5 ways Startups can use Affiliate Marketing

This has never been more important, with ecommerce trends and online sales increasing to record levels in 2021. The impact of the Covid-19 pandemic was seismic across all industries but did provide a boom to online sales and accelerated the trend of consumers using online channels instead of bricks and mortar stores.

Lockdowns and other restrictions provided an opportunity to established online retainers and new startups alike. People of all ages and backgrounds turned to the internet to make purchases and these behaviours have continued since the economies have opened back up.

For startups who have no online presence or are trying to establish themselves online, it can be difficult for customers to find you. This is why digital marketing strategies are important. The number of marketing options and channels out there can be overwhelming, and amongst the options available to startups is affiliate marketing.

But what is affiliate marketing and how exactly do you do affiliate marketing?

Continue reading below for some tips on how to leverage affiliate networks to grow your online revenues.

How to do affiliate marketing

How to do affiliate marketing

Before we can talk about how to utilise it, we need to know what affiliate marketing is.

Affiliate marketing is an advertising strategy where a company pays compensation to a third party in return for them generating interest in (or sales of) their products and services. The third party is known as an affiliate.

The compensation fee paid to the affiliate can be a powerful incentive for them to find new and interesting ways of promoting a startup.

Affiliates may be rewarded in different ways, usually, it’s following a sale, but it can also include generating traffic to a website or platform, or even for clicks on a particular link.

Understanding affiliate marketing

The digital transformation of the economy has forever changed consumer behaviour and the ways in which businesses connect with their market. Affiliate marketing though has been around for a long time. Amazon in particular has been using an affiliate strategy for a long time. Product review websites and bloggers put links to Amazon product pages in their content. They then receive a fee if a reader buys the product through this link.

It sounds simple but by doing this Amazon is able to outsource its selling to a vast network, accessing a much larger audience than otherwise would be available.

Affiliate marketing strategies have been around as long as the internet has, but with the increase in the use of digital marketing, analytics and cookies, this type of marketing has become a huge industry.

Digital Marketing: This is the use of the internet to reach an audience of consumers using social media, search engines and mobile apps. Digital marketing, as opposed to traditional marketing, involves understanding the online behaviours and trends of internet users.

Analytics: Analytics is the process of discovering and understanding the patterns in an underlying data set. Through the internet and computer networks, obtaining huge sets of raw data is relatively simple now. These data sets can be processed in order to provide insights that can be used to inform business plans and marketing strategies.

Cookies: These are essential to the modern internet. They are small text files containing a small amount of data. Consisting of a unique ID, they allow websites to remember you, your logins, shopping carts and much more. This makes browsing the internet a more personalised and rewarding experience.

In terms of affiliate marketing, these elements allow businesses to perform tracking on specific links and clicks and make automatic payments to affiliates after a successful click-through and purchase.

Types of affiliate marketing

1. Unattached affiliate marketing

This particular advertising model uses affiliates that have no specific interest in or connection to, the product or service being promoted. The affiliate will also have no claim or perception of skill, no expertise and not be an authority in the use of the product or service. It is the most uninvolved variety of affiliate marketing. The lack of attachment between the product and the customer prevents the affiliate from making specific recommendations or claims about it.

2. Related affiliate marketing

Unlike unattached affiliate marketing, related affiliate marketing involves the promotion of products and services by an affiliate who does have some type of relationship with it. Typically, this relationship will be in the form of an affiliate that has some type of expertise or experience related to the product or service. The affiliate ‘expert’ will try to influence the audience and generate traffic towards a product/service. Their perceived authority in this area allows them to be a trusted source of information, but they make no claims about the use of the product/service.

3. Involved affiliate marketing

This type of marketing is performed through a stronger relationship between the affiliate and a particular product/service that’s being promoted. For example, involved affiliate marketing might mean the affiliate owns or uses the product/service and believes their experience will be shared by other people. Their personal ‘experience’ of the offering is the advertisement and they are a trusted source of information to their audience. In this type of affiliate marketing, they are essentially making personal recommendations and their reputation could be damaged if problems arise because of this.

Affiliates of all types generate income from these marketing practices. The actual income varies enormously, from a few hundreds of pounds up to hundreds of thousands (and even more in some instances). It all depends on the reach of the affiliate and how effective they are at communicating to their audience.

So how can startups best use affiliate marketing in order to be successful?

5 ways startups can use affiliate marketing

1. Set specific goals

For any type of business strategy, it’s important to have goals in mind. This is still true of any affiliate marketing strategy your startup might embark on. If you don’t clearly define your desired outcomes, your strategy won’t be effective and may end up being a drain on resources, instead of a powerful driver of sales.

The goals of your affiliate strategy should be specific. For example, how much revenue are you wanting your affiliates to create? How many new customers do you want them to generate?

Because your goals are specific, they are also measurable. Meeting regularly to discuss progress is a great way to keep the strategy updated and on track. There’s no point in having specific goals if you’re never going to check and measure progress.

It goes without saying, but any good strategy should be achievable with the resources you have. It’s great to aim for the stars, but don’t set yourself up to fail! With these factors in mind, consider whether your affiliate marketing strategy goals are realistic. If not, you may have to start again.

