How to Structure an Affiliate Program to Generate New Business

How can you motivate affiliates to refer new customers to you? This is a great question to ask at any phase of your affiliate program’s development: whether you are just starting an affiliate program or looking for ways to optimize the performance of an existing one.

If you are more of a visual learner, you may see (and hear) my ideas on the subject in this 4-minute video:

If, however, you’d rather read my answer, read on…

“New-to-file” has been the buzzword for some time. It stands for customers who have never purchased from an advertiser before.

To focus affiliates on promoting you to these new audiences, you could tie the attribution piece of your affiliate program to the first touch (or first interaction) — telling affiliates that you will pay them only on newly engaged customers. This could be an optimal solution for you, but the purpose of this discussion is not to compare first click affiliate programs to the more-commonplace last click ones.

Whichever attribution method your program employs, I’d like to equip you with 3 ways to encourage affiliates to refer new business to you.

1. Recurring Payments

You could tell affiliates that on every new customer they refer — you commit to compensating them every time that customer pays you money.

A number of brands structure affiliate compensation in this manner. You could take a look at a former client of mine AWeber, or the affiliate program run by SEMrush (called BeRush), or one by a current client of mine Unbounce (exemplified below).

Unbounce affiliate program

Now, whether you make your recurring affiliate payouts last a “lifetime” (or as long as the customer stays with you) or limit them in time, it’s up to you to make that call. One argument against lifetime payouts is that they don’t encourage affiliates to keep referring new business to you, and you could very well end up in a situation where a substantial number of high-earning affiliates in your program, no longer market you, but earn on previously-referred customers. We saw this happen more than once in the past.

2. Higher Payouts

A number of advanced affiliate programs compensate affiliates higher for new customers. If you want to take a look at examples, BestBuy does it in their affiliate program, and so does GoDaddy, and who (at the time of this post) pay its affiliates 1% on existing customers, but 6% on new.

Let me also clarify something before you assume it. I am not suggesting that you do not pay anything on return customers. It is a good idea to still compensate affiliates for influencing the repeat customers, even if by a smaller amount. I like how Zappos classifies some of them “re-engaged” customers. It does make sense segmenting some of the return customers into category of their own — as consumers always have options, and when affiliates help bring them back to you, you may want to compensate them for it.

3. Bonuses

Finally, instead of compensating affiliates equally on every conversion, you could offer an additional bonus for new customer referral. Calculate what you can afford to pay based on the lifetime customer value, and then… interweave this additional bonus into your affiliate marketing program.

Whatever approach you end up taking, you can make your affiliate program stand out by motivating affiliate referrals of those coveted new-to-file customers!

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