Creating an affiliate marketing program is difficult and expensive, but in terms of overall expenditure, it is actually on the lower side when compared with almost every other form of marketing with the exception of referral and word-of-mouth marketing.
Neil Patel said,“Affiliate marketing is an excellent opportunity if you truly believe in the value of the product you’re selling. Because many times, you can make money off of something you would probably recommend anyway.”
If you are thinking about setting up your own affiliate marketing program, then here is a clue on what is required and what each element may cost.
Breaking Down The Expenses
Details on costs will come later, but first let’s cover the basic costs and the categories they fall into. You will have to pay for the platform, the creative inventory, the product feed including affiliate landing pages, and you will have to pay for affiliate program management.
1 – Platform
You need to pay for a platform upon which you will run your affiliate program. You may pay for an affiliate network, or you may pay for affiliate management and tracking software. There will be setup fees, and some software allows you to set up a large single payment, where others insist on a monthly fee.
Monthly fee options often have better tech support and will often hold your hand through most of it. Single-payment one-time payment for software will usually give you a great amount of freedom, but the expectation will be on you to carve your own path.
2 – A Creative Inventory
You will need to put together a creative inventory for the program you set up. This is going to include whatever you desire, be it text links, flash videos, widgets, etc. For example, Transferwise set up a widget that web masters can plug into their website so that their users can see currency conversions while still on the web master’s website.
The expense in this case usually comes from hiring somebody to set up your deep-text links, banners, etc. because it takes a fair amount of designing and coding skill to pull it off.
3 – A Detailed Product Feed Including Affiliate Landing Pages
If you are an online retailer, then your product feed will have to be very detailed. Some service sellers simply experiment with a variety of landing pages. Spending money in this area is unavoidable, even if you have in-house staff who can handle all of the hard work. There will be programming, conversion optimization fees and at least a little web design.
4 – Affiliate Program Management
You can hire an outside manager to do this job or you can do it in-house. If you have ever dealt with a crappy affiliate manager, you will know how much resentment and anger they can cause. This is true especially when the affiliate starts with a high PPC fee and the lowers it without thinking you will notice.
Your affiliate marketing program will need policing, which becomes infinitely more difficult if you are paying for clicks rather than actions. There is plenty more to do too, such as announcements, recruiting, legal, compliance, activation of stagnant affiliates and so forth.
Affiliate Program Platforms
Your initial decisions are going to weigh very heavily on your budget in both the short term and long term. This is sometimes true no matter which road you choose because there is a chance you will change your mind at some point and have to reinvest in your affiliate platform.
Are you going to use an affiliate network, are you going to build or use a program in house, or will your strategy include a combination of both? One has more freedom, control and customization, and the other is potentially more expensive but requires less work from you.
Costs For Running An In-House Program
If you wish to build a run your own program in house, then you are going to need a platform. As mentioned earlier, you can choose a subscription service that can charge anywhere from $80 per month to $500 per month. If you find a single-payment platform, you are probably going to pay hundreds and maybe thousands.
Joining an Affiliate Network
When you join an affiliate network, like CJ (Commission Junction), then they do most of the work for you. They already have the infrastructure such as payment solutions, hosting, reporting, tracking, etc. However, you are exposing yours and your affiliates data to a third party, and you are giving up a lot of control over your affiliate program. Costs often include subscription fees and having the affiliate network take a slice of whatever payments are made, which over time can become very expensive.
Running An In-House Program
When you run your own platform, you get to work directly with all of your affiliates, and you have complete control over the affiliate program, which includes control over whom sees what data. A knowledgeable and technically proficient affiliate manager would probably prefer this to joining an affiliate network. An in-house expert is probably going to be able to exploit your in-house platform to its fullest.
What Not To Do
If you have made your one-off payment or you have paid your subscription, and you have your software in-house, you shouldn’t outsource the program’s management. That would be like buying a car and then buying a bus pass. If you do not have the expertise on staff, or you are not willing to learn, then go for an affiliate network before outsourcing your program’s management. The cost is going to be budget breaking otherwise.
Paying For An Affiliate Manager
If we assume you cannot do it all yourself, you are going to need an affiliate manager. Again, a technically proficient person is good, but somebody who is willing to learn is also good. The setup is always tricky, but the maintenance is more a case of awareness and vigilance than it is hardcore programming. You are going to have to budget a little more if you have your own in-house software, and budget a little less if your affiliate manager is using an affiliate network.
An affiliate manager that is using an affiliate network will have ready-to-use tools at his/her disposal, and any information will be provided in easy-to-read formats. The affiliate manager will also have a pool of publishers that may be recruited, rather than having to go out and search for them himself/herself.
Budget For Extra Time Too
Not only do you need to budget for an affiliate manager, you will also need to budget for how much time your affiliate program will take to set up and how much time will need to be dedicated to it every week. Again, using an affiliate network means that setup is far quicker, and there is less work to do over the week, so the amount of time an affiliate manager spends when using an affiliate network should be less than what is required for in-house platforms.
Budgeting For In-House Software
Again, you have bought your in-house software on a subscription or for a single fee, and you are paying extra for your program manager/administrator because more time and expertise is required to run the affiliate platform in-house. You also need to budget for the building of the program (maybe), advertising the program, recruiting affiliates, vetting affiliates, and maybe reviewing their performance over time.
In-House Costs Less In The Long Run
This article has written one bad thing after another about how in-house software will create a platform that is more expensive to set up, etc. However, even though starting costs for in-house software are very high, the long-term costs are far lower than when using an affiliate network.
