In this guide, we’ll show you how to start an affiliate program for SaaS companies, including what you need to get started and how to promote your program to attract affiliates. We also discuss how to protect your brand and business by implementing standards and best practices.
In this guide:
- What is affiliate marketing?
- Different types of partner marketing programs
- What is affiliate marketing?
- Key players in affiliate marketing
- Why affiliate marketing for SaaS?
- How does affiliate marketing work?
- Different types of affiliate marketing programs
- How to start an in-house affiliate marketing program
- How to promote your in-house affiliate program
- How to recruit affiliates
- Processing payments
- Program compliance and fraud detection
- How to measure the success of your in-house affiliate marketing program
- Technical implementations
- In house affiliate program management for B2B SaaS
Before diving in the details. Lets start with the basics.
Affiliate marketing
An affiliate marketing program is a type of partner marketing in which businesses promote each other’s products or services in exchange for a commission on sales.
Affiliate marketing is a performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts.
An in-house affiliate marketing program is run by companies that have their own products or services to promote. As it’s put together by an internal team, companies have more control and can customize it to fit their needs and match their brand.
These types of programs tend to have higher payout rates than those offered by affiliate networks. Sometimes they are available to a limited number of people.
Affiliate marketing is a great way for businesses to expand their reach and generate more sales. You can tap into a wider audience than you would reach on your own.
As more people get exposed to your business, your brand becomes more well-known and recognizable. This means In house affiliate marketing programs also increase brand awareness for SaaS companies.
- Affiliate marketing is worth $16 billion and growing at an approximately 10% rate each year. (Source: Awin(
- Affiliate marketing is responsible for 16% of global eCommerce sales. (Source: TrueList)
What is Partner marketing?
Partner marketing is a form of co-marketing where affiliates, influencers, and publishers work together to promote products or services. Ultimately, the goal of partner marketing is to expand each company’s reach and increase sales by tapping into new markets or customer segments. When done correctly, partner marketing can be a win-win situation for all involved parties.
Other types of partnerships vs affiliate marketing
Besides affiliate marketing, there are other types of partner marketing programs. Here’s a look at some of the most common.
Referral Marketing
A referral program is a type of partner marketing in which businesses promote each other’s products or services to potential customers in exchange for a referral fee.
The difference with affiliate marketing is that referral marketing focusses on customers that spread the word in their (smaller) circle, in exchange for e.g. company points or a month free access. Affiliate marketing has focus on professional marketers that drive traffic to your website and purchases. You can find more differences between referral marketing and affiliate marketing here.
Influencer Marketing
Influencer marketing is a type of partner marketing in which businesses promote their products or services through social media influencers. Influencers are either paid to post about your product or service or get it free, in exchange for exposure.
The difference with affiliate marketing, is that influencers are usually paid up front for exposure to their audience. Where affiliate marketing is a performance based model, you only pay the affiliate for the sales he/she brought in.
Key Players in Affiliate Marketing
There are three key players in affiliate marketing.
- Merchant
- Affiliate
- Customer
The Merchant
The merchant can also be the creator, the brand, or the seller of a product. They are the ones who offer something to be promoted and sold. Merchants create revenue sharing relationships with affiliates in order to increase sales and traffic to their own products.
The Affiliate
The affiliate is sometimes also called the publisher. They are the ones who promote the merchant’s products in exchange for a commission. They can be an individual or a company.
Affiliates use various marketing methods to generate sales for the merchant. Some common ones include but are not limited to, blog posts, social media posts, and email marketing.
The customer
The consumer is the one who buys the product. They are the ones who ultimately generate revenue for the merchant. For B2B saas companies, these are companies that are your clients.
Why affiliate marketing?
So why should you start affiliate marketing for your business?
An affiliate program can help your brand achieve maximum exposure on the digital landscape. Affiliates nudge your potential customer your way, no matter where they are in the marketing funnel.
Your partners can reach more people in more ways than you can on your own.
