Are You Ready for Affiliate Marketing? #28

Are You Ready for Affiliate Marketing? #28

Hey friends! 👋

Hope you had an amazing July 4th holiday weekend. 🇺🇸

I get this question from Consumer Brands a lot:

“How do I know my business is ready for affiliate marketing?”

Another week of affiliate marketing flight school…

These are the core things you need to have in place before you think about partner (affiliate & influencer) marketing…

1. Product Market Fit

2. Revenue

3. Margin

4. Retention

5. Conversion Rate

6. Landing Pages

7. Offers

8. Paid Marketing Growth Loop

9. Dedicated time commitment 1-3 hours per week

10. Creative

11. Gifting

12. Reviews

13. Budget

14. Patience / Align on Time to Value

Now let’s break down each one…

Product Market Fit 🔐

An early-stage start-up in search of product market fit is not fit for affiliate marketing. While this can be difficult to define, this is one of my favorite definitions.

Revenue 💰

A brand needs to be generating enough revenue to support partner marketing, just like any new marketing initiative.

We typically look at brands generating a minimum of $20M per year in revenue to support multiple paid marketing initiatives e.g. Search, Social, and Partner Marketing (affiliate & influencer).

Once you cross the $1M revenue per year mark we would recommend you start considering affiliate marketing as a channel and likely get some basics set up at around the $5M revenue per year mark.

Margin 💵

Not rocket science but a good reminder to ensure you have a healthy margin to enable investment to affiliate partners and influencers, your agency/experts managing the program, SaaS tracking fees, and performance incentives to agency and affiliate partners.

Feel free to hit us up if you have questions about this. We have created a lot of models and forecasts with documented assumptions to guide brands on what they might expect for growth over a 3, 6, and 12-month period.

Retention 🫴 

This is another variant of product market fit.

Without retention, you cannot invest in acquisition.

Take a look at your cohort analysis retention curve, you will want it to look flat over time.

If that retention curve is going down and to the right, you will want to stop the customer churn via qual and quant analysis, customer support, and product improvement before investing money into new acquisition channels.

Now that you have the above, congrats you are…

Conversion Rate 📲

One of the beautiful things about affiliate marketing is that affiliates are willing and able to promote your brand with their time, resources, and capital and only get paid when they deliver a bona fide sale/purchase.

As a result, they are selective about the brand programs they promote.

If a program has a conversion rate that is too low and drives down the overall time to value, then it will opt to promote other offers.

Landing Pages 🛬

Sending your customers to the ideal landing page, product detail page, review page, and destination at each stage and medium is critical to your success.

Improving the user experience and conversion rate of your landing pages only increases your affiliate adoption.

You might not have the ideal landing page or customer experience now, but if you are going to launch an affiliate program you need to be willing and able to invest in a variety of landing pages built for conversion.

This empowers affiliates to have the ammo they need to support your brand on various mediums/channels.

Offers 🤝

If landing pages are the storefront you are welcoming customers into, then offers are the front door enticing them to enter.

Running a successful affiliate program requires using a number of offers to fuel partners and drive conversions for your brand.

You can utilize existing site-wide offers and variations for your affiliates. Brands often will run exclusive, semi-exclusive, one-time use, and seasonal discounts to affiliate partners.

Keep in mind offers do not always have to be standard % off or $ off discounts.

You can get creative and offer “gift with purchase,” BOGO (Buy One Get One), and other carrots to entice your prospective customers to join/purchase/re-engage.

Of course, you will want to ensure that this aligns with your brand, promotional, margin, and competitive strategy.

Paid Marketing Growth Loop 🔁

Reforge has done a great job outlining the various foundations and functions of growth and performance marketing.

As a quick refresher, there are only so some key ways for a modern business to grow via the following loops: 1) viral (Facebook, TikTok, Slack, Tinder), 2) content (HubSpot, Yelp, Thumbtack), 3) sales (Salesforce), and paid marketing (Glossier, Monday.com, Uber Eats, eBay)

Paid Marketing growth loop would be where we sit and the foundation of this discussion. Affiliate marketing falls under the paid marketing growth loop.