Ensure your goals are time limited, allowing you to review and update your strategy to make sure it’s always moving in the right direction.

2. Get the commission right

The commission that your startup will pay its affiliates is the central pillar of the whole affiliate strategy. Setting the right rate is a balancing act between attracting and incentivising affiliates, and it being affordable for the startup to continue paying out.

Setting the rate too low will make affiliate recruitment difficult, or you may attract only low quality or inappropriate affiliates. If your rate is set too high, it might become unaffordable in a short space of time, eating into profits and resources needed elsewhere.

There are some questions to ask yourself that’ll help:

How will your commission be paid?
Cash is the default option but depending on the circumstances of your startup there may be other options that affiliates will consider.

What is your average customer lifetime value?
(CLTV). Knowing the average lifetime value of a customer gives you an upper limit to your commission rate. If you set your rate above this, you’ll lose money, if you match it, you’ll break even. In practice, you want your commission rate well below the average CLTV of your startup.

What are other people doing?
Check out your competitor's rates. If you’re below them, affiliates may gravitate towards them.

Do you want to incentivise affiliates by offering bonuses?
If you do, decide how much will this be and what the criteria for achieving the bonus will be.

3. Define how affiliates get paid

As mentioned already, usually affiliate marketing is focused on generating sales. However, there are nuances to this and it’s important you pick the right model to support your startup.

Startup affiliate marketing strategies can be designed to pay out when a sale is completed by a customer clicking through a particular link.

Depending on the nature of your startup and the products and services you offer, you may want to consider other options. Such as:

• Paying the affiliate if the product isn’t returned.

• Paying the affiliate if the service isn’t cancelled.

By doing this, you can make sure that the sale is final and you’re getting a return on the investment paid out to the affiliate. Otherwise, your commission is a straight loss to your business should you have a return/cancellation.

If your startup has a longer sales cycle, it may be more effective to pay affiliates based on generating leads as well as sales. Staggering commissions like this may keep affiliates motivated and incentivised, not just to pursue leads, but also to close a sale on your behalf. A ‘lead’ can be defined by you in any affiliate strategy agreement. For example, in order to receive a commission, you would need a lead to click through an affiliate link and then provide contact details and other such information.

One area of affiliate commission to stay clear of is commission fees for clicks or impressions. These would leave your startup susceptible to fraud and are difficult to manage effectively.

4. Find your affiliates

Once your program strategy is in place, the next step is to find affiliates. These might be achievable through an existing network of contacts or you may have to make new connections.

There are existing affiliate networks which are essentially platforms that act as middlemen between businesses and affiliates. A business puts its affiliate marketing program on the platform, and members of the network sign up to it. The affiliate network acts as both marketplace and manager for both parties.

The benefit of using an existing network would be to save time and resources. These platforms also have the digital infrastructure in place to manage the affiliate marketing program, tracking the analytics and providing sales data to the business through a dashboard.

However, this comes at a cost. The cost will be in addition to any commission you pay the affiliates on the program.

If your startup wants to find and manage its own affiliates, it can do. But it needs to be managed well. If you don’t already know who your target affiliates might be, it might be time consuming to go out and find them, and there’s no guarantee they will then sign up with you. Your startup will also have to have a software solution in place to monitor the program and provide commission payments to your affiliates when they have earned one. There will be little point in attracting affiliate marketers if you can’t track their impact, and if they aren’t rewarded accurately, they may well leave for a competitor.

5. Keep track of progress

Once the affiliate marketing strategy is up and running, there has to be a way of monitoring and supporting it. Affiliate marketing isn’t something that can be set up and then forgotten about. Although if you do it right hopefully the required input will be minimal.

The monitoring can be done either through signing up with an existing affiliate network or through any software solution you build and integrate yourselves.

As part of the strategy, your startup should at least be monitoring:

• Which affiliates bring in the most sales/leads.

• Which affiliates bring in the least sales/leads.

• How the strategy is performing against its measurable goals.

Depending on the outcome of these questions, your startup can react and adjust. Making tweaks to the strategy in order to make it more effective and efficient.

For example, there’s no point limping along with a lineup of affiliates that are weak and a commission structure that’s not generating the revenue growth you were aiming for.

In summary

This blog has covered how your startup can do affiliate marketing. By outlining how affiliate marketing works and how best to structure a strategy, you should now have an understanding of what elements are most important and best support an effective affiliate programme.

From here your startup’s next step is to devise your own marketing strategy and look at what your competitors are doing. By using this guide, you should have the confidence to move forward with a well defined and thought out plan. Giving your startup the best chance of success.

When embarking on any growth programme, it can be useful to seek professional guidance. Which is where we can help.

Hi, we’re Accountancy Cloud

We’re here to help startups and businesses like yours get their finances right. We offer market leading accountancy and finance services, allowing ambitious business leaders and founders to free up time and resources. We partner with you on your growth journey, and by doing so we identify the areas of your operation that we can best complement.

The experienced and dedicated finance professionals on our team provide the online accounting, CFO and R&D Tax support you need to understand current (and future) market challenges and make timely strategic decisions.

Through our motivated and personalised service, we can help you achieve all of your business goals. Talk to us today to see how we can help you.