What if I told you there was a way to have other people working to sell your product, but you didn’t have to pay them UNLESS they generated actual sales? That’s the gist of affiliate marketing and it can be a really powerful channel for eCommerce businesses.
On this week’s episode I’m talking to Rick Magennis, President & Founder of Bearcat Media, an affiliate marketing agency. Rick has been in the affiliate game for over a decade and even uses it for his own eCommerce business.
We have another kick ass guest on the show today, Rick Magennis, founder of Bearcat Media, an Affiliate Management Agency dedicated to driving the right results for each client. In this episode, we talk all about not only why you need an affiliate program, but how to actually do it right.
Not only has Rick been managing other people's affiliate programs for the last decade, he even uses it for his own eCommerce business so you know, this stuff really works.
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What is affiliate marketing and an affiliate program?
The basics of affiliate marketing involve having an eCommerce website and having a third party affiliate, who wants to promote your products or service.
They promote your product or service either on their website, through an email list, through paid search campaigns or social media. Every time that they drive a sale through your website, they get a commission which is either a percentage or flat dollar amount on each sale.
Basically it’s like having a sales force out there that's getting paid on performance only. It's performance based which makes it a no brainer. You're not paying them unless they actually convert sales, which is the distinction between affiliate marketing and what you may think of as influencer marketing or working with content creators where you pay upfront for the creation of content.
How do you get started with affiliate marketing?
Although there's a lot of things that you need to do and it may seem overwhelming, it’s not really that difficult.
Run a competitive analysis
Never start a program or take over an existing program without doing a competitive analysis first because it tells you a lot about what you need to do moving forward.
Competitive analysis involves finding out where other competitors' programs are being run, their commission amounts and structures and understanding what type of affiliates they have. Find affiliates that are helping your competitors succeed because you want to bring them on board to help you succeed as well.
After you do the competitive analysis, that's where you can actually figure out where and how you're going to set it up.
Decide where and how you want to run your affiliate program
By now you should know what your competitors are doing with their affiliate program. You need to decide where you’re going to run your program from, whether it be a big affiliate network like ShareASale, CJ Affiliate, or on SAS software like Refersion. Or are you going to use a plug-in software that goes into your Shopify store like Affiliatly?
Decide how much commission you should pay per sale
Affiliates often sign up for multiple programs at one time, not just yours. You need to stand out and be as competitive as possible. Affiliates can easily go to the next brand, start promoting them and make more money.
Rather than saying you’ll pay 10% commission because it may be higher than your competitors, consider whether they have a tiered structure that allows them to pay based on performance. Once you know that, you can create a program that allows you to be as competitive as possible.
The percentages affiliates receive varies a lot depending on the industry. In the fashion and apparel industry for example, there is a program called rewardStyle, which every fashion blogger and every retailer is part of, but they're only paying upto to 5% on apparel and accessories.
By doing the competitive analysis upfront, you’ll be able to make sure your program and your business is something that affiliates want to put their time, energy and effort into actually promoting over everyone else's.
How much does it cost to set up an affiliate marketing program?
Setting it up really depends on the budget that the brand has. There are big affiliate networks, which charge a nice chunk of change just to set up. On top of that, they also take a percentage of each sale, which you have to factor into your budget.
If you’re using software on the other hand, then it mostly consists of monthly charges, which range anywhere from $50 to $200 a month. The price depends on the software and what kind of solutions you have included. For the most part, you can set up an affiliate program for a few hundred dollars.
Prove your product organically before you start affiliate marketing
Before you think about jumping into affiliate marketing, make sure that your website converts and you’ve proven your product organically.
If you’re just getting started, test to see whether people even want to buy your stuff and that your website converts and is optimized for sales.
If not, fix that stuff first. If affiliates start pushing traffic to your website but they're not making money, they're gonna stop pushing traffic to you—simple.
What are the different types of affiliates and what should you be looking for?
Any way you can think about promoting a product, there's an affiliate out there for it. You just have to know where to look for them and to provide them with enough of an incentive to consider you and your brand to promote it.
Content affiliates are people who write blogs.
Review affiliates review products.
YouTube affiliates promote products on YouTube whether it be through reviews, or skits and things like that.
Email affiliates promote brands to their email lists.
Paid search affiliates strictly do paid search campaigns for brands.
Programs like rewardStyle, which we mentioned earlier, is what we call a sub-affiliate. The person signs up for the affiliate program but then they have all the fashion bloggers and sub-affiliates underneath them.
Check out Rick’s break down of the 11 types of affiliates to consider for affiliate programs
Does one type of affiliate program work better than the other?
It depends on the industry, the product, the customer and what the brand wants to do.
Content-based affiliates are in demand
Most brands want the content out there—the blog posts, the reviews, the user generated content, the influencer content. Not so much on social media but the influencers on YouTube where the content lives forever.
And there's really no shortage of them. New ones pop up every day. It will stay this way for a while. Content is the thing that sells products. It’s what really keeps business moving forward.
Coupon affiliates are on the way out
The majority of the brands nowadays want to minimize or limit the coupon affiliates because they don't really add value to the program. They are hijacking a customer that would have converted anyway.
