You have a product or service that is ready to sell and you created a website. Now what? The biggest barrier to growth for early stage startups is figuring out how to attract customers and how to build brand awareness. Cold calling and aggressive sales techniques are not effective anymore, at least not in most industries.  If done correctly, affiliate marketing can help startups attract targeted customers quickly. Take Groupon for example; They were made popular almost exclusively through affiliate marketing.

Affiliate marketing is revenue sharing between online advertisers/merchants and online publishers/affiliates.  Compensation is based on performance measures, typically in the form of sales, clicks, registrations, or a hybrid model. An affiliate network functions as an intermediary between the two by connecting advertisers and publishers. Advertisers provide the product or service, and publishers  supply the customer. It is a mutually beneficial agreement in which both parties earn income. However, there are a few key elements that need to be in place in order for affiliate marketing to make sense for a startup.

First, your company should operate correctly and efficiently. You only have one chance to make a first impression, and launching an affiliate program too early can be detrimental to your company. Be sure to have all elements of your website tested and fully functioning, your distribution or delivery system in order, and customer service people ready to answer questions from customers. What you need to have in place before you start depends on your product or service, but in all cases you should have tested all key operating elements.

groupon banners

Second, you need to determine if you have the in-house capacity to develop landing pages, banners, email banners and other creatives. If you do, you should have your web developers and graphic designers create several versions of each so you can determine which ones generate the highest conversion rates.  If you don’t have the in-house capacity or if you can’t make the time commitment, you can either outsource it or ask an affiliate network to create these for you. An affiliate network may be hesitant to do this for a startup at first, or they may ask for an exclusive relationship in exchange, but most networks will offer this option. Creating different versions of banners is always recommended in order to test clickthrough rates (CTRs) and to appeal to different groups of consumers.

Third, determine what you can budget monthly to spend on affiliate marketing and what compensation model or  models you want to work with. This requires assessing what you are willing to pay for a new customer at each point in the conversion funnel (an impression, a click, a lead, a sale, etc.). Once you have done that, you can choose what compensation model would be most effective for you, or you can use a combination of them. You can choose from several: cost per impression (CPM), cost per click (CPC), cost per sale (CPS), cost per lead (CPL) or cost per acquisition (CPA).  A CPA model has the lowest risk for you as an advertiser because you only pay for actual conversions, while PPC affiliates can help you optimize your search engine rankings. A combination of models can be effective as well.  Whichever way you choose, it’s recommended to build out a campaign slowly and steadily to mitigate risk, to start with low caps and to measure and optimize often.

Finally, determine if you want to work with an affiliate network or if you plan on running an affiliate program in-house. If you do the latter, you will have to make a commitment to training your employees and investing in proper software. This can be very time-consuming, especially if you have no experience in the space. Think it through before you make a bad investment. Working with an affiliate network can be very beneficial because if your product/service is unique then an affiliate network will be willing to feel out the best way to help run your campaign. In addition, they already have a base of affiliates that can promote your offer more quickly. It is key to select the right network for the long haul. Building up relationships is important in the affiliate space, especially as a startup company.

Affiliate marketing requires several considerations, but if you feel like it’s a good fit, affiliate marketing programs could be a great way to build up your customer base.