Let’s look at the classic marketing model “AIDA.” This model is well known for describing the customer’s journey from awareness to purchase.
Now, let’s have a look at how affiliates can have a role in each stage.
Awareness stage
In the awareness stage, the customer is exploring a niche and products on a more broad level. They don’t have the intent to purchase yet and are just getting familiar with topics related to your niche.
Here the affiliate helps boost your presence, and future customers might get the first glimpse of your brand.
Interest stage
Next, the customer goes into the interest stage. Here, the customer has more knowledge about your product category, and they might be looking for information and solutions.
In this stage, the affiliate comes in as a third-party recommendation; a trusted provider of information on how your products work and what your company stands for.
Desire stage
When the customer arrives at the desired stage of the marketing funnel, they already know they want a solution for their problem.
They are looking for information that helps them choose between multiple companies. Or they want to learn more in-depth what a particular company has to offer.
For customers in this stage, the affiliate offers comparison articles, reviews and information. Pros and cons are provided as well as how the product can work for them.
Action stage
One of the most critical stages of the customer purchase funnel is the action stage.
The customer has gathered enough information to decide to buy the product. In this phase, the customer might use keywords such as “buy”, “get”, or “test” to get some final information.
Affiliates can offer the final push for clients to buy your products. Review and comparison articles are valuable in this stage, so are discount codes and final endorsements for your product.
Scale your digital presence
The content and activities affiliates bring to your marketing strategy affect every stage of the prospect’s purchase funnel. The quantity and quality of promotions you can get from affiliates might not be something you can produce solely with an in-house marketing team.
Having an army of skilled marketers to help sell your brand can have an enormous impact on your internet presence. New audiences will hear about your brand, and you will get organic traffic from multiple new sources.
How does affiliate marketing work?
Affiliate marketing is a commission-based marketing model. This means that affiliates get paid only when they generate sales for the merchant.
There are four main steps in the affiliate marketing process:
1. The affiliate promotes your product
2. The customer clicks on affiliate link
3. The customer buys your product
4. Your affiliate earns commission.
Let’s take a closer look at this process.
The affiliate agrees to promote the merchant’s product or service
The first step in the affiliate marketing process is for the affiliate to agree to promote the merchant’s product or service. In the case of running an in-house affiliate program, this agreement is with your company and is a signed document.
The affiliate promotes your product to their audience
Once the affiliate has agreed to promote the merchant’s product or service, they will need to find a way to market it on their website or blog. This can be done through banner ads, text links, or product reviews.
A customer clicks on the affiliate’s link and is redirected to your website
When a consumer comes across the affiliate’s marketing material, they will click on the affiliate’s link. This link contains a special code that tells your company that the sale came from the affiliate.
A cookie is placed on the customers website to track when a purchase is made. Setting a cookie window can help you bridge the time between a customer doing a trial and purchasing the product.
When you run in-house affiliate program for SaaS, you work with first party cookies. You can read more about affiliate cookies in our article: Affiliate tracking cookie and the effect of Google’s cookie ban.
After the customer purchases the affiliate earns a commission
If the consumer clicks on the affiliate’s link and goes on to make a purchase, the affiliate will earn a commission. The amount of the commission varies depending on the merchant and the affiliate program.
Now that you understand the basics of affiliate marketing, let’s take a look at how to get started.
How to start an affiliate marketing program for SaaS
Here’s what you need to get started with your own in-house affiliate program:
- Program resources
- Affiliate reward model
- Tracking software
Program resources
The first step to starting your own in-house affiliate program is to put together the necessary resources. This includes finding an affiliate manager, putting together a marketing budget, and creating promotional materials.
Your affiliate manager will be responsible for recruiting affiliates, communicating with them, and tracking their sales. They should have experience in running similar programs and be familiar with the affiliate marketing landscape. You’ll need to decide whether to fill this role internally or hire specifically for this role.
Your marketing budget will determine how much you’re willing to spend on recruitment and commissions. Promotional materials can include banners, text links, and email templates.