For example, say you send an email to someone, they click through the email, they come to your website, they go to make a purchase, and then the Honey coupon bar pops up so they use one of those coupons to complete the purchase.
Instead of the attribution going to your email, it goes to Honey instead because that was the last action the customer took before they made a purchase. That means that you’re now going to pay a commission to Honey when really they probably would have just bought it from clicking on your email.
If you are a huge, multi-million billion dollar business, then that's fine, because you're really just looking for that top line revenue. But as a small business, I would really stay away from that stuff.
How do you avoid ending up in a coupon program if you’re using an affiliate marketing platform like PepperJam?
It depends on who's managing the platform. If you are managing the program, you’ll get notified every time a new affiliate applies to the program, and you'll see who they are. If it's a coupon site like Honey, you can just decline them.
If you have an outsourced program management team running the program, then it’s on you to give them specific instructions to keep these types of affiliates out of your program.
How can you work with coupon partners in an alternative way?
Rather than just cutting out coupon partners completely, instead, you could pay them a lower commission, like 1% on a sale. The default rate everyone else gets will be 10% (or whatever makes sense for your brand.)
Depending on the software you have, another option is to split the attribution. The person who introduced the product gets 75% of the commission and the closer gets the remaining 25% of that.
There's different ways you can do it so that you can still work with them within different parameters. It does take a little more work to set all that up though.
It's all about what your goals and expectations are. Sometimes when you're beginning to ramp something up, it's okay if it's not perfect or not as profitable as you want it to be. As you get better and better at it, it will become more profitable. Don't be afraid to invest a little bit in the beginning.
That being said, if profit is tight for you, then maybe stay away from those kinds of platforms—at least in the beginning.
What are paid search affiliates and how do they work?
There are paid search affiliates that strictly do paid search campaigns for brands. They can either be the whole paid search team and work on a performance basis. Or they can work in conjunction with the current in-house team by filling the gaps with paid search tactics.
Coupon sites like to come to brands and ask them if they can do what they call a “trademark plus” which means they use the brand's trademark plus the word coupon or promo code or deals in paid search campaigns.
Some of them are successful, but you do have to keep an eye on it. Have policies in place that they can't outbid you for certain things. Ensure you have certain parameters in place.
There's definitely pros and cons to this. I believe in it 100% because I'm using it for my own eCommerce store. It's just a matter of making sure that you're on top of it.
What are some affiliate marketing best practices and things that people should be prepared to do?
The most common reason why affiliate programs either fail or don't hit their potential is because there's not enough time invested into running them. It really is a full time job. It should be given the attention it needs because you need to keep your affiliates active. The only way you're going to do that is by communicating with them regularly, providing them with new content, and new creative assets for new products that are coming out.
The bottom line is if you're not communicating with your affiliates multiple times a month, they're going to go to another program that will treat them like a part of their team.
affiliate marketing is relationship oriented. It's not like social media where you just flip a switch to start your ads and things happen on their own. affiliate marketing involves a lot of manual steps where you have to go and find the affiliate, bring them in, set them up, and then get them what they need and continue to nurture that relationship.
There's not a lot of education out there showing brands how to run an affiliate program successfully and what they need to do. People think that you just get affiliates in a program, you give them the links, and they're gonna just go off and do what they got to do.
It's really not that simple because the affiliates expect you to communicate with them. They expect you to find out what they need and get them updated promos.
How do you bring in and manage new affiliates?
The most difficult part of growing an affiliate program is recruiting new affiliates. You have to sell your brand to someone so well that they’re willing to come in and promote it.
To find them, you have to have a plan. You can't just go out there and say, I'm gonna just go find super affiliates each month, you need to
Step one: Narrow it down into niches.
For example, my eCommerce store sells high-end fire pits for inside or outside and we had to consider what type of affiliate we wanted. Content wise, I knew I wanted to have backyard outdoor type of content sites so I went out and found a list of websites that fall into the category of “outdoors”.
Step two: Document all the potential websites
Write down the names of these websites and contact email addresses if you can find them.
Google search is your friend for finding blogs and YouTube is going to provide you with people who create videos reviewing products.
It's time consuming, but there are a lot of quality people out there that are willing to promote on an affiliate basis
Step three: Craft a message
Explain to them what you want them to do as an affiliate. Tell them what's in it for them, the compensation they’ll receive, what you expect from the relationship in terms of posts on social media and their website, ect. If there's a sample available, you can provide samples.
Make the messaging as personal as possible to avoid making it sound like a pitch template.
Step four: Follow up
It sounds simple, but it’s not. Chances are you're going to have to follow up with these people multiple times. They get bombarded with multiple affiliate offers and yours is just in that pile.
Stand out, be different. Remember, you don’t have to contact everyone all at once. Space it out over a few months until you find your sweet spot.
Continuing communication to strengthen your relationship with affiliates
Send out newsletters and outreach emails to your affiliates. Make sure that they understand that you're there to help them and you're there to make sure that if they need anything. You'll be there to help them or you'll find someone within the company that will be able to help them.
The last thing you need is to have a bunch of affiliates in the program and none of them are active or promoting your brand because you never paid attention to them.
