How to Start an Affiliate Program [Complete Guide]

Let us discuss a few ways a merchant should start the affiliate program.

Types of Affiliate Programs – Choosing the right for you

There are various kinds of Affiliate Marketing Programs a merchant can run or an affiliate can join.

These are based on the type of compensation or commission model the merchant follows. Pay-per-sale (PPS) and pay-per-action (PPA) are the most commonly used programs.

1. Pay per Sale (PPS) / Cost per Sale (CPS)

This is the most popular kind of affiliate marketing program. Around 70-80% of the merchants follow PPS as their affiliate payout system. Here, the merchant pays the affiliate a percentage of the price or a fixed amount to sell its product.

The merchant is guaranteed a sale before it goes out to make affiliate commissions. This system makes it very simple for the merchant to calculate profit margins.

Following the previous example, for a 40% profit margin product, keeping a 20% affiliate commission makes it very attractive for the affiliates and gives the merchant a considerable increase in business.

The merchant must also factor in all the upsells planned for the products. A merchant’s PPS percentage can undoubtedly increase, driving 20% of its customers to buy the upsell.

From an affiliate’s perspective, the affiliate must ensure the sale before expecting any payout. Getting a customer to visit the merchant’s site is not enough! If the affiliate pulls off the sale, it receives considerably high commissions. Tracking such a system is more accessible for affiliates and merchants.

2 Pay per Action (PPA) / Cost per Action (CPA)

The pay-per-action (PPA) or cost-per-action (CPA) model of payment for affiliates refers to a method where the merchant decides an action based primarily on the prospective customer. The affiliate mainly gathers this information by getting the customer to fill out some form.

An action may also refer to a free trial (or a very minimal amount) given to a prospective user. Once the user tests the product, the merchant may proceed with the main sale and then go along with the upsells.

This method is generally used by merchants who prefer to use their sales efforts (sales pages, website, etc.) to complete or close the sale with a prospective customer.

In this case, the merchant needs information about its product’s conversion rates. For example, if one out of every 25 people visiting the site buys the product, the price of making a sale is 25 x (amount paid per action).

If a merchant pays $0.10 per action, acquiring that customer costs 25 x 0.10 = $2.5. Thus, a merchant can quickly improve conversion rates to utilize the affiliate’s visitors more efficiently.

From the affiliate’s point of view, getting somebody (prospective customer) to fill in the form (the action) ensures the merchant’s payment. Getting a sale out of the customer is then up to the merchant.

An affiliate who can drive that kind of traffic through its already existing sites, blogs, etc., or otherwise would be advised to enter into a CPA affiliate program. The CPA payment amount may vary from product to product, depending on its value for a merchant.

3 Choosing the type of Affiliate Program – Critical!

The affiliate program type you will start is critical for your success. You can make changes later on, but it’s important to track results and update them accordingly.

Some affiliate marketing niches, such as gambling, financial services, dating, magazine subscriptions, and game downloads, work best with the CPA affiliate marketing model. In contrast, informational products work best with pay-per-sale in other niches, like eCommerce.

Affiliate software or Affiliate network

Before anything else, you should decide whether to host your affiliate program or run it through an affiliate network. Of course, you can do both, but I suggest you do this when you have already established one of them.

There isn’t any common answer, as affiliate software and affiliate networks have PROs and CONs. In a nutshell, if you want to have more control of the payments, the affiliate program, and the affiliate, you should run your program.

On the other hand, if you start your affiliate program through a network, you will immediately have hundreds or thousands of affiliates ready to promote your product.

As I said earlier, at some point, you can transition from your affiliate to an affiliate network or more. For instance, in the email below, IPVanish announces that its affiliates have decided to migrate from Post Affiliate Pro to Commission Junction.

If you are on WordPress, we suggest checking our top 10 recommended affiliate solutions for WordPress and WooCommerce.

Setting Commissions and payment terms

The best way to attract an affiliate or, for that matter, any person is MONEY. Show affiliates the money, and they would do anything to sell the product.