Even without management costs, the use of an affiliate network can cost hundreds of dollars per month because they take a slice of what is paid out. For example, an affiliate network may charge as much as 30% of each outgoing payment. In other words, if you pay an affiliate $100, the affiliate network is going to send you a bill for $30. This is known as a percentage override. This is a performance based fee, which means people starting out may not realize just how expensive the use of an affiliate network is going to get over the coming years.
The important thing to remember is that network costs, similar to affiliate commissions, are performance-based. If you have to pay them, it means you’re selling and making a profit.
Taking into account the above, if this is your first affiliate program, I suggest that you start by joining an affiliate network. You will spend less and obtain results faster, with fewer hassles.
Later on, when you start scaling and gaining a better understanding of affiliate marketing, you can build and run your in-house affiliate program.
If you are itching to try a network, then here are the most popular ones. The members are people with affiliate programs that they are running via these companies.
- ShareASale – Almost 6,000 members
- CJ Affiliate – 1,700 members including very big retail brands
- Rakuten LinkShare – More than 1,400 members
- AvantLink – 700 affiliate members
- Pepperjam – More than 500 members
These are your text links, your banners, your widgets, flash content, single-links, and things of that nature. These are the tools that your affiliates will use to promote your business and generate traffic. You can save money with a smaller inventory, but some web masters will not integrate your adverts if the right ones are not available, and some web masters may suffer if your creative inventory is a little uninspired.
You can spend around one or two thousand and have a very nice creative inventory built for you, and these days you can do it with freelancers. Though, one may suggest you use somebody you can see in person so you can hold that person accountable.
Saving Money On Your Creative Inventory
One hesitates to offer this type of advice because why spend so much money on setting up an affiliate platform, only to scrimp and scrape during the creative inventory creation? Nevertheless, let’s say you are only offering a limited number of products or services, it may be okay to rely on referral links. If your inventory is large, then you need a bigger inventory with more variety, such as banners, videos, etc.
If you are running your affiliate platform from a network, then they are more likely to have creative inventory tools you can use, which allows you to do some of the work yourself. To save money, in the long-run, you may wish to invest in creation tools of your own. To save money in the short term, you will need to rely on a suitably sophisticated affiliate network.
Budget For The Future
You are going to need to update your creative inventory as time goes by. You will need to launch new products or set up a creative inventory for your new campaigns. Trends and technology will also change and affect what you spend.
Landing Pages And Product Feeds
A product feed is a file listing a merchants products and attributes. For example, when you run out of Cheesy Nibbles on your website, it should show as such in your online inventory, and that online inventory should be mirrored by your product feeds. In short, you do not want people clicking adverts for Cheesy Nibbles, only to find your store doesn’t stock them anymore.
What can one say about product feeds other than that you will need them if you are an online retailer who relies on affiliates to sell products. They are a fundamental part of your affiliate program, so you are going to need some in-house help. In short, your product feed needs setting up, and then whomever is managing your online inventory needs to make sure that your product feeds are updated in unison with your inventory.
What Will This Products Feed Thing Cost?
If you have a staff member who is proficient in handling your inventory, who has sufficient technical expertise, who can handle all the database stuff, the live feed stuff, the communications stuff and so forth, then it takes only one staff member to manage your product feeds. It is more of a maintenance job than a full-time endeavor. It will cost you a few hours of work per work from a capable staff member.
Landing Pages Costs And Hassles
Creating landing pages for your affiliate program is easy. If you have a content management system like Magento, WordPress, etc., then you are probably proficient in making the landing pages yourself, so the costs should remain low.
What about co-branded landing pages, are they expensive? It really depends on how you set them up. For example, BlueHost sets up stationary web pages that feature their name and the name of their affiliate, and then a special offer. It looks as if the affiliate is offering a deal that is otherwise unavailable to other people.
Setting up this type of co-branded web page yourself is not difficult. In fact, the hardest part would be hiding it from search engines, web crawlers and search apps because the last thing you want people to do is find the page in any way other than through the affiliate link.
Affiliate Program Management
Management costs and recurring costs are going to occur and you will need to budget for them. At the very least, you are going on have to hire an affiliate program manager. Unless you have the time and expertise yourself, you will need somebody on hand to manage your program.
Do I Need To Budget For A Full-Time Program Manager?
Have somebody on staff on a full-time basis, or two people just in case one quits, and have that person spend a part of his or her week managing the affiliate program. There is no need to have somebody work full-time every working day on the affiliate program unless it is the biggest source of your income.
Nevertheless, you cannot hire a part-time manager because there is firstly the issue of commitment. Secondly, keeping that person may be difficult because there are others who would like to headhunt a good affiliate program manager. Here are some of the tasks your program manager will have to undertake.
- Creating marketing campaigns
- Communicating with affiliates
- Answering questions tech and customer support questions from affiliates
- Recruiting affiliates and then activating them
- Maintaining program rules and policies
- Optimizing the affiliate program according to best practices
- Ad-hoc maintenance (such as changing the program when Google changes its SEO rules and such)
If you are running your affiliate platform in house, then you can slowly learn how to maintain your own affiliate platform. This will mean you need not rely on a single manager to keep things flowing. Nevertheless, having one or two people responsible for the platform can take the weight off the shoulders of a busy company owner.
Conclusion – Can Costs Be Lowered?
In short, when you are budgeting an affiliate marketing program, you have two options. You can invest a lot of money upfront and do it all in-house. This will save you money in the long run. Or, you can use an affiliate network and the initial costs will be tiny compared to in-house setup, but in the long term it will cost you more. The choice is yours.
Mónica Rodríguez is a writer, art historian. She specializes in Art History, Art Conservation, History, Literature, Finance, Tech, Wellness, and Travel. She also writes article for 45cash.com.