How to Set Up an Affiliate Program for Your SaaS – Step By Step
Updated on June 17, 2021
Your customers are your best salespeople. It’s true.
You know what it’s like when you’re excited about a new restaurant you’ve found and you want to tell all your friends about it. You sell it to them harder than any salesperson could do.
How can you leverage that for your SaaS business?
Affiliate marketing is where a person or a brand, an affiliate, has an audience and they promote products or services they use or produce content about. In essence, they market the products/services of businesses they are affiliated with.
In return, the business pays them a commission, usually on every sale, but some agreements can have special terms.
The affiliate links to the business they’re promoting in their content. When a reader or watcher of the content clicks through the link and becomes a customer of the business, that’s when the sale is made and the affiliate is paid their commission.
Pretty neat marketing strategy. Businesses usually do it one of two ways.
When they go in-house they build their own affiliate program. They connect to a tracking software and an affiliate payment system, do affiliate outreach and recruitment, and manage the affiliates.
When they use an affiliate network, the network provides the affiliates for them and arranges payments to affiliates; it has the tracking dashboards, contact management, and payment set up and tracking all in one place.
Using an affiliate network is straightforward, so let’s look at how to go in-house.
How Do You Set Up Your Own Affiliate Program?
We’ll go through the five steps to setting up your own affiliate program to make more sales through affiliate marketing. Ready?
Step 1: Competitor Research
You can learn a lot from your competitors. Sam Walton, the founder of Walmart, used to spend a lot of time walking through competitor stores, seeing how they operate to learn how to improve his store.
You can walk through the affiliate stores of your competitors. See what commission rates they’re offering, but don’t think affiliates are just looking for high commissions. If you can’t compete with the rates your competitors are offering, then make sure your site is converting visitors into customers well. Affiliates will appreciate working with a site that generates more sales than one that generates fewer sales at a higher pay rate.
Also, look at the logistics: how they onboard affiliates, what their affiliate requirements and program T&Cs are, and what sales tracking software they’re using.
This will give you a good idea of how SaaS businesses like yours set up their affiliate programs.
Step 2: Choosing Your Affiliate Management Software
While you set up your own logistics for your affiliate program, you use an affiliate management software to keep track of everything.
This will be where you oversee your program with the sales data, affiliate contacts, payments, and campaign performance, all on one dashboard.
You’ll still be responsible for acquiring contacts and making payments, but the software allows you to keep it all together.
Here’s some examples of affiliate management softwares:
- Tapfiliate – Easy to set up with just a short piece of code.
- FirstPromoter – Automated email drip campaigns and notifications.
- OSI affiliate – Tools to help you promote your affiliate program.
- Post affiliate pro – Sub-affiliate and banner ad promotion features.
Step 3: Sales Tracking and Commissions Structure
This is where you set up your affiliate program structure.
First and foremost, you want to create a robust set of terms and conditions for your affiliates to follow. Your brand reputation is on the line when you have affiliates you’ve never met promoting your brand, so you want to make sure they are doing it in the right way.
Set expectations here on how you want your brand to be promoted, as well as what affiliates can and can’t say. If you provide a solid marketing message or messages for your affiliates, the better they can promote your service. You also want to create terms around how affiliates will work with you; how they’ll be paid and what they’ll be paid for.
That said, it’s up to you to make sure your website is able to convert the visitors they send into leads and customers. An affiliate program won’t work for you if your site or sales funnels have poor conversion rates or bugs that prevent people from using your site properly.
How you pay your affiliates ties into your sales tracking, for which there are three main types of payment metrics:
- Cost per action (CPA) – this is where you pay an affiliate commission for every sale you make from their efforts. How much could you pay for a sale at a maximum? If your customers pay $500 for your service, could you pay $200 for that customer? This is what you need to consider when setting your CPA pay. The higher you set your commissions, the higher the quality of the affiliates you’ll attract.
- Cost per lead (CPL) – you determine what a lead is to you. Is it a prospect who engages in a phone call with your sales team? Or one who signs up for one of your lead magnets? Once you’ve defined this you can set a commission amount for this metric, but bear in mind that you need to make a profit, so you should first know how much a lead is worth to you before you set the commission.
- Cost per impression (CPM) – this is where you pay affiliates based on how many visitors they send to your website. We advise against using this metric, as it’s more difficult to determine how much revenue you generate from impressions on your site. If you’re confident in your site conversion rates, however, this could be a metric you consider.
