Affiliate Marketing 101 by Douglas Michael - HTML preview

AFFILIATE MARKETING 101

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Effective Affiliate Program

Management

Welcome to Effective Affiliate Program Management. I

wrote this for one reason, and one reason only, and

that's to show you how to maintain both your affiliate

system, the affiliates contained within it, the offers you

send them, and how to get the most out of al of the

above. Also, I"l be talking to you about what not do to

with them, why they're so important and some of the

reasons that affiliates and affiliate systems are often

underestimated or seen in a negative light from the

perspective of program owners looking solely at their

short to medium term profit.

One thing I wil say is that It"s important to acquire and

consume this knowledge at the earliest stage possible for

reasons we"l discuss shortly. Even it isn"t your top

priority at this particular moment, you"l be able to see

just how powerful affiliate marketing is and why you

should start planning before even launching your

products.

Setting the Scene - Displaying the Power

Lets take it from the top. First up, how do you define an

affiliate program, or affiliate system? A system in which

an owner or licensee of a product al ows people outside

of his or her own company to promote for them for a

percentage of the commissions.

Pretty much everyone online uses this resource to their

advantage, because lets face it, it's far easier for 100

people to sel 1000 units of a product than it is to have

one person sel a thousand units of a product. I'm sure

it's possible, but we don't have al the time in the world,

so affiliates are general y the answer, and should make

up a large amount of your business' revenue if you're

promoting your own products.

In case you're kind of underestimating the situation, don't

have any affiliate system in place, or haven't decided to

ful y utilize this type of system within your business, let

me put a scene to you to make this al crystal clear.

Here’s the situation;

You're a business owner, you've just launched your shiny

new site, which just happens to sel the same product as

Mr. X here. Both yours and Mr. X"s product is priced at

$500. The difference is you've built yourself up a

relatively modest 150 affiliates, and Mr. X is doing al the

promotion alone.

Now imagine you each make ten sales in the first month

through personal promotion. You both make $5000.

Great, but when your affiliates come in, it's easy to see

how this figure can double. Now of course not al of your

affiliates are going to be heavy hitters, great promoters or

even make any sales at al , ever. But lets say just 10% of

your affiliates, just 15 of them, make a measly three

sales each in that same month at 60% commissions,

which I'l set higher than average right now for a reason

I'l reveal in a moment.

Pul ing out my handy calculator, I can tel you that

through those three sales from a smal percentage of

your affiliates, you've just made an extra $9000, bringing

your total to $14000 for that month. You're laughing, and

poor Mr. X. He was one of the many marketers out there

that didn't take this type of affiliate marketing seriously, or

didn't see any real profit in it. Meanwhile, you've just

pocketed in a month what it takes most of my friends in

regular jobs to earn in four or five months, often longer.

Cool huh?

Why Don’t You Set It Up? - I Asked

Them.

So now you can see how important this is, never ever let

anyone tel you it's not worth spending the extra money

on the set up of an affiliate program, made even easier

nowadays by the plethora of software and solutions

available to you as an online business owner.

”So why not set one up? They"re more than doubling my

income”, I used to say to my less experienced contacts in

the online business world. Ask yours the same question if

you like and see what they say. The reasons they'l give

you when you ask why they hold their negative opinion

on this subject, more often than not wil be that in their

experience hardly any of their affiliates promote. Wel ,

they"re not wrong, it varies from business to business,

but many affiliates don't bother to promote, or sign up

meaning to and forget, or just don't have their resources

built to a point where they have the promotion power to

make the sales. This doesn't mean that you shouldn't stil

grab them at every opportunity, as you can see here from

just that smal example above, just 10% of affiliates

promoting, making a smal (very smal ) amount of sales

each can easily double, triple., quadruple your income

and sometimes even more. Looking at these figures

always gets me excited. Have you ever seen someone

making 40-50, 60 or 100 thousand dol ars a month and

wondered to yourself how the heck they pul that kind of

cash out of their products when you're struggling to hit

five or ten thousand a month? Wel let me tel you, this is

a very big part of it. Don't miss out, or you might find

yourself just getting by instead of extremely comfortable

where income is concerned.