At Partner Nova we can help you train your in house resources for affiliate management. Or help run your in-house program. You can find all our affiliate marketing services for Saas companies here.
Affiliate marketing reward model
There are three common types of affiliate rewards models:
- Pay-per-sale
- Pay-per-lead
- Pay-per-click
Let’s look at each of these in more detail.
Pay-per-sale
Pay-per-sale is when an affiliate earns a commission for each sale that they make. This is the most common type of commission. The advantage of this type of commission is that it is performance-based. This means that the affiliate only earns a commission if they are able to make a sale.
The disadvantage of this type of commission is that for affiliate marketers it can be more difficult to earn than other types of commissions. This is because the affiliate needs to find customers who are interested in the product and then convince them to make a purchase.
For SaaS companies this is the most profitable model. Since you only pay affiliates for the sales they bring in. It is therefore the most common affiliate commission model for SaaS companies.
Pay-per-lead
Pay-per-lead is when an affiliate earns a commission for each lead that they generate. A lead is usually defined as someone who provides their contact information, such as their email address or phone number.
Pay-per-click
Pay-per-click is when an affiliate earns a commission for each click that they generate. A click is defined as someone clicking on an affiliate link. The affiliate is rewarded for driving traffic without conversion.
Check out our guide on our affiliate attribution model to learn more.
Tracking software
In order to track sales generated from your affiliates’ links, you’ll need an affiliate tracking software. One option available to you is to build your own tracking software. The benefit of this option is that you have complete control over the software and can customise it to fit your specific needs.
The downside of this option is that it can be very time-consuming and expensive to build your own software. If you don’t have the in-house resources to create this, it wont be an option.
Another option is to use a hosted solution. There are a number of companies that offer this type of software. The benefit of this option is that it’s usually less expensive than building your own software. The downside is that you don’t have as much control over the software.
Which option is best for you, depends on your specific needs and goals. If you want complete control over the software, then building your own might be the best option. However, if you want a less expensive solution, then using a hosted solution might be a better choice.
When choosing an affiliate tracking software, you should consider a few factors, such as ease of use, cost, and features. Some of the features you might want to look for include support for multiple languages, integration with other software, and real-time reporting. We created a list of Software for affiliate marketing that work for SaaS and B2B.
Technical integration
Whether you decide to go for third-party software or not, you need technical assistance to link all the transactions. Discuss who will take care of implementing the affiliate attribution and how it will be done.
Also, discuss scenarios when a transaction is counted as an affiliate sale and when it’s not. Will there be a refund window? And what about transactions you need to assign to affiliates later on?
It’s good to start discussing technical implementations early on, as there will be adjustments needed along the way.
How to recruit affiliates for your in-house affiliate marketing program
The quality of your affiliates will have a big impact on the success of your in-house affiliate marketing program. To the greatest extent possible, you want to recruit affiliates who are a good fit for your brand. Someone who will be enthusiastic about promoting your products or services.
To find top candidates, the recruitment process needs to be carefully planned and structured. The first step is to define your target audience.
Define your ideal affiliate profile
Before you start recruiting affiliates, it’s important to have a clear understanding of your target audience and affiliate profile. This will help you attract affiliates who are a good fit for your brand and who will be enthusiastic about promoting your products or services.
Make a list of the qualities you are looking for in an affiliate. Once you have defined your target audience, make a list of the qualities you are looking for in an affiliate. For example, some of the qualities you might be looking for are:
- Current power user and fan of your product (high score on NPS survey can be a great indicator)
- Access to an audience that relevant for your niche
- A track record of successful affiliate marketing
Once you have defined your ideal affiliate profile and the qualities you are looking for in an affiliate, you are ready to start recruiting. However, first you need to find potential affiliates.
Finding affiliates to recruit
So you do you find affiliate for your in house affiliate program? Let’s start with outreach.
Outreach to potential affiliates
One way to promote your in-house affiliate program is to email potential affiliates and ask them to promote your products or services. To find potential affiliates, you can search for bloggers and businesses in your niche using different tools. Once you’ve found some potential affiliates, reach out to them via email and let them know about your program.
