I’ve seen lots of startup founders making the same mistake – spending all the funding they have on headcount and expensive and inefficient marketing campaigns. It gets even worse if the first version of their product is not good enough to generate revenues. Initially, lots of potential clients may be interested to try out the product because it’s new and the flow of new users may mask the high churn rate. Even more, some founders are not interested in the churn rate at all early on. Instead, their focus is on acquiring more and more users no matter the cost per acquisition. Inevitably, one morning they wake up to see empty bank accounts, high churn rate and the need to raise more funding to fix the product. However, raising funding takes time and the investors are unlikely to be queuing to fund a startup in such a shape.
Don’t worry, there is something that can save you if you are currently facing this challenge.
Affiliate marketing has been around for many years, yet not many startups take advantage of it. Ironically, it’s the tool that can boost revenues and buy time till the next funding round.
So, how to make affiliate marketing work for you?
Know your userbase
Your product may not work as expected and the churn rate may be times higher than anticipated, but you still have an asset – those users who have already registered with you. Like any other asset, your userbase can be monetized if you understand those users well enough. Obviously, they were curious to try out your new product but there are lots of other complementing products they may be interested in. Especially if you offer them a deal or a discount.
Here’s how we did it at Transformify
Our user base comprises of job seekers looking for all types of jobs and companies looking to hire. They use our HR Software, ATS or Freelance Platform, but to keep them active, we had to offer them something more than jobs and secure payment. The one thing both freelancers and business clients need is an office. Especially the business clients – the more they hire, the more office space they need. Once we identified the need, we reached out to WeWork and arranged for a special discount for our users which makes them happy and helps us to sell at ease.
I call it 3 in 1 – you keep your users engaged, offer them deals they love and monetize your user base twice.
This step by step guide will help you achieve the same results.
Step 1: Understand your users
Your users need to be kept active and engaged with the brand. What other products and services may they need? Who offers these products and services and may become a potential affiliate partner? It may not be easy to provide answers to these questions, but once you ask your users what other software or services they use, it will become clear.
Let’s go back to the example with Transformify. Our business clients use our HR software and Freelance Platform to hire employees and freelancers. What other software or services they may need before or after they hire all those people? Well, (i) an office, so all co-working office providers are a great fit, (ii) payroll software, (iii) accounting software, (iv) team building and food delivery services, etc. The list goes on, and so far, we have 200+ affiliate partners.
Step 2: Negotiate a discount or a deal
Identifying who your potential affiliate partners are is important, negotiating deals and discounts is as important. Remember, you are selling the products and services of your affiliate partners to your users. A deal or discount makes it much easier to sell and adds value to your users who will stay with the brand until you resolve all the issues with the product and are likely to be your loyal users in the long run. 10% discount or 7-day Free Trial are more likely to attract user’s attention than ‘’ We’ve partnered with company ‘’X’’ and now you can use their services as well.’’
Step 3: Negotiate the affiliate commission
This is the tricky part. In general, you can negotiate a commission per sale or commission per lead. If you negotiate commission per sale, this means that you will be paid only if a sale takes place.
Commission Per Sale
Normally, the commission per sale is a percentage of the value of the deal. Put simply, if Transformify's affiliate program states that you will be paid a 20% commission per sale and the sales value is USD 1000, you will be paid USD 200 commission on each sale. In some cases, it may negotiate that a flat commission to be paid per sale – e.g. USD 150 per each sale that takes place regardless of the value of the deal.
What are some potential traps?
Test the unique tracking link provided by your affiliate partner as it may not track all sales, especially if the checkout process is not simple.
Check if the commission is recurring or one-off. A recurring commission over 180 days means that you will be paid a commission if the same client referred by you buys again and again within 180 days. If the commission is defined as one-off, you will be paid just once when the first purchase takes place.
Read the small print. Some affiliate partners may include a clause that the client you refer to them shall never be in touch with the company before, attended events organized by the company, etc. Put simply, you will not be paid a commission for a client referred by you if this client has ever been in touch with the affiliate partner and there is no way for you to have this information beforehand.
Commission Per Lead
In this case, you are paid a commission for each client you refer to your affiliate partner regardless if a sale ever takes place. Usually, this is a flat commission and the earning potential is much lower if compared to the commission per sale. Again, double-test the unique tracking link and read the small print to avoid any misunderstandings.
Affiliate Tracking Software
In General, there are two options - to build affiliate tracking software in-house or to purchase it. Both options have their own advantages and disadvantages.
Internally Built Affiliate Tracking Software
An internally built affiliate tracking software may be cheaper in the long run as you invest once to develop it and after that, the maintenance costs are relatively low. However, as it is an internally developed affiliate tracking software, many affiliates may question the reliability of the reports they have been presented with and the commissions that have been earned. The reason is simple - you have built the affiliate tracking software and you are also the merchant paying the affiliate commission that has been earned. There is no third party validating the clicks, sales, leads, etc. Another disadvantage is the time required to build an affiliate tracking software internally and then to launch your affiliate program.
At Transformify, we initially decided to build an affiliate tracking software internally. However, many of our affiliates were asking for a third-party solution to ensure that the earned commission has been calculated correctly and no leads, clicks, sales, etc. have been left untracked. Eventually, we switched to ShareASale which not only provides us with an affiliate tracking software, but also gives us aces to their database of affiliates having experience with SaaS ( software as a service) merchants.
Off the Shelf Affiliate Tracking Software
As with any third party software solution, the main advantage is the time to market. Some of the available affiliate tracking software solutions are free or low cost allowing users to set up and launch their affiliate programs in no time. Some examples include FirstPromoter, Affise, Voonix, Post Affiliate Pro, etc. There may not be a monthly subscription fee, but most affiliate tracking software providers charge a fee based on the affiliate commission that has been paid out. As a result, the better the results delivered by your affiliate program, the higher the fee you will have to pay to the affiliate tracking software provider.
Although not free, affiliate networks have many advantages. Instead of recruiting affiliates, qualified affiliates will apply for your affiliate program. In substance, affiliate networks are marketplaces helping merchants and affiliates to meet, exchange information and transfer payment. Hence, if your affiliate program offers a lucrative commission, there will be many affiliates eager to join it. On top of that, most affiliate networks provide affiliate tracking software and increase the confidence of all parties.
Which affiliate network is right for your business?
Well, it depends on the industry and business model. Some affiliate networks are focused on B2C ( business-to-consumer) models, others prefer e-commerce merchants and coupon sites, etc. Some examples include ShareASale, JVZoo, ClickBank, CJ Affiliate, Rakuten, etc.
As Transformify is an HR Software provider, ShareASale was the obvious choice for us as this affiliate network accepts SaaS ( software as a service) merchants. Although there are many coupon sites, still, ShareASale provides a selection of affiliates having experience with business software providers.
Affiliate Marketing is a fantastic way to monetize your existing user base twice, keep your users engaged and generate revenue in the long run. It is a life vest if you are running out of cash, the next funding round is likely to take months and your product needs to be fixed in order to sell it.