When doing research for my affiliate program management book, “A Practical Guide to Affiliate Marketing”, I looked at 100 affiliate programs in the same vertical, and analyzed their program agreements. The results were literally shocking: 51% of the merchants lacked Terms of Service agreements altogether, 36% had extremely generic ones, and only 13% of the affiliate programs in my sample had full affiliate program agreements in place. Does your affiliate program clearly outline the Terms and Conditions, the responsibilities and obligations of all involved parties? If it does not, you are in for a long-term headache.
Another amusing fact discovered in my above-quoted study was that close to 70% of the affiliate programs that did have the full agreements in place had them copied – often world-for-word – from their competitors’ affiliate programs.
If you are reading this, and you could use some initial guidance on what an affiliate program agreement should look like, and what areas it should cover, I have made one publicly accessible here: Sample Affiliate Program Agreement. Feel free to use it, but please take your time to modify it to suit your own situation.
Best of luck!!
Geno,
Huge fan of your blog–you’ve really created an incredibly valuable resource. Thank you!
I have a question about how an affiliate programs can affect the ROI of a pay-per click campaign:
What happens if a customer clicks on an affiliate link decides not to buy at that time, but now has the affiliate cookie, then later buys by clicking on one of your pay per click ads.
Have you ever found that having to pay both affiliate commissions and pay per click costs on some sales at all effecting the ROI of pay per click? Does increased cookie life raise the cost of pay per click at all or is the effect too small to be worth considering.
i.e. Say I convert 1% of pay per click traffic and my cost per keyword is $1 and my profit on the sale is $150. My cost per sale through pay per click is $100–therefore I make $50 on those customers.
Say I extend my cookie life to attract affiliates and now I find that 1/2 of those sales also have affiliate cookies on them. I pay a $100 commission to affiliates.
Now instead of a $50 profit I am paying out on average a $100 for PPC and $50 to affiliates—leaving my profit at 0. Is PPC now no longer profitable?
(This could also apply to other marketing methods–such as offline– a customer buys by responding to a direct mail piece and also was referred–I pay a referral fee and the cost of the direct mailing.)
Or am I missing something obvious?
Thank you so much for sharing your vast knowledge–it is highly appreciated!
—Luke
Luke, first of all thank you for your kind words about the work I’m doing through my blog. I meant to create a “valuable resource”, and I’m glad you’re finding it to be such. Thank you.
Re your question: with affiliates, it will be the same way as with any other marketing channel you may employ in the process. Say, in addition to (a) your PPC campaign and (b) your affiliate program, you also (c) have a display advertising campaign paying according to a CPM model, (d) pay a placement fee to have a banner up on a niche content site, and (e) pay a comparison shopping engine to feature your products. In an event when the end consumer uses all 5 of the above-quoted channels, and buys, you’ll pay all 5.
Will limiting the cookie life help? It may, but not much; and neither do I recommend it (your competitor will most likely offer longer cookie life). See this post: Cookie Retention Study Reveals Important Data.
Why not let affiliates do the PPC instead?