There are a number of ways to find potential affiliates. Here are some common methods:
- Search the internet: A simple Google search can be a great way to find potential affiliates.
- Social media: Social media is a great way to connect with potential affiliates. Look for relevant groups on Facebook, LinkedIn, and Twitter
- Affiliate directory
- Existing customers: Another great way to find potential affiliates is to ask your existing customers if they would be interested in promoting your products or services.
- Your competitors’ affiliate partners: If your competitors have an affiliate program, they are likely to have a list of their affiliates on their website. This can be a great way to find potential affiliates.
- Attend conferences and industry events: Attending conferences and industry events is a great way to meet potential affiliates.
Reach out to influencers, experts and educators
Influencers can help you reach new audiences that are interested in your product category. Reach out to them to get them on board.
Dive into social media groups, communities, forums and educational platforms. Find the experts your target group listens to. Check their follower base and what kind of content they create.
For influencers, some criteria to keep in mind are:
- Industry relevance and brand fit
- Number of followers
- Social media engagement
- Website traffic
- Domain authority
Next, you write them a personalized message to invite them to your affiliate program. Introduce your product and make it clear why you think they would be interested in a partnership. Make sure to send follow-up emails to those who have not responded.
Once you’re in conversation with a potential affiliate, you can offer extras such as a free product or discount code to get them on board. You can read more about working with influencers as part of your affiliate marketing strategy here.
More tips in our article How to get affiliates for your affiliate program – 17 strategies.
How to get exposure for you affiliate program
Other ways you to promote your in-house affiliate program:
1. List your affiliate program on affiliate directories
2. Run ads for your affiliate program
List your affiliate program on affiliate directories
There are many affiliate directories where you can list your in-house affiliate program. By listing your program on these directories, you’ll make it easy for potential affiliates to find and promote your products or services.
Run ads for your affiliate program
You can also promote your in-house affiliate program by running ads for it on Google AdWords or Facebook Ads. When creating your ad, be sure to include a link to your affiliate sign-up page so that potential affiliates can easily find and sign up for your program.
Once you have potential affiliates interested, it’s time to start the recruitment process.
Onboarding new affiliates
The onboarding process is the process of getting new affiliates up and running. This includes providing them with information about your products or services, training them on how to promote your company, and setting up their affiliate account.
Sign up and approval
After outreach and recruiting, your sign-up form is the last hurdle to get partners on board. Only ask for essential information and make the form as compact as possible.
Besides basic information such as name, address, and company, you might want to ask:
- Website and social profiles
- Tax information
- Payment method and details
- Country
Your sign-up form also serves as a gateway to filter out unwanted affiliates. This initial information gives you the ability to approve or disapprove your affiliate to the program.
You can either choose to pre-approve sign-ups and screen them later or check each affiliate before letting them in the program.
It is also possible to segment your affiliates by the type of activities they do. For example, if you have an affiliate program in the health niche, you might want to split between marketers and health professionals. You can make this categorization on your landing page or in your sign-up form.
Finally, you should always include the terms and conditions of your program (more on this in the section “Program compliance and fraud detection”).
Welcome your affiliates
After the affiliate is approved, you want to wish them a warm welcome to the program.
Good communication with your affiliates is crucial for the success of your program. So, you want to have a great start.
If you have many affiliates joining your program, an automated welcome email helps you save time. A personal email, however, will be more engaging and will give you a higher response rate.
In the email, you explain the next steps of the sign-up process.
Are you providing any materials? Do you have an onboarding guide?
Make sure your affiliate gets to know precisely how the program works and how they can ask questions.
You can also invite the affiliate for an onboarding call or provide them with an onboarding video.
Provide materials
Whether you’re recruiting experienced affiliates or marketers who just started as an affiliate, give them thorough instructions on how your program works.
An affiliate guidebook or “how to get started” tutorial will shed light on your program. It should include when and how sales are tracked and to what data the affiliate has access.
