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The Price of an Affiliate Program

  |  August 18, 2000   |  Comments

We often hear about the benefits of an affiliate program: excellent return on investment, branding, etc., but the costs that go against these benefits have not been as well chronicled. To figure the price of success, you've got to factor in the start-up costs, monthly costs, marketing, and staffing. One vital question is whether to create the program in-house or outsource to a solutions provider. Shawn gives you start-up and monthly costs for the Big Three solutions providers: Be Free, Commission Junction, and LinkShare.

We often hear about the benefits of an affiliate program excellent return on investment, branding, etc., but the costs that go against these benefits have not been as well chronicled. In order to figure the price of success, you've got to factor in the start-up costs, monthly costs, marketing, and staffing.

Start-Up Affiliate Matrix

You've got a vital decision to make before starting up an affiliate program and that is whether you will be creating the program in-house or outsourcing to a solution provider. While there are success stories that have gone the in-house route (e.g., Amazon, E-Commerce Exchange, One and Only Network), it's generally more practical and realistic to outsource to a solutions provider (unless, of course, your IT group has tons of free time!).

When it comes to solutions providers, the talk is generally of the Big Three: Be Free, Commission Junction, and LinkShare. There are a number of other excellent vendors out there, but for our purposes, I'll keep it to the Big Three. The start-up and monthly costs, as well as services rendered, vary, and I would encourage due diligence before jumping into bed with any of the Big Three.

At last check, Be Free charges $5,000 to start, and 2 to 3 percent of gross sales. It also offers a variety of affiliate recruitment and management services at additional costs. Similarly, LinkShare's start-up fees run $5,000, and commission charges are 2 to 3 percent of gross revenues, as well as a $1,000 license renewal fee. Start-up fees are $795 at Commission Junction with commissions at 20 percent of the affiliate earnings and a $595 renewal fee.

The Invisible Affiliate Program

If an affiliate program was launched, but nobody ever heard about it, could it succeed? Not likely. It's imperative that you create an awareness of your program in order to attract affiliates. The first step is to get listed in the affiliate program directories.

There are two tactics to achieve listings in the directories. You could submit your listing manually to the top 40 or so directories, or you could pay $79 to a service like Affiliate Announce and have your listings submitted for you. Don't be penny wise and pound foolish because time to market is important, so let somebody else do the rote tasks.

Speaking of the directories, if you are going to make a media buy for your program, the affiliate program directories are the logical place to go. As Al Ries and Jack Trout stated in The 22 Immutable Laws of Marketing, "It's better to be first in the mind than to be first in the marketplace." That said, it's a good idea to price out the cost of banners in your category on the directories.

The best bet for reaching a large audience of affiliates is to inquire about ad prices on 2-Tier, AssociatePrograms.com, Associate-it, CashPile, Refer-it, and ReveNews. The rates vary wildly for ad size and placement across the directories, so it's best to touch base on your own to inquire about costs. Many of the directories also offer email advertising in their newsletters and email blast announcements.

On the low-cost end, there are many guerrilla tactics that can benefit your program. Web Cards are full-color postcards of web pages with prices starting at $95 for 500 postcards. The Web Cards can be used as an effective offline follow-up with prospective affiliates.

Minding Your Ps and Qs

The most important investment in your affiliate marketing budget is the cost for staffing the affiliate team. If you think that an existing employee can juggle the affiliate program, in addition to other duties, think again. You will need an affiliate team to manage a successful program.

According to the "New Affiliate Marketing Models" report from Forrester Research, 50 percent of merchants have two employees or more managing their respective affiliate programs. But who are these employees? My ClickZ colleague Joel Gehman explored the skill sets of affiliate marketing professionals in his column "What Does an Affiliate Manager Look Like?"

I'm mostly in agreement with Joel's description of the ideal affiliate manager, but I differ on his perspective that academic pedigree should be weighed significantly more than people skills. Without great communication and customer service, all you can really offer the affiliate is an occasional commission check and some buggy software. That doesn't cut it. From my experience, a good communicator succeeds more in affiliate marketing than a B-school prima donna.

As far as the price points for affiliate-marketer salaries, the United States Affiliate Manager Coalition recently surveyed affiliate marketing professionals regarding their annual incomes. The survey, based on 43 respondents, revealed that 7 percent of affiliate marketers are making less than $40K per year; 44 percent earn $40K to $59K per year; 30 percent earn $60K to $79K per year; and 19 percent earn $80K or more annually.

What is the price of a topnotch affiliate program? There's no black-and-white answer, but if you want to do it right, go with an affiliate solutions provider, a qualified affiliate team, and an open checkbook to pay as many commissions as possible. Remember, you get what you pay for!

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Shawn Collins

Shawn Collins is a Co-Founder of the Affiliate Summit conference, Co-Editor-in-Chief of FeedFront Magazine, and has been an affiliate marketer since 1997.

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