An affiliate program is a digital marketing strategy where your business recruits partners, known as affiliates, to place links to your business on their website, blog, or social media page. You then pay these affiliates a commission every time someone makes a purchase or visits your site via their affiliate link.

There are two ways to have an affiliate program: One is through an already existing affiliate network and the other is by using your in-house tracking solution.

Advantages of building your own in-house affiliate program

Here are some benefits of having an in-house affiliate program:

Cost-saving. While networks might charge a 30% override, you might pay only 5% when using your own tracking solution. 

Better understanding of the company products and customer needs. Having an in-house affiliate program gives you the benefit of relying on your own account managers’ knowledge of your products or services. This can often be lacking with the network.

Fast market. In times when there is a quicker turnaround on time-sensitive offers, your in-house manager would be able to contact key affiliates instantly and arrange promotions.

Total control. With the program managed in-house, you have complete control over your affiliate program, your products, systems, and how you are presented online.

Disadvantages of an in-house affiliate program:

Payment and commissions. When running in-house, you will be entirely responsible for the finance team that takes care of invoicing and payment.

Reporting. You will have to be responsible for creating weekly report templates and measuring performance if you want to get insight into a number of variables. This can often be quite time-consuming.

Policing the program. Of course, you are solely responsible for monitoring and ensuring that affiliates are promoting your brand ethically while abiding by your standards.

Recruitment. You will have to start from the ground in building a network that will instantly connect to thousands of affiliates, a task that would be very time-consuming if done in-house.

Here are some other important points to consider when building an in-house affiliate program:

• How will you allow affiliates to promote and distribute their affiliate links? Which marketing channels can they use?
• How long are affiliates entitled to earn a commission after someone clicks on their affiliate link?
• What are the policies and terms and conditions your affiliate program should include?
• How will you make your affiliate program stand out, compared to competitor programs?
• Will you designate or hire a dedicated affiliate manager for your program?

6 Steps in Creating an In-house Affiliate Program

1. Set goals for your program

Just like all things in the world of marketing, it is important to start your game plan by determining your affiliate program’s goals and objectives. This clarity allows you to select the right affiliates and define your commission. 

First, you’ll need to establish what types of audience you would like to reach before asking what types of affiliates you should target to help you reach those types of audience.

The next step is to set some quantifiable goals for your program. This will help you determine from the beginning the program’s feasibility and success indicators.

Your main objective should be scaling up the amount of profit you’d like affiliates to bring in per month, per quarter, or per year. Start asking quantifiable questions like, “How often do you want your audience to click on your affiliates link to make a purchase of your products? Your goals should include conversion rates of the value added by your affiliates.

You may also set goals based on the sales your affiliates make in a determined time period. Some businesses would even formulate goals based on the number of clicks, engagements, and leads the affiliates to drive to your site. Metrics are definitely an important factor in determining the success indicators of your affiliate program.
 

2. Setting up a strategy based on your goals and objectives

Once your program objectives are defined, you need to set up the strategy that will help to reach them. This strategy may be apportioned into four parts: terms and conditions, setting Pay per Click (PPC) rules, approach to certifying sales, and recruiting the right affiliates.

The highlight of the terms and conditions of your program should focus on how affiliates can promote your business. It therefore plays a big role in online representation and how successful you will be at achieving your objectives.

So one of your objectives could be to increase your visibility and presence on search engines. Other things to consider are whether your affiliates can link PPC directly to your site and whether they can use your URL in the ad copy. These are decisions you should not miss to state in your terms and conditions.

3. Decide on the right affiliate commission

One of your most important choices to make in the design process is the commission structure or the way you’ll pay your affiliates.

First, decide whether you’ll pay a set amount for each sale, or a percentage of each sale affiliates make. 

A golden rule, you should only compensate an affiliate if a sale is made via their affiliate link. 

Next, decide on the exact commission you’ll offer affiliates. In deciding this, you will also need to consider your customer acquisition costs, your retention rate, and your average customer lifetime value. How much does it usually cost to bring in a new customer? What percentage of customers do you retain in a given year? How much revenue can you rely on each customer to bring in?

Use all of this information to calculate a commission that will attract new affiliates, but will also be sustainable.

You may also want to consider offering commission bonuses to your top affiliates who meet certain revenue goals. This will make your affiliate program even more attractive.

Here are a few things to keep in mind:

• Do not pay per impressions or clicks. Affiliates always want to run campaigns with the lowest possible risk for them and ask for PPC payment. Don’t do that.
• Your affiliate program is your product and affiliates your customers. You’ll have to put in a lot of work to convince your affiliates to choose your product. You can succeed by showing how your affiliate program can make lots of money through high conversion rates.
• Do competitor analysis. You should know how much they are paying, and what the standards are in the market. Set up your commissions based on the analysis of your competitors. Keep in mind that the quality of your affiliates is more important than the quantity. Just make sure their contextual impact with your product is strong.
• Your commission should reflect the financial value for your brand. Make sure your commission is sustainable over time; you can’t afford to lose money to get more sales. 

4. Recruiting the right affiliates

Now that you have designed your own program structure down to the commission plan, your next step is to find the right affiliates. 

There are two ways you can use to help you monitor your affiliate’s performance that will let you enroll affiliates, set up the links, and monitor their progress: You can use either an existing affiliate network or affiliate program software.

An existing affiliate network can help you build up a base of representatives quickly, especially if they already have relationships with top affiliates in your niche. But affiliate networks also present a huge disadvantage. They charge their own commission, or a finder’s fee in addition to the commission you pay affiliates directly. You also won’t have direct control of your valuable affiliate data.

Forming your own personal network of affiliates, on the other hand, will cost much less per year than the fee you’d pay to engage with an existing affiliate network. Plus, this software grants you full control over the data you need – and all other aspects of running a program. 

How to form your own network of affiliates?

• Make a list of all reputable and significant websites, bloggers, and social media influencers that fit in the niche your business occupies. Then, make a list of people behind those accounts you’d like to be part of your affiliates.
• You may also promote an open affiliate application on your website and let potential affiliates come to you. Of course, you will have to screen them carefully, and see how well their niche and audience match yours. A LinkedIn group is another great way for affiliate networking.

5. Train your affiliate team

After you’ve recruited affiliates, brief them on your program’s terms and conditions, and have them sign an agreement to abide by these rules. Then, train affiliates on brand and program fundamentals, give them their unique affiliate links, and supply them with promotional resources. 

6. Keep track of how your affiliate program is doing

After you’ve started your affiliate program, you’ll need to regularly track its success through your affiliate program software or the affiliate network you’ve signed up for.

Keep track of which affiliates are bringing in the most sales. Also, check how well your affiliate program is meeting the measurable goals you set during planning, including the amount of revenue, conversion rates, unique sales, and AOV. If your program isn’t meeting these goals, it may be time to tweak your commission structure or rethink your affiliate lineup.