Besides basic materials on the program and how to navigate the affiliates dashboard, you might also want to provide other information.
This can be information on how to use your products and what your company stands for. You should also provide ready-to-use banners and materials for the affiliate’s campaigns.
Materials you can provide to the affiliate
- Tutorials and guides on how to use your products
- A deck with your company’s value proposition
- Customer case studies
- Marketing materials such as banners, videos and email templates.
Follow up and activate
After you send out welcome emails and materials, make sure to follow up with your affiliates. Regularly check in with them and show interest in their business.
Explore other collaboration opportunities and show them support. Ask them about their needs and open the door to receive feedback to improve the program
Commission structures for In-house SaaS affiliate programs
Commission structures refers to how affiliates get compensated for the sale of products or services. The most common options include the following:
- Percentage of the sale
- Flat fee
- Recurring commissions
- Product credits
Percentage of the sale
This is the most common type of commission structure. You earn a percentage of the sale based on the product or service price. For example, let’s say you’re an affiliate for a web hosting company. They offer different hosting plans that range from $5 to $500 per month.
As an affiliate, you earn a commission based on the plan your referral signs up for. If they sign up for the $5 per month plan, you might earn 5% of that, which is $0.25. If they sign up for the $500 per month plan, you might earn 50%.
Flat fee
With a flat fee, you earn a set amount for each sale, no matter the product or service price. For example, let’s say you’re an affiliate for an online course provider. Each time you refer a student who signs up for a course, you earn a $50 flat fee.
For business, you know exactly how much they’re going to pay in affiliate commissions, regardless the price of the purchase. However you can end up paying a high commission for multiple lower priced purchases.
Recurring commissions
Recurring commissions are based on subscriptions, not individual sales. this option is great for products or services that customers will use on an ongoing basis, such as web hosting or software-as-a-service (SaaS) products. With this type of commission, you earn a percentage of the sale each time the customer pays their bill.
This means that the affiliate brings in a referral and can earn multiple commissions from that referral on future renewals.
Product credits
With product credits, you earn a credit for each sale that can be used to purchase products or services from the company you’re promoting. For example, let’s say you’re an affiliate for an online retailer. For each sale you generate, you earn $5 in store credit. You can then use that store credit to purchase products or services from the retailer.
Business who offer product credits do so because it’s a way to give back to their affiliates. It’s also a way to keep affiliates engaged, since they can only use their credits to purchase products or services from the company they’re promoting. The downside is that many affiliates are interested in money over company credits.
What’s the best commission structure for you?
The best commission structure for you will depend on your sales goals and the products or services you’re promoting. If you’re looking to generate a lot of sales, a percentage of the sale commission structure may be the best option. However, if you’re promoting high-priced products or services, a flat fee commission structure may be more beneficial.
For SaaS companies, recurring commission usually fits best with their subscription model.
Affiliate programs have the great benefit of “no cure, no pay.”You only pay affiliates for the desired results, usually sales.
Although there are other upfront costs for running an affiliate program, such as hiring an affiliate manager, buying a software subscription and investing in marketing tools and campaigns for recruiting affiliates; The profit margin is, in general, still higher than other marketing channels.
It’s a good idea to research how your competitors pay commission. This will give you an idea of what’s standard in your industry and help you determine what type of commission structure will be most attractive to potential affiliates.
Learn more in our guide Affiliate marketing compensation models for SaaS.
Processing affiliate payments
How you process affiliate payments can impact the success of your program. There are a number of factors to consider when putting together your payment process. These include:
Payment processor
A payment processor is a company that helps you process payments.
If you decide to create your own in-house affiliate software. You need to link up with a payment processor to do your commission payments. Examples PayPal or Stripe.
A payment processor can provide:
- Ease of use – you want a platform that is easy to use and understand.
- Fees – you don’t want to be charged hidden fees or exorbitant rates.
- Speed – you want a platform that can process payments quickly and efficiently.
- Security – you want a platform that is secure and protects your customers’ data.
