Building an Affiliate Flywheel Part II #16

Affiliate Marketing Powered Growth Loop

April 13, 2023

Hi Friends 👋!

Nice to be back from parental leave.

The little guy is eating a ton and growing!

But let's talk about what's really important...

Building an affiliate flywheel - PART ✌️

I love a good sequel.

The best part about creating an affiliate flywheel is often what gives people the most problems with implementation, here are the 3 key components:

  • Aligning incentives

    • OKRs, KPIs, ROAS/MER target, % contribution to revenue, they need to have buy in from brand leadership team, marketing team, affiliate manager, affiliate agency, set up effectively in affiliate network with compliance, brand guidelines, terms & conditions all working toward a similar goal. If there is conflict in this chain of command it will limit growth.

    • Payouts cannot be publicly different unless clearly defined e.g. payout for new customer is 10% but existing is 3%. Payout for coupon/deal is 1% and media house content is 10%.

    • Refer A Friend payout cannot be higher than affiliate partner payout

    • Why? Because affiliates are savvy and they will take the highest offer they can get

  • Building relationships

    • This sounds boring cheesy or cliche to some but it's true

    • Affiliate is one of the last paid marketing levers to rely heavily on relationships

    • Influencers want to promote brands they believe in

    • Affiliates want to work with brands that are in it with them for the long term and view it as a long term partnership/collaboration

      • e.g. it might take months to get payout, landing page, offer, product mix right in order to yield the highest return

    • Advertisers/brands that pull the rug out from under partners will lose in the long term gain from a partner marketing perspective now matter how strong they are - easy pickings for competitors

    • The industry is small and aware of who most of the players are

  • Managing the levers that work for affiliates . (Not just what works for the search auctions or social algorithms 😜)

    • Payout (flat fee per sale, % of sale commission, $ per lead/email submit, $ per download, flat fee payout, gifting)

    • Conversion Rate (this is where semi exclusive, exclusive offer, landing page optimized, co-branded landing page, landing page build specifically for the medium e.g. TikTok, YouTube, Blog matters

    • Creative - the frequency, volume and quality here really can make a difference between a profitable partnership and one that fails

    • Communication - getting clear terms & conditions, boundaries, rewards and incentives and updates on product and coming promotions sales or changes on a regular cadence is needed for any via

If you take care of your affiliates, they can/will do a lot of that work for your brand.

Very few things will ever replace Google and Facebook ads for brands in this current ecosystem, but affiliate can be a more predictable compliment. (when instrumented correctly)

Why does this matter?

  1. The number of brands building Affiliate flywheels is very rare

  2. The impact is sustainable + predictable

  3. There are halo effects that permeate multiple spheres of your marketing mix where other channels will not. (Ex: a men's health article allows you to use the logo in a paid social ad, on your website for social proof, and in organic search)

What do you need to build a world-class affiliate system?

(Note: future newsletters will focus on each of these in detail)

  1. MarTech foundation - tracking, reporting, attribution.

  2. Partner Principles - execute best practice & long term thinking putting a collaborative and long term positive relationship at heart of what you do. Being cool with your partners goes a long way.

  3. Economic Alignment -  “Show me the incentive and I will show you the outcomes”. - Charlie Munger (complete legend). Paying partners well v. competitors is key, but ensuring payouts are tied to your most high-value revenue-driving actions is just as important.

  4. Partner Diversification - concentration risks can hurt. You will need to eliminate concentration risk and have affiliate partner representation in each business model: content, influencer, tech, coupon/deal, cashback/loyalty, search, email, media buyer, emerging (of course dependent on type of brand). Far too many affiliate programs neglect one or many business model or over-index on one partner type (often coupon and loyalty), leaving a gap in the marketing funnel (awareness, consideration, conversion). Diversify or perish.

  5. Active management - this ain’t an index fund. Brands that attempt to operate them as such fail. For brands working with teams like ours, we recommend 1-3 hours per week (depending on program size and scope) to review and approve partners, plans. If you are doing it yourself you might be investing 10 hours - 40 hours per week (yikes 🤢). Launching on an affiliate network, setting your payout, tracking, and adding creative is only the beginning. 😮

  6. Growth is never done - ongoing experiments, offer, landing page, campaign, and appropriate commission increase tests are required to always be looking for ways to improve performance.

To say it more bluntly, if you effectively court, support, and feed your affiliates (influencers and partners) high quality landing pages, offers, exclusives, unique content, ads, brand guidelines, freedom to test, time to learn and optimize and invest in long term relationships with them, your output will be more affiliates, more traffic, more revenue, and higher quality of both.

Take the revenue from the output and reinvest it as the new input! 💥

If you can do that an affiliate marketing flywheel.

Why does this matter?

Once your affiliate program flywheel or growth loop is spinning, it does not stop unless you stop feeding it.

It can be a more consistent “channel” with a stronger moat around it versus your competition. It can also mitigate your reliance on paid search and social. 🚀

Yes, too many brands are over-leveraged on Google & Meta and need another source of high-quality customers. If you do it right you and your e-comm brand will get:

  1. Lower CAC ⏬

  2. Higher ROAS ❤️

  3. 20% of your monthly revenue 🚀

  4. Increased sustainability and diversity 🤝

Yes, while it takes longer, it is more secure diverse ad predictable than paid search and social.

💥 Conclusion: e-comm brands do not understand affiliate marketing, and even worse they have no idea how powerful affiliate marketing can be when you turn it into a flywheel and keep it spinning.

Let me know if you have questions, comments, or want to build a flywheel for your affiliate program.

Have an amazing day!

Tye