or intended affiliate demographic it is hard to recommend whether you should choose a recurring or up-front (i.e. 3 months' subscription worth) commission model—but I'm sure a quick poll of your intended channel will answer this for you. I think you'll find the appeal of a recurring benefit pretty strong, and the advantage is that you can market the benefit that this will build up substantially over time for successful members.

        Re: last point. Networks like link CJ or Linkshare certainly make it easier to get things started. It sounds like you are going down the path where your affiliates and everyday customers will be two distinct user groups (I may be wrong here) so either of these would be suitable. As mentioned above, if you meet criteria—go for it.

        An aside: If you were looking to turn every customer into an advocate/referral agent (maximum leverage), I'd suggest avoiding 3rd party services and build your own—as it will better suit the intricacies of your platform and avoids the cost of paying for the service. But, if time is of the essence (and it is for all of us), you may like to look at Referral Candy and Referral SaaSquatch, or NextBee (which offers both referral and affiliate options).

        Hope that helps.

  • SC

    Shana Carp

    almost 5 years ago #

    Are you thinking about it?

  • LM

    Lincoln Murphy

    almost 5 years ago #

    Lot's of great answers already, but to your question re: a "great moment" here's the main one...

    ...Affiliate Marketing requires Product / Market Fit.

    Pretty much, don’t try to get affiliates to sell for you until you can sell your product yourself to people other than early adopters.

    It's not uncommon for early-stage startups to attempt to rely on affiliates to figure out what they’re selling and assume they can just integrate the hard work of the affiliates back into their marketing.

    Doesn't work that way.

    If your site doesn’t convert, your affiliates will quickly stop promoting your stuff no matter what the promised payout is... since they’ll never get it because your site doesn’t convert.

    Have fun trying to get them to promote your stuff again after you've already burned 'em.

    I like to think of Affiliate Marketing as being for scale and distribution… not as a replacement for a lack of marketing ability.

    Also, once you reach P/M Fit and decide you should scale via an Affiliate Model, be sure to get to know the affiliate ecosystem that you'll leverage... and build your Affiliate Program around them (just like you build your marketing strategy around your market and not your product, right?)

    I wrote a little post on this topic a few months ago; might be worth a read:

    http://sixteenventures.com/affiliate-marketing

    • LR

      Lucio Ribeiro

      almost 5 years ago #

      Lincoln like this very much "don’t try to get affiliates to sell for you until you can sell your product yourself to people other than early adopters.

      but how much do you think is worth to give a try on affiliate as a learning exercise rather than specifically lead gen?

  • JE

    Jeff Epstein

    almost 5 years ago #

    Rhys has touched on a lot of issues that you should consider while structuring your affiliate program.

    There's a misconception of the value of "Affiliate Networks" for a small businesses (including 99.9% of startups).

    Understand that a small business is competing for space (i.e. opportunity cost) on a publisher's website. In addition, you'll have to have competitive commissions and great conversion rates and marketing collateral that generate high CTRs.

    Most startups aren't this far along. That's okay. If you are though, you'll be competing with Netflix (they pay ~$7 per trial) or Amazon (~7%) for space.

    I talk to companies all the time looking to move off of networks. Most are hugely disappointed.

    Instead, start with your early adopters & establish partnerships who can drive targeted referrals (bloggers, influencers, 3rd party apps). As you begin to formalize your program, you'll need to consider questions about scale and management, etc.

    Good luck!

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