- Payment reconciliation – you want a platform that can help you automatically reconcile your payments and keep track of your sales.
The best way to find a payment processor that meets your needs is to research and compare a few options. When you have chosen a payment processor, you will need to set up an account and integrate it with your website and own affiliate management software.
When you choose to use a ready affiliate software (third party), they often come with 1 or more payment processing options. If your company finances and purchases only run on certain payment processors, you want to make sure it’s compatible with your affiliate software provider.
The processing of payments is something you want to set up as smoothly and reliably as possible.
Paying timely and accurately helps build the relationship with affiliates. You want to pick a regular day of the week, month or quarter on which the affiliate can expect to receive their commissions.
Most affiliates prefer to get paid frequently rather than wait several months to collect their earnings.
Stages of affiliate payments
The following stages are important before paying the affiliate:
You want to have a payment process in place before you kick off your program. While the overall processes can vary, here are a few key components to consider:
It should outline the various stages of the payment process. For a secure process, include the following stages.
- Customer purchases a product or service
- Check for refunds against the customer’s order.
- Review the affiliate’s activity to ensure they are in compliance with the terms of your program.
- Calculate the commission owed to the affiliate and reach the treshold.
- Send the affiliate their commission.
- Audit the entire process regularly to ensure accuracy.
Refund policy
You will also need to decide how you will handle refunds. Do you offer a full refund, a partial refund, or no refund at all? This affects affiliate commissions. For example, if an affiliate refers a customer who later requests a refund, the affiliate may not receive a commission for that sale.
If you honor the customer’s request and have already paid the affiliate, you’ll end up losing money. So, it’s important to have a clear refund policy that is communicated to affiliates and customers.
You commission window should be in line with your refund window. For example, a subscription based company has a 2 week full refund policy for customers. Therefore the affiliate has a 2 week commission attribution window. Only 2 weeks after purchase, the commission will be credited to the affiliates account.
You also want to monitor the number of refunds linked to each affiliate. If an affiliate has a high number of refunds, they may be an issue. For example, they could be using deceptive marketing practices or fraud.
To avoid this, you can set a maximum number of refunds for each affiliate. If they reach that limit, you can flag the case to investigate the affiliates promotion activities.
Payout schedule
The payout schedule is the frequency with which you will pay affiliate commissions. The most common options are weekly, bi-weekly, and monthly. Choose a schedule that is convenient for you and your affiliates. And one that fits your customer refund window.
Make it Easy for Affiliates to Get Paid
I’s important to make sure your affiliates are getting paid promptly. There are a few things you can do to make sure your affiliates are getting paid on time:
- Set up automatic payments
- Offer early payment for high-performing affiliates
- Use a reliable payment processor
- Keep your affiliates updated on when they’ll get paid
- Address any delays promptly
Payment threshold
The payment threshold is the minimum amount that an affiliate must earn before they are eligible to receive a commission payout. For example, if the threshold is $100 and an affiliate only earns $50 in commissions, they will not receive a payout until they reach the $100 threshold. The earned commission will stay in the affiliates account untill threshold and the next payment day is reached.
The country you are located in
Where your company is headquarter can also affect your payment options. You need to be aware of the laws and regulations in your country that apply to how affiliates get paid. Taxes on affiliate commissions, are the affiliates responsibility and you might want to include some information on taxation in your affiliate onboarding.
Program compliance and fraud detection
Affiliate marketing fraud can divert your organic traffic, damage your brand and defraud customers. With the right fraud tools at hand you can save your company money and filter fraudulent affiliates from quality partners.
Fraud In Affiliate Marketing
Fraud in affiliate marketing takes many forms. Here are some of the most common:
Self referral
One of the most common types of fraud for in-house SaaS affiliate programs, customers who sign up as an affiliate to receive a discount on their purchase.
PPC Fraud
PPC fraud entails all fraud made through paid advertisement. This includes bidding on branded keywords, and pretending to be the company by copying ads. You want to make sure to state the rules about paid advertising clearly in your terms and conditions.