Why should you do affiliate marketing?
Affiliate marketing allows you to reach out to the people you want to promote your brand and they only get paid when you get paid. Setting it up costs a little bit of money, but you can do it relatively inexpensively. If you do it right, you're only paying for when sales happen versus social media and paid search where you're paying thousands of dollars a month (and you potentially won’t get anything out of it.)
Affiliates also have a unique set of people following them in their audience, so you're going to have access to a broad spectrum of new customers. They may not know about your brand now, but with the affiliates doing their job through promotion, it can not only generate sales, but brand awareness.
When people start searching for products similar to yours, you're going to pop up in the search results because of those affiliates. You're getting access to people that you probably wouldn't have had access to in terms of potential customers through your affiliates.
What can you do to ensure that they have a successful affiliate program?
Hiring someone to do it for you. There are companies out there that do manage affiliate programs for brands. They come in, set up the program and manage the day to day so that you can be hands off. All that you’ll need to do is consult on the creative and strategy.
Companies that do that everyday know how to recruit new affiliates, activate them, communicate with them, make sure that they're compliant and strategize to make the program grow. That may not be in the budget for brands starting out because it can be a little expensive, depending on the company that you go with—the minimum is probably $1,000 a month plus a performance bonus.
But it is something to consider down the road as you grow and bring in a professional team to do it for you. Doing it yourself is never a bad thing. It's just a matter of making sure that you bring in the right partners and right affiliates and monitor them and make sure that they have everything they need.
If you’re doing it in-house, go for quality over quantity when you're first getting started. If you have people that you are already working with, like a YouTuber, consider moving them into an affiliate platform instead.
That way, they have their custom links, the tracking will always be perfect, and you don't have to rely on the customer to use the coupon code, because they don't always do that.
It will be much easier for you to manage those existing relationships that you already have, because of the unique links and the dashboard. The whole process will be so much easier.
Is there a benchmark you should hit before you outsource to an affiliate marketing agency?
Brands that are just starting out probably should not invest in professional management right away. I would rather you use that money to grow the program.
Take that $1,000 a month and invest it into more influencers and more affiliates that are going to drive content. As you start to see consistent sales every month, and you keep growing to a point where it has the potential to get out of control, then you should consider hiring an agency.
What I've seen with the brands that are just starting out who hire an agency to run their affiliate program is that they give up on it too quickly because it gets too expensive. They stop doing it and then they get the whole perception that affiliate marketing doesn't work.
The reality is they weren't quite ready for that step. You have to have a proven concept that you can generate consistent sales. Then when you have enough money to cover the cost of an outside agency.
Prove that the program works and then hire someone to support you to scale it and make it better, which is kind of how you should all just run your eCommerce businesses in general—prove everything first and then take that next step.
What’s your biggest affiliate marketing “failure”?
With certain brands I like to do contests with affiliates. For example, whoever gets the most sales in a month will get a bonus of $100. But the way I ran them initially didn’t work. No one was engaged. No one was doing anything.
The problem was that there was nothing there for them to shoot for. The people that generated a lot of the sales were still at the top of the board and the smaller affiliates had no shot at it. I was handicapping them from the beginning without even realizing.
The one size fits all thing didn't work out so I had to figure out ways to split it up into like the higher performing affiliates versus the smaller affiliates. I wasn't taking into consideration that not everyone is equal.
Instead of competing against each other, you could run it in a way where they’re actually competIng against themselves. For example, if you increase your sales from five a month to eight, we'll reward you in a particular way.
What was your biggest affiliate marketing success?
Back in 2013/2014 I met an affiliate who claimed that he got his promotions go viral.
At the time, I was like, whatever guy, sure. But I asked him if he would be interested in testing it out with a couple of the brands I was working with.
We gave him a code to use for this cookie brand just to see what he could do and in one month, he did like $60,000 in sales by himself. He counted for probably almost half the revenue.
Sometimes when people say they make stuff go viral, they're actually not lying.
He does it on Reddit, which is such an untapped platform. But before you go jumping straight into Reddit, you have to remember: you are either a Redditor, or you're not. People can sniff out a promotion in two seconds and they will just destroy you if they don’t think you are genuine.
Don't judge the affiliate by their cover
Some affiliates may not look like a match or they may seem like they're not going to be a fit for your product. Just try it because you never know what could happen.
The worst thing that can happen is they drive no sales, and it costs you no money. So it doesn't even matter.
The thing to remember about influencers and affiliates is that this is their job. They put a lot of time, energy and effort into doing this. Don't discount what it takes for them to create these kinds of results. They're worth it and they are helping you and your business.
What's the most important thing to remember when it comes to affiliate marketing?
We're in 2021. You need to have some sort of affiliate program in place, whether it be a referral program, an affiliate program, or an influencer program.
The cost of other marketing methods are going up. There's no reason why you can't set up an affiliate program and have it generate revenue. As it starts to grow, then you can start investing more money into it.
Do some research on affiliate marketing programs and strongly consider getting one set up. If you're going to do it, set it up before Q4 because that's when a lot of these affiliates tend to stop looking for other brands to work with.
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