The second reason you might be told that having

affiliates promote for you is a waste of time and effort on

your part, is that they're hard to find. It's another one of

those little niggly things, like the list craze going on al

around us. In general the more responsive your list, the

more cash you're going to make out of them now and in

the future. This is exactly the same. Don't ever let

anyone tel you that you're making a mistake putting a

successful affiliate program high on your list of priorities,

even over making direct sales.

So What Makes Your Situation Any

Different?

What we're going to look at now is what to do with your

affiliates to try and hit and exceed that ten percent

promotion rate. Once again, if you"re not sure about

getting the affiliates in the first place and maintaining

them doesn’t interest you right now, not to worry. The

moment you begin to build your list and launch products

al of this wil become relevant.

Continuing with management of affiliates, you might be

surprised to find out it's not al that complicated and

relates closely to other forms of resource gathering, from

lists, to customers, joint ventures and the like.

You’re Making Money, Not Losing It -

Dashing the Affiliate Doubts

We're going to jump ahead now, and start to build up a

picture of the ideal affiliate program, with a view to

getting your affiliates promoting. The rest of this report

contains some fundamentals, so keep reading along with

us even if you don't have a system set up yet, because it

wil provide solid knowledge base and assist you in

understanding what your software needs to be capable

of.

So where do we start with affiliate marketing? Wel , the

first and most important thing I want to get out of your

mind is that you're losing money, or the amount of money

you gain by putting in the extra time and effort to run an

affiliate program isn't worth it. I want to show you a few

more examples and sum it up with a couple of sentences

that should dash any doubts you have in your mind

about whether this is al worth it or not.

Let"s look at a different example this time, one where the

price and short term gains aren't quite so visible. Take a

membership site. Lets say you're running it at a modest

$15 per month. I could sit here and tel you that with 200

members that you referred yourself is $3000 per month.

Not bad. A handy little earner there. The problem comes

when you start talking about giving 60% commissions to

affiliates who promote for you. It doesn't seem like a

good deal at al . That leaves you with a rather tiny $6

profit per sale per month.

I think this is where the whole affiliate program is a bad

deal state of mind comes up a lot with the people I meet.

That looks like a massive cut in profits, but lets say again

that you have 150 affiliates, and this time, due to the

lower price, and it being slightly easier to get people to

part with their cash compared to a $500 product, 15 of

your affiliates refer 15 members each that just happen to

stay with you for a year. That's a minuscule $337.50

extra per week. Now some might see that as not worth it,

but let"s add that up. $1350 per month, or $16,200 per

year. Looks a little better now. I could buy myself a 64"

plasma screen with that, or 6 brand new top of the range

computers. What would you buy with an extra $16k a

year? Not a bad little earner for something that original y

took your profit per sale down to a hardly impressive $6.

So here's the thing, and this applies to al cases I can

think of. If it's viable to have an affiliate program, have

one, because lets face it; a sale by an affiliate that cuts

your profits on that sale by 60% isn't a 60% loss, it's a

40% gain on a sale that quite likely would not have been

made without that affiliate. The potential for this is huge,

but we're done with examples for now. If that didn't

persuade you that having a solid line of affiliates ready to

promote for you is as important, if not more important

than having your own list, nothing wil .

Look at it this way. With affiliate marketing you're kind of

adding to the resources you have on hand, and your

promotion power. As much as joint ventures and a big

hungry and responsive mailing list are great, they're

massively enhanced by a few hundred affiliates going for

you.

Ok, it's time to look at management of your affiliates

themselves, how to get them to promote in the most

profitable way possible depending on your product.

Not an Overnight Task

Doesn’t Mean It Can"t Be Fast

Ok, let"s get started. The first thing I want at the front of

your mind when going through this is affiliate sales and

affiliate building is not an overnight thing. I could lie to

you, but I won't. Affiliate building is like list building. The

more products you create and promote, the more

affiliates are likely to join you on the way. Like with list

building, the more joint ventures and promotions you get

sorted, the more people wil join your list on the way.

Understand that if this is your first day, and you don't

have any affiliates they wil only grow as fast as you

promote. Keep in mind though, that even five good new

affiliates wil put you wel on your way to earning a heck

of a lot more.

