Affiliate systems could be lower cost than advertising
Providing an affiliate system to your customers and visitors is an ideal way to increase your traffic and sales. At dm³ we have extensive experience in implementing and running affiliate systems.
Types of affiliate systems
There are several business models, such as direct, broker and multi-level.
Direct: This is the simplest. Members join your affiliate system and you pay them a percentage of each sale they generate.
Broker: You provide a direct payment and offer a percentage of sales generated by new members referred by the original member. For example, 20% of all direct sales + 10% from all sales from people referred. This has the advantage that people will promote your product and affiliate system.
Mutli-level: The same as the broker model but continues through a number of levels. Too many levels results in low payments per order so a balance has to be found. Mutli-level is best suited for members who are “experts” at web based marketing.
Return for your members
Which model you choose also depends on your own sales conversion rates. As a general rule if you can provide £0.20 or $0.30 per click you will have a very successful affiliate business. At these rates you can attract people who will make their full time job promoting your business. However, if you provide less, your affiliate business will not work and you need to look at sales boosting before you consider an affiliate system.
Working out your affiliate member’s earnings per click is done as follows:
- Work out your own sales conversion rates from quality traffic sources such as link swaps, social networks and search engines. For example, you may convert 2% of your visitors into paying customers. Exclude low quality sources or traffic that is “forced” to your site.
- Work out your average order value. For example, £10.
- Decide what percentage you are willing to give to your affiliate members, for example, 20%.
Enter these values into our calculator to determine if an affiliate system is viable.
If your affiliates’ effective earnings per click is too low then you will need to reconsider your position, can you afford to increase the commission level? Can you increase your sales conversion rate? Can you increase your average order value? If you’re offering low earnings potential your affiliates will leave for another system or place Google adverts which can pay variable amounts from £0.10 to £2.00 per click.
Affiliate members can also be very paranoid when joining a program so you have to provide high quality reporting tools. They expect to see reports showing the number of visitors they have sent, the order value, their commission. Never hide anything from your affiliates. If they are not earning money then its’ your responsibility to make the changes to ensure they do. You have to have a working business to be successful.
Cash out options
Affiliates expect prompt payment. Large companies may consider automatic bank transfers, where as small companies should pay members via Paypal or similar online payment gateways. It’s typical to pay members when they reach a predetermined threshold.
Offering an affiliate system also increases your exposure to fraud. Hackers use affiliate systems to process orders with stolen credit card details to increase their balance in the hope that you will make a payment to them. For example, if they order a £1,000 product and you pay them 20% it’s a very quick way for them to launder £200. Payment clearing delays, effective earnings per click and many more variables need to be monitored to prevent losses. At dm³ we have over 10 years experience of fraud prevention.
Educating your affiliates is critical to your success. You will need to provide both marketing material and advice. Such as, how to generate traffic and sales both online and offline. Printed collateral such business cards with custom offer codes. Web banners that are attractive and generate high click rates. White label systems allowing your affiliates to replicate your business.
We can integrate an affiliate system in to your current e-commerce solution and provide all the reporting structure. In addition we can advise you on the training tools that will need to be provided. Contact us to discuss your own requirements in more detail.