Your sales can be validated on the affiliate management software you connect with. They will produce the links for you and collect the sales data on their dashboard, and there you can connect to PayPal and other payment processors to pay your affiliates.
Some also allow you to pay a recurring commission for the lifetime of your customers. This is desirable for affiliates and what sets SaaS affiliate programs apart from other types of programs.
Step 4: Recruiting Affiliates
What a lot of business owners see when they look at their affiliate data is the minority of their affiliates generating the majority of their business. These successful affiliates are the ones you want to target.
You can set minimum standards for your affiliates, such as traffic volume for their site, conversion rate, and content production rate, among others. This will help ensure you recruit affiliates that are more likely to produce results. It’s not a good idea to set these standards too high, however. You have to remember that the best-performing affiliates work with the best affiliate programs, so unless you can also deliver with a high commission rate and high conversion rates on your site, then you should keep your standards conservative.
If you’re in the startup phase of your business, then it might be a good idea to accept almost any affiliate who adheres to your terms and conditions while you get your business off the ground.
You can outline these conditions on a recruitment landing page. Here, you want to state who your company is, what services you offer, your commission structure, and the benefits of your program. You also should consider having an affiliate operator that affiliates can contact. You want to look after your affiliates because they can drive a lot of business. It improves the experience for them and is a desirable quality that the best affiliates require as a minimum. The affiliate operator can be one of your team or you could outsource this role to a virtual assistant (VA).
The first place to go for outreach is to your own customer base. Integrating a referral program, which would differ slightly from your affiliate program, could pay off for you. The way it would differ would be the way your customers use your referral link. They may not have a content site to connect to the program, so they’ll be sharing the link directly to their friends and associates. You’ll still be able to track sales in your affiliate management software, just be sure to segregate this audience into a different category to make tracking easier.
The best affiliates are hard to find and require a different type of sales pitch to be encouraged to join your program. Therefore, it might be best to start small then go for the bigger affiliates once your program is a bit more fleshed out and generating business.
Another place you can go for outreach is to partner with other services that have an overlap with your audience. If you can find a way to make an arrangement that benefits both parties, then getting on their email list and other promotional channels can be a great way to promote your affiliate program.
Finding affiliates on YouTube is a great way to get some video content produced for you, so search there for affiliates creating content about services similar to yours.
Other places to search are online affiliate groups, as well as social media groups and LinkedIn accounts. Joining these groups and informing people about your program is a simple way to recruit affiliates. Just make sure you don’t breach the terms of the groups as some have promotional restrictions.
Step 5: Managing Affiliates
Once you’ve recruited your affiliates, it doesn’t stop there. They probably have other products and services they’re promoting, so you need to remind them on a regular basis why they should be promoting your SaaS. This can be done with a simple automated email campaign.
You also want to set up a weekly or bi-weekly newsletter to keep your affiliates updated. You can share information about new features you’ve added to your software, business news and upcoming events, helpful content they can use to learn more about your service and company, as well as any new ideas you come up with for them to promote your service.
On the backend of your program, you should be tracking your analytics and the overall performance of the program. See which affiliates are bringing in the most revenue – they may well request higher commissions. You could offer performance bonuses to further incentivize them to promote your brand.
Keep track of your metrics, CPA, CPL, CPM, or whatever metrics you choose to measure whether your campaign is profitable or worth the management time. This should be done monthly to allow enough time for results to be generated from your affiliates.
That’s how to set up an affiliate program!
While scaling your business is essential to increase its earnings, is it the best way to earn?
Is Scaling Your Business the Best Way to Go?
As you can probably figure from this overview of the affiliate marketing program creation process, scaling your business requires a lot of work.
It requires capital investment, constant improvements and iterations on your software’s features, and hours of the day spent on sales and research to take your business to the next level.
When you carry out a marketing campaign like the affiliate marketing program we’ve discussed here, there is some risk.
SaaS businesses scale differently to other online businesses. Because of the nature of SaaS and how it integrates into businesses, if you have a good product-market fit, then your business’ growth can explode. This doesn’t simply mean more customers and money. You have to scale your software and business operations to meet that demand. If you’re not able to quickly enough, it can kill your business, and having an affiliate marketing program could potentially set your business into what we call a ‘hyper-growth’ phase.
What’s the alternative then?
Selling your business to someone who has the capital and resources to scale your SaaS business.
This presents an opportunity for you to cash out on your business to reinvest in new business ventures or just enjoy the big payday.
SaaS businesses are worth a lot more than other online business models because they generate recurring revenue which is desirable to investors.
Interested to see what your SaaS business is worth?