You should do the calculations here carefully. Calculate the expected sales and product profitability increase, taking out affiliate commissions.

Keep in mind that the second variable should be kept comfortably positive.

The payment date of the commissions should include the refund period you offer for your product, if any. Doing this will ensure you will not send the commissions to the affiliate, and the buyer will refund the purchase.

If you haven’t decided yet whether you want to run a pay-per-action (PPA) or pay-per-sale (PPS) affiliate program, it’s time to do so.

Are you looking to drive traffic to the site and confident that your sales conversion rates would be better? Then, go in for a pay-per-action affiliate program. If you want to pay the affiliates only once the sale is complete and confident with the profitability, it should go in for a pay-per-sale affiliate program.

Here is a good article on how to set up affiliate commission rates for your affiliate program.

Affiliate contract details

Affiliate contract details are essential for several reasons. The most prominent one is that they will ensure that your program complies with your country’s laws.

The affiliate agreement between you and users will also set the expectations right and prevent you from getting sued. Last, it will help you terminate the agreement with some affiliates if things don’t go well.

I strongly suggest consulting a lawyer in your country with affiliate marketing experience. Besides the affiliate program terms and conditions [Example here], you should write the Affiliate program details [example here], Affiliate program FAQ [example here], and GDPR document [example here] if you address affiliates in the European Union.

Another tip is to create a complete guide so that your affiliates have all the information they need at a glance.

Promotional creatives

Setting up the promotional creatives the affiliates will use to promote your product is essential. These must be carefully picked and shared for the program’s success and to keep the affiliate’s convenience and requirements in mind.

It would be best not to wait for the affiliates to request them because that would never happen, and the affiliate would go on to promote another product. Merchants need to know they are marketing themselves to the affiliate and competing with other merchants in the market!

For instance, here are several creatives from Semrush available for their affiliates to promote the product:

Merchant resources are mostly limited to affiliate links to the website and banners. Affiliate links are provided to the affiliates once they log into the system. The merchant must provide banners in all possible sizes and colors, keeping in mind the brand colors (if any).

The generally used banner sizes are 120×90, 234×60,  468×60, 728×90, 120×600, 300×250, and 160×600.

If your product is available in multiple languages, you should upload creatives in all the languages you want to generate sales. This is because the affiliates might have different pages on the website where these plans are presented. Thus, they would wish to separate banners for each of these pages.

Also, don’t limit yourself to banners. You can add free ebooks, email sequences, widgets, etc. Make the lives of affiliates easier, and they will bring more sales.

Payment methods

Before launching the affiliate program, you need to configure one last step: the payment methods you will use to pay the affiliates’ commissions. If you start the affiliate program through an affiliate marketing network, you will send the funds to the affiliate network, and they will pay the affiliates by their methods.

However, if you start your affiliate program, you must choose payment methods carefully.

Each industry has its standard payment methods. For instance, casino industry affiliates expect to be paid in one or several of the following casino payment methods: PayPal, Skrill, Neteller, or cryptocurrencies like Bitcoin.

If you are in the niche of digital products like video courses, WP plugins, and digital marketing services, you should go with PayPal and bank wire for larger payments.

Get inspiration from the competition.

I recommend spending enough time studying your competition well. How do they design their affiliate program, the terms, and payment methods, what promotional creatives they use, and what are the affiliates complaining about so you can improve?

Here is a list of over 65 successful affiliate programs, which you can check to get some ideas for your new affiliate program.

Starting An Affiliate Program FAQ

Here are the most frequent questions we get from our readers about starting an affiliate program:

Conclusion

So there you have it—the complete guide on how to start an affiliate program. This is the first part of our trilogy, which will continue with two new guides mandatory for your affiliate program’s success: How to promote your affiliate program to attract affiliates and How to manage your affiliate program effectively. Subscribe to our notification to know first when we release them.

Now, about you. Did you enjoy reading the guide? What’s your takeaway?

Do you have questions? Please let us know in the comments form below. I regularly check them and reply with details.