Your First Questions

In setting up your affiliate program, the first question

you'l likely have to ask yourself is how much do I award

to affiliates per sale and on how many levels? While

there are many factors to take into account, the answer

isn't real y al that complex. Always look at things from an

affiliates point of view. We've real y been spoiled by

commissions as of late, I've seen things up to 80%, and

even 100% for the first month quick start bonuses. This

is why it's important that your first level is at least 40%.

Remember that's not a 60% loss, it's a 40% gain from a

sale you may never have made. If there"s one thing I"d

like you to keep in mind at this point, it"s that when

getting started, affiliate promotion is more about resource

building for future promotion than making immediate

profit, something the big earners realized early on. Sure

you"d give away 80-100% if it meant you"d have a list of

several thousand to promote to as a result of the

increased affiliate activity. Don’t think in two dimensions, or

you"l see your highly contested for affiliates go

elsewhere for higher commissions.

Next up comes level two. It's real y important to have a

level two commission going, because this wil give al the

first level referrers a passive income (cliché, I know)

once they've exhausted their first level promotion. I know

some people who won't even promote products unless

they have a second level commission there (very big tip,

don"t forget this widespread factor), or the first level

commission is particularly high. So a second level is a

must, unless you have a very high ticket product to start

with. Use your discretion, and remember to test whilst

your selecting your levels and whilst your affiliates

promote for you.

Now I understand that there may be circumstances

where 40% commissions or a second level commission

may not be possible. For example, if the products that

you're creating are tangible, or have a high production

cost, but stil go ahead and create yourself an affiliate

program, whether it's five or ten percent. It won't get you

as much interest as a high commission program, but you

real y don't have much choice when paying a 40%

commission rate would put you at a loss every sale.

Taking into Account the Price of Your

Products

The next thing you'l want to look at when trying to set

your affiliate commissions is the price of your product

itself, and its structure. It's far easier to get people to

promote for you in four situations.

1. Where you have a high price

2. When your commissions are higher

3. When you have a second level

4. Where the commission is re-occurring over time

If your affiliate program doesn’t meet at least one of

those requirements, we have a problem on our hands.

The more of these four points it meets, the stronger is

your position both for attracting affiliates and keeping

them promoting.

Analyze Your Offer Objectively

I've had people ask me why they're having trouble

getting affiliates to promote for them, and more often than

not, they're trying to get people to promote a one off sale

$10 product, or something similar. Now if that's not re-

occurring, and has no fol ow-up product, then what good

is a $5 one off commission for the promoter? Not a lot.

Of course I'm not saying you wouldn't get any affiliates in

this situation, but it may be harder than you expect to

attract. The competition for joint ventures, lists, and

affiliates right now is as harsh and as cut throat as the

competition for actual sales of products.

So before you actual y decide to shel out on some sort

of affiliate software, make sure that you don't offer

commissions that are too low, non-reoccurring, or don't

have a second level.

Put yourself in the affiliates’ shoes. Remember, they don"t

care about your profits. They care about theirs.

If you were them, would you promote your product?

Would it be profitable for you? Would it even be worth

your time? These are the things to think about when not

only setting commissions, but deciding whether or not it's

even worth having an affiliate program up there for

people to take advantage of in the first place. If you can't

answer those two questions with a confident 'yes' then

your setup probably needs to be changed in some way

until you can, because it's likely others wil have the

same reaction as you, and your tracking and testing

results wil tel you the same.

If you don't have an affiliate system up and running

already, and have just skimmed through this so far, I

would suggest coming back and using this as a

reference when you do start thinking about setting one

up. It should be soon though, how about with your next

product?

A Short Quiz. How Well Do You

Analyze the Affiliate Profit Potential of

Your Products?

Time for a little break from the figures. Just in case you're

a little unclear about what I just said above, I want to hit

you with a few examples to demonstrate my point, and to

prove that you do actual y know how to analyze the

situation effectively and make changes to your

advantage. So here are some examples, and some

questions for you. You just learned how to do something

new. Here’s the proof.

