For many companies, finding new and cost-effective ways to market their products and services is a must. Effective marketing helps keep the sales funnel full of prospects. However, traditional advertising channels (such as TV, print, and radio ads) have lost their cost-to-performance ratio.
According to data from Linchpin SEO, the average cost of a lead from “traditional advertising” channels is about $619 ($38 on the low end; $1,200 on the high end). Fit Small Business states that the average cost of a 30-second commercial spot on a national TV network is about $115,000—not including production costs.
To improve their Cost Per Lead (CPL)—and ultimately, their Client Acquisition Cost (CAC)—many businesses have turned to alternative marketing strategies such as creating affiliate programs. What are affiliate programs? More importantly, how can you create an affiliate program that will drive success while minimizing the risk and impact of fraud?
An affiliate marketing program is a tool used by businesses to generate awareness. In this program, businesses pay affiliates to promote the company’s products or services to the affiliate’s peers or audience.
Successful affiliates are paid according to one of several revenue models, such as:
Different affiliate programs will use different revenue models. Some companies may shift affiliate revenue models as needed to meet different goals over time, as well.
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So, how can you make an affiliate program that will drive results for your business? There are a lot of things to do and to consider when making an affiliate marketing program, such as:
If you haven’t set up an ecommerce storefront and website already, then you’ll have to do so before trying to launch an affiliate program. Your website and ecommerce platform will be critical pieces in your affiliate program—letting you track customer interactions and check which affiliate they came from.
Prior to setting up your own affiliate program, take some time to check out what your competitors are doing to advertise their products and services. Some things to check include:
By looking for mentions of the competitor on third-party sites or social media platforms, you may be able to identify (and then reach out to) the competitor’s affiliates to ask these questions.
If you’re planning to have affiliates endorse your products, it’s important to review the Federal Trade Commission’s (FTC’s) Guides Concerning Use of Endorsements and Testimonials in Advertising.
Some of the key points of the FTC’s rules regarding endorsements include:
It’s important to review these rules (and explain them to your affiliates) when running an affiliate marketing campaign to avoid potential liabilities.
There are a lot of different revenue models that companies can choose from when setting up an affiliate campaign. However, there are pros and cons to each of these revenue models. Some common considerations when choosing a revenue model include:
For example, CPM is considered a poor choice of revenue model for affiliate programs. While attractive to affiliates, it’s all too prone to fraud. As noted by Crazy Egg, “Just because a brand got 100,000 impressions and 10,000 clicks from their affiliate campaign, it does not mean that the affiliate is productive.”
Fraudsters can use bots to generate impressions and clicks rather easily—then charge you for them even though they aren’t generating any real results. So, CPM and CPC revenue models aren’t generally used for affiliate marketing campaigns because of their fraud vulnerability.
Learn More about Affiliate Marketing and Click Fraud: Download The Rise of Affiliate Marketing Fraud!
On the other end of the spectrum, revenue-sharing CPS models are picking up in popularity. While it’s harder to attract large numbers of affiliates since there’s more work involved in generating an actual sale versus just getting a lead, impression, or click, CPS campaigns can attract high-quality affiliates who generate real results.
This does often require more work on your end, too since you need to track sales back to specific affiliates. If your commissions are percentage-based, then you will need to calculate the total value of all the sales an affiliate generates to reward them appropriately. Some companies use revenue sharing models that only pay for the first transaction, while others pay a portion of every transaction to the affiliate.
Affiliate fraud can be an enormous drain on your affiliate marketing campaigns. Based on past Anura customer data, the rate of affiliate fraud in any given campaign can vary between 25% and 40% on average.
In other words, for every million dollars you spend on affiliate marketing, you can expect to lose between $250k and $400k to fraud.
Finding ways to fight fraud in your affiliate campaigns can be a great way to reduce advertising costs and improve affiliate campaign ROI.
Aside from using an affiliate revenue model that is more difficult to defraud, one of the best ways to fight affiliate fraud is to use an ad fraud solution. A software-based fraud detection tool can help you identify affiliate fraud in real time so you don’t end up paying fraudsters for fake leads.
What are some current affiliate marketing programs that you could use as inspiration for your own affiliate program? Here are a couple of examples of top-ranked affiliate programs that you can learn from:
Amazon is one of the largest retailers on the market today. Their Amazon Associates program is a part of that success. Under the program, affiliates (called “associates” by Amazon) can sign up to receive customized linking tools to promote various products on Amazon. Then, Amazon pays associates “up to 10% in associate commissions from qualifying purchases and programs.”
It’s a relatively simple revenue sharing model that makes it easy for affiliates to join and earn money. Also, because Amazon sells so many different products, it’s easy to attract a broad range of affiliates with different interests and expertise. This contributes to Amazon Associates being one of the largest affiliate networks in existence.
Instead of building an affiliate network internally, ShareASale gives companies a chance to access an existing affiliate network. There are many preexisting affiliate networks like this that offer companies an easy way to launch an affiliate marketing program without having to make extensive (and expensive) technology investments.
Using a service like this to access publishers can help save time and money on affiliate campaign setup. However, it may mean surrendering some control over the campaign—particularly of ad measurement data that may be needed to spot fraud or measure campaign success.
Do you need help setting up a fraud-proof affiliate marketing campaign? Reach out to Anura today to get started!
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