Incentivized traffic
Incentivized traffic fraud occurs when an affiliate offers incentives, such as cash or prizes, to get people to click on their affiliate links. It also happens when a fake discount code is promoted to customers looking for a discount. The browsing customer end up clicking on the link with the fake discount, and get redirected to the company page through an affiliate link. More about coupon and discount affiliate marketing here.
Sales Fraud
Sales fraud happen when an affiliate generates fake sales in order to earn a commission. It may be that the affiliate uses a stolen our fraudulent credit card to purchase product through their affiliate link. A commission window that is aligned with your refund window can help prevent these commissions.
Misleading domains
Misleading domains are used when an affiliate registers a domain name that is similar to your brand’s name but with slight difference in spelling. For example, if your brand name is “XYZ Widgets,” an affiliate might register the domain name “xyz-widgets.com” in order to get traffic from people who mistyped your brand’s name.
I’s crucial that you have a compliance and fraud detection strategy in place from the start. First, it will help you avoid paying commissions to affiliates who are not following the terms of your program. Second, it can also help you identify any fraud that is taking place.
Having a good compliance policy also helps the affiliate understand the limits of and rules of your program.
How to Detect Affiliate Program Compliance and Fraud Issues
There are a few different ways to detect if your affiliate program as compliance it fraud issues
Manual review
This involves manually reviewing affiliate’s website to ensure that they are following the terms of your program. This can be time-consuming, but it is an effective way to detect compliance issues. This is especially needed when you suspect a misleading domain or misleading communication.
For self referrals, you can easily check them by comparing the end customer details (referral) with the affiliate’s information. If they match it is a self referral and you can go ahead by either asking more information from the affiliate or declining the commission.
Automated review
This involves using software to automatically review affiliate websites for compliance issues. This method is less time-consuming than manual review. However, it is not as effective. There are several tools on the market to automate affiliate fraud detection.
Commission and traffic tracking
This involves tracking which affiliates are generating sales and traffic. And compare that data to the commissions you are paying out. This can be effective, as you can detect unnatural looking spikes in sending traffic and referrals to your company website.
If you notice an affiliate is highly active but you don’t have a clear view of how they promote your product, its good to contact them for more information. That way you know if they follow the rules of your affiliate program.
We dedicated the article Affiliate fraud detection in your SaaS affiliate program to all matters relating affiliate compliance.
Creating a Compliance and Fraud Detection Strategy
There are a few things to consider when developing your compliance and fraud detection strategy:
- Define what actions constitute a violation of your terms and conditions. For example, if you don’t want your affiliates to use incentivized traffic, make sure to include that in your terms and conditions.
- Develop a process for monitoring affiliate activity.
- Enforce your terms and conditions consistently.
- Take action when you find an affiliate in violation.
Create an affiliate agreement that outlines the terms and conditions of your affiliate program. To ensure the agreement is effective, keep the following in mind.
- Be clear and concise. Avoid any language that could be misinterpreted.
- Include a detailed description of what constitutes a violation of the terms and conditions.
- Outline the consequences of violating the terms and conditions.
- Make sure both you and the affiliate sign the agreement. Don’t forget to date it.
- Make sure it is legally binding. Consider using an attorney to review the agreement.
- Review and update the agreement regularly. Be sure to update your affiliate partners promptly when there are any changes.
You can find a template of affiliate terms and conditions in our article How to create affiliate program terms and conditions.
How to measure the success of your in-house affiliate marketing program
Once your in-house affiliate marketing program is up and running, you’ll want to monitor its performance. This is important for a couple of reasons. First, you’ll want to make sure that your affiliates are actually generating sales and driving traffic to your site. Second, you’ll want to ensure that your program is providing you with a good return on investment (ROI). Lastly, measuring the performance can help highlight any areas that need improving.
