Should I do it in-house

[akorff]

Hi, I'm Aaron.

I would like ot get everyone's opinion on something.

My partners and I are launching in early September. I'm convinced that this pay-per-month software would benefit from an affiliate marketing strategy. We have a very high profit margin, and therefore I can afford to give a good chunk to affilates.

I have three questions and would love to hear everyone's opinion:

1) Should I do it in-house or do everything through an affiliate site like ShareASale? we've developed some huge e-commerce systems, including affilate marketing systems. So I can develop this In-House. In fact we could even plug all the affiliate data into the system, including minutes on site, conversions, and payments.

2) My original thought is to do a master affiliate/sub-affiliate setup. 10% to the sub affiliates and 5% to the master affiliate for the first year. Or I could just do a straight-forward affiliate setup of 15%. Which do you think is better and why?

3) Are affiliates generally cool with getting monthly checks that get cut as the accounts pay their monthly fee? I have no way of knowing what my retention rates will be until I get some good statistical data, but I'm going to (wildly) guess that the average customer that signs up for the first month, will keep paying for 1.5 years, so I figure one customer is worth about 1K to me. However, I don't want to to flat rate it at $150. First, the highest price-plan is $250/mo so conceivably 15% on something like that over a year is much more. Second, I'm worried about fraud and a shady affiliate having his buddies sign up for a month and cancelling, leaving me with a net loss.

Thanks for taking the time to read all that.

 

[Rob_TID]

1) You might be able to develop an inhouse system, but it won't be a good one if you do it quickly. Just trust me on that. (EDIT: I just reread that you have already developed one so maybe it would be good - where is it used?)

Go with shareasale. As an affiliate, I know I will get paid. If it were inhouse, I probably wouldn't join unless I knew a lot about you.

2) Depends on what you are selling, but in general, go with the 15% option. Most affiliates just don't bother with recreuiting sub affiliates, but sometimes it's worth it cos it's no extra work on your part and some MIGHT recruit a 2nd tier. Plus usually it's 5% or whatever OF 10% (ie. 0.5%) (not 5% and 10%)

3) Why not 10% per month for the life of the customer? Recurring income is very attractive to affiliates plus you won't lose out.

4) Give Linda a call - she used to offer a free phone consult and she will steer you in the right direction. Hell, it's well worth it if she charges a few hundred bucks for that. She knows what she's doing.

 

[Larwee]

Aaron, in case you don't know who Linda is, this is the person Rob is talking about http://affiliate-marketing-forums.5staraffiliateprograms.com/members/linda-buquet.html

If you scroll down the right sidebar you will see something about the free consultations.

Calls should be between 1 pm and 3 pm Pacific Time. However Tuesday might not be a good day to call. But I will notify Linda about this thread and she will probably post a reply sometime on Tuesday, July 15, 2008.

 

[Linda Buquet]

Hi Aaron,

I do agree with lots of the points Rob made and he knows his stuff too.

I've been out of the office with a major crisis. This week is really booked up as a result. I do have lots of answers for you and no time to type. But we can set up a call for next week in the PM. I don't charge for consultations and you wouldn't qualify to be a client or anything I don't thing, it would just be free advice that could help you a lot.

You do need to set an appointment to reserve my time though.
Please email me at linda AT 5staraffiliateprograms DOT com and refer to this thread so I know who you are and can review your questions before our appt.

 

[akorff]

Thanks!

Just read these replies, and will email you tomorrow, Linda. You are all very nice.

My company developed all the technology for CopierSupplyStore, but Bruce Cooperman over there is brains of the operation. He's a great internet marketer. I just don't want to take any credit for the business logic of their marketing systems.

And truth be told, we bought a third-party system for the affiliate code that I would not recommend, so I won't even name them here. But that gave us a lot of base code, and then we had to make MANY adjustments.

I agree with Rob that we shouldn't develop anything too quickly. We've spent almost a year in hard-core development of the product, and I've definitely taken on the philosophy that we shouldn't do anything even at 90% effort. To that end, I don't want my customer base to grow too quickly because we will be dealing with infrastructure issues as we grow and I don't want to degrade the product. So I don't need to have a full-fledged affiliate marketing upon release (which is targeted for Sept 1).

A little background as to why I want to do it in house as well: The online software (ASP) that we are selling is for those who bill hourly and it handles their time tracking, billing, payroll, etc. So I figure I could give an account on the system to each affiliate and automatically feed it time-tracking information that shows the time their click-throughs spend on the site, and load payment information as invoices that get automatically paid. I'm biased, but I think the site conveys trust, and the product tour shows that it's not a fly-by-night product (Rob made a good point about the issue of trust).

Rob, thanks for the insight on the master/sub thing. I'm almost relieved to hear that because the master/sub model adds a layer of complexity. The more I think about it, I've come to the conclusion that adding a master layer is something that could be accomplished later.

I guess I could do 10% in perpituity. It's just my nature to fear things that are in perpituity because it locks the business into a revenue model that can't be altered.

Thanks again for all the feedback, and I look forward to speaking with you, Linda, and I'll be sure to send an email to lock down a time with you. I appreciate you reaching out like that.

 

[Smaxor68]

Honestly this is a question I think most advertisers ask them self as they jump off the diving board into the affiliate space. My question would be what would the long term goal be to recruit a bunch of you own affiliates? That's a job unto itself. Why not stay focused on building new products and services. Managing affiliates is a lot of work.

On that note there was a time I tried to do everything design, coding, buisness management, negotiations, seo, research..... etc etc. At some point you have to pull to you strengths and focus on them. If you have a long term goal of being an affiliate company I say go for it. If not I'd say leave it to the networks that have hordes of affiliates already. You put up your offer, email goes out and the affiliate managers work with affiliates you don't have to. Then you go back to spending time to improve your product.

 

[akorff]

Great advice

That's what my gut is telling me. I guess my main concern is that I'll miss out on real super-star affiliates. I feel like the best affiliates look for direct deals.

-Aaron

 

[ncmedia]

You've got quite the complex setup so I see the need to go in-house however as noted there are many variables that will work against you. I've published xx programs to date, and this is my personal observation of going fully in-house.

Point form:
* Affiliates are harder to recruit, that darn 'trust' thing is just hard for aff's to default to with in-house merchants. You're right in thinking that many bigger aff's won't touch it.

* You get targeted for mass fraud/chargebacks/refunds/hassles. It's difficult to do quality control with BOTH customers AND affiliates. Make sure you have a logical and lengthy allowance with no overlap/gaps that could make you liable for payments already made.

* If/When you do develop a good base of aff's in the xxx or xxxx range, believe me you're going to need a lot of accounting and policing (perhaps even the accountant ).

* Supporting those aff's without forum or centralized support center is quite difficult (but a good problem to have). Be prepared to have amazing training guides for n00bs, more n00bs will join your program than pros (at least at first), so train them well/fast.

On the bright side, you get to keep a little more money and perhaps have even MORE quality control over your program. I think if you offer amazing analytics, amazing marketing materials and even better conversion ratios, you can in fact do well with your own program, just want to show you some extremes to be devils advocate.

I'd MUCH quicker go through a network, and if you're program is digital/membership based, don't be shy to give your affiliates a LOT more than 10% (I go as high as 75% with my digital stuff). You'll find that aff's will run to your program to test it quick, and if it sticks/converts well, you'll get a good snowball effect with a network that you might not on your own.

My .02. Cheers!
Norb

 

[akorff]

Thanks

Thanks Norb. I appreciate the pointers.