No Chain, No Gain
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Amazon.com has become one of the most pervasive brands on the Net, due in part to its savvy use of affiliate, or associate, programs (also known as revenue-sharing programs). By using referral fees, Amazon.com has created an extended network of associates who promote, review and sell merchandise through links to Amazon.com's Web site.
But you don't have to be a big guy like Amazon.com to copy this tactic in your own e-commerce endeavors. Brad Waller, Peter Olpe and Edward Arenberg, owners of EPage, a classified advertising service that lets people place ads for free, started their affiliate program a few months before Amazon.com did. Called the Classified Service Provider (CSP) program, the affiliate program has grown from 150 affiliate sites in 1996 to more than 15,000 today. Roughly 50 percent of the Redondo Beach, California, company's sales now come from its affiliates.
Waller travels nationwide to lead workshops on Web-based affiliate marketing. What prompts entrepreneurs to give up part of their profits to affiliates? "It's not just the increased sales, or the fact that you have thousands of salespeople for your product or service," says Waller. "You also get far better search engine rankings [because of the additional] links back to your site and affiliates promoting your program."
Tips to keep in mind as you implement an affiliate program:
- Use a one-tiered program. In a two-tiered program, affiliates who attract more affiliates get a percentage of sales from the tier below them. "The danger is that all the affiliates will be trying to get more affiliates, and none will be making sales," warns Waller.
- Make sure you have enough staff. You'll need accounting expertise to track commissions, customer service personnel to handle technical support and staff to manage the program.
- Offer a compelling commission structure. Waller recommends starting with half the net profit you make from each product "Think of affiliate sales as sales you would otherwise never have seen," he says, "so even [earning] half your profit is better than no sale at all."
- Decide if you'll offer a high initial payment or steady lifetime earnings. Some programs offer a high commission at first, but over time the percentage drops. Others offer a relatively low commission but a steady percentage for the duration of the relationship. "[High] early payments get affiliates interested," Waller says, "but [steady] lifetime payments make them feel like they're part of the process, not just circus barkers pulling in customers for a one-time shot."
- Set a minimum amount for payouts. Make sure it's low enough for affiliates to achieve, but high enough so you don't have to send out hundreds of checks for 50 cents each.
Shannon Kinnard (email@example.com) is president of Idea Station, an e-mail marketing agency in Atlanta, and author of Marketing With E-Mail (Maximum Press, $24.95, 800-989-6733).