Example one: A year or two back (This is a true story by

the way), someone I met through one of my sites tried to

strike a joint venture deal with me. It was a JV of the

simplest kind. He gives me higher commissions, and I

promote his product. Ignoring the quality of the product

right now and just concentrating on it's earning potential,

he had a $57 product, and offered me two dol ars per

sale, one off commission. It's probably quite obvious at

this point that I said no at the time, and for good reason.

Would you promote anything for $2 per sale on a one off

single level commission? There are far better deals out

there.

So what do you reckon he could have done to entice me

further, improving his offer at the same time? Try and

come up with a couple of ideas based on what we"ve just

talked about before reading on.

How about bringing the commissions up to an even 60%

for a start? It was a JV after al , so I'd expect higher than

average commissions. Even at 50%, I may have been

tempted to accept. Hey, it's a quick burst of cash, it was

possible I may have said yes. So how else could he have

enticed me? Remember back to the four points we

discussed a few minutes ago..

How about some commissions over two level? That

would have meant my one off promotion, while not

reoccurring isn't quite so one off anymore. If he wanted

to entice me further, he could have dropped the

commissions to maybe 45-50% and offer a monthly

recurring commission if the product al owed this.

Taking things a step further, what if the product he had

been sel ing for $57 was a low ticket item that fed

through to a high priced one off sale for $200-$2000 per

sale at 50% commission? I definitely would have gone

ahead then if the product was quality.

Do you see how bad design of a pay plan or product in

general can doom it failure from the start, unable to be

revived without some major overhauls to how the whole

sales system works? You may wonder why you"d change

the way your whole business works just to get me

promoting, but that"s not what it"s about. In general,

affiliates are after the same thing in a program they"re

going to promote, whether it"s me, or any of the other

thousands upon thousands of them out there.

Can you also see how through this last snippet of

information about bringing a low priced product through

to a high priced product, you can attract people who

wouldn’t normal y promote a $20-$50 product for

someone else? There"s plenty of people out there who

only promote for others if it"s a high ticket item. This is a

great way to carve your way through the competition and

start pul ing in the joint venture prospects that do just

that. Joint ventures are a whole new bal game however,

so we"l continue on now through affiliate management.

All About Adding Value

So you see, it's al about adding value, something that

many demote to just a product sales relevant technique,

however it is one of the biggest improvements you can

make to any of the resource building parts of your

business, be it affiliates, list building, JV"s, returning

customers, any of them.

Your product doesn't have to be the most expensive, or

offer the highest first level commissions in the world. It

doesn't even have to off reoccurring commissions either,

but it does have to be worthwhile for anyone to consider

promoting for you. And remember, it's about building

affiliates for the future rather than to make a shed load of

money in a few hours. If you have to give a little bit more

away short term to gain long term affiliates and contacts,

that's definitely one heck of a good deal. Don't think of it

as having to wait. Think of it as having the choice to earn

$100 extra a week for the rest of your life, or having to be

patient but earn $1000 and more extra per week for the

rest of your life for example. I know which one I'd

choose.

The General Rule

Here's a general rule to go by. It doesn't apply in al

cases, but in most. The better your product is, and the

more the affiliate earns over time, or the higher the

commission for the single sale product, the more

affiliates you wil attract, the more money you'l make.

This should give you a good insight into what to do with

your levels, reoccurring level, and overal percentage.

If in doubt, pul out that calculator and start working out

how much you and your affiliates wil earn with a select

number of sales over a period of time in a theoretical

situation. There's nothing wrong with doing this to get an

idea of the kind of figures you're likely to be seeing, but

I'l be honest with you, nothing beats testing, not to

mention playing with numbers is a heck of a good

motivator.

A Brief Glance at Innovations

One more thing we need to look at when we are dealing

with what kind of percentages to give your affiliates and

what levels to set these at. There are some innovative

ideas floating around out there about getting the most

out your affiliates with regards to commissions. Look at

quick start bonuses for example. How about offering

100% commissions for the first month, and then a

smal er percentage ongoing afterwards? Quick start

bonuses seem to be growing ever popular in the race to

have affiliates promoting your product. It's worth thinking

about what other types of ways, bonuses, and loyalty