Opinions expressed by Entrepreneur contributors are their own.
Amazon.com has become one of the most pervasive brands on theNet, due in part to its savvy use of affiliate, or associate,programs (also known as revenue-sharing programs). By usingreferral fees, Amazon.com has created an extended network ofassociates who promote, review and sell merchandise through linksto Amazon.com's Web site.
But you don't have to be a big guy like Amazon.com to copythis tactic in your own e-commerce endeavors. Brad Waller, PeterOlpe and Edward Arenberg, owners of EPage, a classified advertisingservice that lets people place ads for free, started theiraffiliate program a few months before Amazon.com did. Called theClassified Service Provider (CSP) program, the affiliate programhas grown from 150 affiliate sites in 1996 to more than 15,000today. Roughly 50 percent of the Redondo Beach, California,company's sales now come from its affiliates.
Waller travels nationwide to lead workshops on Web-basedaffiliate marketing. What prompts entrepreneurs to give up part oftheir profits to affiliates? "It's not just the increasedsales, or the fact that you have thousands of salespeople for yourproduct or service," says Waller. "You also get farbetter search engine rankings [because of the additional] linksback 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-tieredprogram, affiliates who attract more affiliates get a percentage ofsales from the tier below them. "The danger is that all theaffiliates will be trying to get more affiliates, and none will bemaking sales," warns Waller.
- Make sure you have enough staff. You'll needaccounting expertise to track commissions, customer servicepersonnel to handle technical support and staff to manage theprogram.
- Offer a compelling commission structure. Wallerrecommends starting with half the net profit you make from eachproduct "Think of affiliate sales as sales you would otherwisenever have seen," he says, "so even [earning] half yourprofit is better than no sale at all."
- Decide if you'll offer a high initial payment orsteady lifetime earnings. Some programs offer a highcommission at first, but over time the percentage drops. Othersoffer a relatively low commission but a steady percentage for theduration of the relationship. "[High] early payments getaffiliates interested," Waller says, "but [steady]lifetime payments make them feel like they're part of theprocess, not just circus barkers pulling in customers for aone-time shot."
- Set a minimum amount for payouts. Make sureit's low enough for affiliates to achieve, but high enough soyou don't have to send out hundreds of checks for 50 centseach.
Shannon Kinnard (shannon@ideastation.com) ispresident of Idea Station, an e-mail marketing agency in Atlanta,and author of Marketing With E-Mail (Maximum Press, $24.95,800-989-6733).