In our experience, it typically makes sense to stand up a successful paid marketing growth loop e.g. using Google & Meta Ads prior to an affiliate program. This often serves as an added validator for performance marketing teams and affiliate partners.

1-3 hours per week ⌛️

While not a ton of time, 1-3 hours per week is required to respond to requests, validate strategies and recommendations, and provide creative, content and landing pages.

This assumes that the brand is getting a lot of help in the form of agency support, maybe some in-house expertise depending on size, creative, landing pages, and initial (minor ongoing web dev monitoring) web dev support setting up SaaS tracking via tag manager, pixel, or API.

Creative 👩‍🎨

If the above conditions are met, and you are running multiple paid marketing channels, you are likely already building a lot of creative in the form of User Generated Content (UGC), Influencer, and Branded content and ads.

Affiliates will rely on similar IAB standard ad units and an additional list - hit me up happy to share with you - you will need to resize and build this out for affiliate partners.

Affiliates will also ask for unique assets that they have a high degree of confidence will perform well for their audience. This might mean, video, testimonial, or collaborate with you to make their own. This is an important one to prepare for and provide them with your clear brand guidelines and affiliate terms and conditions to follow.

If affiliate partners are the currency that finds a way to turn your brand into revenue online, creative assets are that moment of truth where the customer interacts with the affiliate/partner/influencer.e

As a result, this is a key differentiator and an important requirement before you launch your affiliate program. It’s ok to start with zero but you will need to invest here if you want to have a successful program.

Gifting 🎁

We have talked about this a lot lately but it’s an easy win with a medium lift. Be prepared to gift to a segment of right-sized influencers and review sites. Budget and plan for maybe 100 per quarter depending on your AOV / product type.

Do you have what it takes to launch an affiliate program?

Reviews 📣

This is a great validator. Especially when you are asking partners, review sites, gift guides, and influencers to tout your brand. Getting quality valid human non-incentive review volume will only continue to help you make this channel a success and unlock a team of marketers (affiliates) to promote you!

Budget 💸

Brands that are willing to invest a minimum starting point of $25k per month and quickly ramp up to $50k+ per month on this “channel” will be successful. It is similar to Search, Social, and Programmatic in this regard.

Setting aside some budget minimum of $5k per month to $50k per month on the higher end to test paid placement as a % of your overall partner marketing investment is recommended.

While the lion's share of the “channel” is pay for performance/cost per purchase, and cost per lead, we recommend some dedicated to integration fees, and flat fee placements to secure spots with more coveted, quality, high-traffic partners. This will drive awareness consideration and conversion and accelerate fueling your partner program.

Time to Value ⏱️

Is affiliate marketing the most underrated lever in performance marketing? Yes

Is affiliate marketing the most misunderstood lever in performance marketing? Yes

Is affiliate marketing more than just deal, coupon, and browser toolbars? You bet.

Can affiliate marketing make up 20% of your revenue? Yes

Does affiliate marketing typically take 2x as long as paid search and paid social to yield value/revenue/ROI? Yes

Give yourself about 6 months minimum to really stand up build measure and assess affiliate marketing.

This is a big one. This performance marketing lever requires patience. If you have it and continue to focus on your inputs, you can win in affiliate marketing.

Recap & Next Steps

Just as product market fit can be a moving target, so is your evaluation of channel-market fit and if affiliate marketing is right for you and your brand.

Let’s revisit a foundational equation for setting up a healthy affiliate program:

Commission Rate + Conversion Rate + Average Order Value + Creative + Landing Page + Offer + Gifting + Reviews

(each of these variables needs to be competitive if you are going to launch and manage a successful affiliate program)

= Your Affiliate Growth Score (more on this coming soon!)

Giving partners the maximum fuel they need to promote your brand!

Take a good look at each of these requirements. They might change based on your situation at any given time. If you have questions at each stage let me know.

If you check all these boxes and want to talk further or need help - hit me up, happy to help.

Have an amazing rest of your week!

Tye