To measure the performance of your affiliate program set goals and use key performance indicators (KPIs). There are a few KPIs that you should track in order to gauge whether your program is successful. These include:
- Conversion rate
- Average order value (AOV)
- Number of sales
- Return on investment (ROI)
- Number of active affiliates
- Number of dormant or lapsed affiliates
Here’s a look at each metric in detail:
Affiliate conversion rate
Conversion rate is the percentage of consumers who click on an affiliate link and make a purchase.
Measuring the conversation rate can provide valuable insights into the effectiveness of your affiliate marketing program. First, if you see a low conversion rate from traffic to sign up, it could be indicative of a number of issues, such as low-quality traffic or obstacles in the customer purchasing flow. Second, a high conversion rate could mean that your affiliates are doing a good job of driving targeted traffic to your site.
Affiliate conversion rate from sign up to sale should be compared to company conversion rate to check for any differences. The affiliate conversion rate should be similar to the company overall conversion rate. If not it may also indicate problems in the technical attribution flow of the affiliate commission.
Average order value (AOV)
Average Order Value (AOV) is the average amount that consumers spend when they make a purchase on your site. AOV can be a helpful metric for a few reasons. It can help you see how much revenue your affiliate marketing program is generating and which products are most sold by affiliates.
It can also help you compare the performance of different affiliates. As your affiliate program grows you might want to segment your affiliate base and have a different approach for affiliates that bring you e.g. enterprise deals vs core deals.
Lifetime value of referred customers
The lifetime value of a customer is a prediction of the total amount of money a customer will bring to the company before they stop buying the product. This value is based on a forecast of how long you can retain your customers.
To make an accurate calculation, you need to take into account your company’s churn rate, average revenue per user (ARPU) and profit margin.
Once you have your best estimates, you can use the above formula to calculate the customer lifetime value.
The customer lifetime value will tell you how much profit an average referral brings in. It is also an important number to forecast your program’s profitability.
Number of sales
The number of sales is the total number of transactions generated by your affiliate marketing program. This gives you insight into how effective your affiliate marketing program is. You can then calculate how your affiliate channel stacks up against other channels in your company.
ROI
Return on investment (ROI) is a measure of the profitability of your affiliate marketing program. ROI can help you see how much money you’re making for each dollar that you invest in your affiliate marketing program. The higher your ROI, the more profitable your affiliate marketing program is.
To calculate your ROI, you’ll need to know two things: your total investment and your total revenue. Your total investment is the sum of all the money that you’ve spent on your affiliate marketing program. Your total revenue is the sum of all the money that you’ve earned from your affiliate marketing program.
Number of active affiliates
The number of active affiliates is the number of partners who are actively promoting your product. This metric can be helpful because it shows you how many people are interested in promoting your product. When running an in house affiliate program, the goal to grow the number of active affiliates. Not just the number of total affiliates.
In general active affiliates are defined by making at least 1 sale per month. We can then look at the percentage of active affiliates per month and see if our affiliate activation methods have affect on our sales.
We gathered the best tips to make your affiliate active in the article How to get affiliates to sell your products
Number of dormant or lapsed affiliates
Dormant or lapsed affiliates are affiliates who have not promoted your product for a long period. This metric can be helpful because it shows you how many affiliates are no longer interested in promoting your product.
It’s important to monitor this metric so that you can take action to keep your affiliates happy and engaged. After all, engaged affiliates lead to more sales and more revenue.
In house affiliate program management for B2B SaaS
Running a SaaS affiliate program is a great strategy for increasing sales and brand awarness. While you only pay commissions for sales vs leads (no cure no pay).
Affiliates help you to create brand awarness and increase your reach through their audiences. For any starting SaaS program getting access to a wider audience to introduce you products in great.
The subscription based model allows you to create an interesting an affiliate compensation model for your partners. Most SaaS companies choose recurring affiliate commission to incentivise their affiliates.
You can find more info on B2B affiliate marketing in our article: Affiliate marketing for B2B: how does it work?
We hope this guide to in house affiliate marketing is useful to you. Don’t hesitate to contact us if you have any questions about running an in-house affiliate marketing program.