Monday, 2 July 2012

What to Look for In a Good Affiliate Program

Affiliate marketing remains one of the most attractive and lucrative industry for many bloggers, SEMs and marketers out there. While the industry is still dominated by some of the bigger, more well-known players like Amazon and ClickBank, a rather large number of new merchants have also joined in. As an affiliate, there’s a lot to choose from, and choice and the ability to choose is always a good thing.

Here are a few things to consider before choosing an affiliate program:

1. Product

Extremely important to start off on the right foot, that is start with a product that you’re interested in marketing. In all likelihood, you will be spending a lot of time talking about the product and promoting it on online, therefore it is imperative that it is something that interests you and something that you feel passionate about.

Choose a product that appeals to a wide group of people out there, one that a lot of people will be interested in. Doing basic marketing research is essential and something that every smart affiliate marketer would do.

Using Google AdWords Keyword Tool would be a good place to start, as it would give you a good idea of which products get looked up most frequently, as well as the competition for those products. The winning formula would be choosing a product with a high search volume and low competition.

Above all, it should be a quality product, because much like your own self, people like quality and value, and if they think that their best shot at getting both these things is through you, they will not only give you the sale but become returning customers.

Key Takeaways: (a) choose a product that interests you, (b) ensure that there is a reasonable demand for it, (c) ensure that it is a quality product, and (d) ensure that it is a product that allows you to compete.

2. Merchant’s Online Presence

As the next step, it is recommended to have a look at how your merchant’s website looks like. Ideally, the website should be user-friendly, should explain the process of becoming an affiliate comprehensively and in easy terms, and perhaps above all, the products should be shown in the best way possible so that visitors know exactly what they’re buying.

Also check for ‘leaks’ – links out of the website, such as on the checkout page, that lead to non-commissionable website, and will hence not earn you any money or help you close down a sale.

Key Takeaways: It is always a good idea to stick with reputable and well-known affiliates.

3. Commission

This is, with a shadow of a doubt, one of the most important aspects for any affiliate marketer when choosing the merchant, and in all probability, the first thing that an affiliate will look at is the payout rate, aka. the commission. Often times, this is the deciding factor when choosing a merchant and people tend to go for merchants which have the highest payout rates. While this is not an advisable approach to take, payout rate remains one of the most important factors when choosing an affiliate.

Calculating the payout rate is pretty simple and straightforward – the merchant defines an amount and the affiliate earns that amount whenever a sale is made through his or her marketing efforts. It could be anywhere – from 0.1% to 50%. For example if a merchant offers a commission of 20%, it means that whenever a sale is made through your affiliate marketing efforts, you will earn a commission of 20%  - if the sale was worth $100, you earn $20.

Key takeaways: Pretty obvious. Better commission or payout rates are better, but should not be the only consideration when choosing an affiliate program.

4. Conversion Rates

In simple terms, conversions refer to the number of people, who respond to your CTA or complete an action you intended them to complete, out of a total of 100 visitors. For instance if your website gets a 100 visitors during any given point of time, and 5 of them complete an action you wanted them to complete (such as buy a plugin or any product), you have a conversion rate of 5%.

Conversion rates are important because if your merchant’s website has low conversion rates, you will almost never be able to make any money with your promotion and affiliate efforts.

So what sort of conversion rates should you be looking at when choosing an affiliate? While conversion rates of 1% are considered to be the industry average, my recommendation would be to find an affiliate which boasts at least 2-3% conversion statistics.

Conversion rates are strongly connected with commission rates. Let’s suppose that a merchant pays 5% commission, and has a conversion rate of 1%. This means that if you drive 100 visitors to their website, and out of those 100, one person makes a purchase of $100 dollars (as their conversion rate is 1%), you’ll make 5 bucks. If the conversion rate was 3%, you’ll be making 15 bucks off the same $100 worth of sales. Therefore the higher the conversion, the more you’re earning.

Key takeaways: higher conversions equal more money in your pocket.

5. Average Order Value/Order Size

Another key performance indicator when it comes to affiliate marketing, especially when combined with commission and conversion rates. Average order size (AOS) or average order value (AOV) is calculated by dividing revenue from the number of transactions.

Let’s take a look at this example: If merchant 1 pays 10% commission and merchant 2 pays 15% commission, you will be inclined to choose the first one based solely on those numbers. However merchant 1’s AOV is $300, while merchant B’s AOV is just $50, which means that 10% of 300 will make you $30 per sale, while 15% of $50 will make you a measly $7.5.

Even if you factor in conversion rates, for instance if Merchant 1 has a 1% conversion rate and merchant 2 has a higher conversion of 2%, it means that you payout will be $30 with merchant 1, but just $15 with merchant 2.

In which case the merchant with the higher AOV (despite having lower commission and conversion rates), it still the obvious winner.

Key takeaways: AOV/AOS is an important consideration and an important KPI, and should be used in tandem with other metrics.

6. Earnings Per Click

Quite simply, EPC is calculated by dividing overall commission by the number of clicks (or visitors). For instance if you are able to make 20 bucks after sending a 100 clicks (or visitors) to the merchant, you EPC is $0.20/click – which essentially means that you earn 20 cents per click, or you make a dollar for every 5 clicks/visitors that you send to the merchant.

EPC then gives you a fair idea of your performance as an affiliate, and allows you to gauge your performance based on how much money you make per visitor.

In addition, EPC is also a good gauge of measuring a merchant’s performance and their program’s earning potential based on the affiliates who are already a part of the program. Some merchants make this information publicly available while others do not.

Key takeaways: EPC is a good gauge of how successful a certain program is doing, as well as a good way to measure your own personal performance.

No comments:

Post a Comment