OK. You’ve decided to launch your own affiliate program. As a very first step you’ll need to define the core elements of your affiliate platform. Compensation models, tracking issues, commission levels, etc. Every single “small” element is extremely important in creating an attractive and competitive functional unit that can be aligned with your business objectives, but there are 8 key elements that must be defined for every affiliate program:

1. Compensation model

Affiliate marketing is performance-based marketing. In other words, you’ll pay your affiliates in exchange for generating a predefined qualified action. You can use various different action types or compensation models – even hybrid scenarios – depending on your business goals. The 3 most common compensation models are: pay per sale or PPS, pay per lead or PPL and pay per call or PPCall.

• Pay per sale or PPS: the PPS model is the most widely utilized compensation model in affiliate marketing; this is where you are going to pay only for actual buyers, and this is why is used by more than 80% of affiliate programs; you can choose to pay a given percentage after every generated sale or you can choose to pay a flat commission for every purchase.

• Pay per lead or PPL: this is where you are going to pay for potential customers; your sales are far from being guaranteed and this is why the PPL model usually is used as a secondary payment model in mixed strategies that are combining PPS and PPL.

• Pay per call or PPCall: the pay per call model lately has become a quite popular compensation method, mostly as a component for mixed strategies; is used especially for high-consideration products or services (those with an increased emotional significance for the customer) and can be extremely efficient in closing the gap that exists between offline and online marketing.

Obviously, you have to define precisely each and every so-called qualified action associated with the chosen compensation models. You’ll have to describe as simple and clearly as possible the specific result that must be driven by the affiliate in order to get compensated.

2. Commission rate

Defining an efficient, profitable and sustainable commission structure for your affiliate platform can be a real challenge.

First of all, you have to consider any party involved in a given transaction. It would be a fatal mistake to omit any party who is entitled to receive a share (for example, an affiliate network, an affiliate manager or a second-tier affiliate)! Also, you’ll need to perform a comprehensive competitive analysis to find out the “standard limits” for your industry.

That being said, your first task is to define a base commission and a maximal affordable commission. Once you have these two numbers, you can outline a set of other incentives and performance-related bonuses with a total value representing the exact difference between the maximal affordable commission and the base commission. The recommended gap between these two limits it should be at least 25%! The competitive base commission calculated in accordance with the typical profit margins of your industry is a must. A well-thought-out set of attractive incentives can be easily transformed in a powerful secret weapon that can help you to outrun your competitors. Use activation incentives combined with performance incentives and make them time-sensitive to generate more instant actions! And one more thing: you should always leave some room for growth! In other words: don’t ever neglect the future factor when you start an affiliate program for your business!

Finally, keep in mind that several other – equally important – variables also must be included in the final equation. Indeed, we are greedy by our nature, but the commission rate is not the only truly important factor in this game. A lower commission rate coupled with an outstanding conversion rate is far more effective than a jaw-dropping commission associated with a poor-performing product.

3. Cookie life

You can choose between two attribution models: the first click model and the last click model. In the former scenario will be credited the very first affiliate connected with the customer, in the latter one you are going to pay the commission to the affiliate who placed the last cookie on the user’s computer. In these days almost every important affiliate platform or network is using the “last cookie wins” rule.

I won’t even try to give you an average. Everything is possible. I’ve seen literally everything between lifetime cookies and cookies set up to expire in 12 hours … There are no golden rules here. You’ll have to find out the optimal and most productive range for your yourself, but you should know, that a value under 30 days can be quite discouraging for your affiliates.

I know one thing for sure: an expired cookie won’t generate any profit for you. What I want to say is this: don’t overthink it! Set the cookie lifetime for 365 days and move forward to the next element that must be defined.

4. Locking period

Unfortunately there are many possible reasons that can force you to void a given transaction. These can include failed payment authorizations, cancelled payments, doubled orders, unclaimed shipments, fraudulent transactions, black hat promotional techniques, etc. The locking period is a vital shield for an affiliate advertiser and can be defined as a certain period (for example, 30 days) or as a specific date (for example, the 21st of the upcoming month). My suggestion: use the lowest possible value, in other words, the minimum time needed to validate the transaction on your end.

Again: you’ll need it … but must be used very fairly, because ...

A high reversal rate can kill your affiliate program in a heartbeat!

5. Payments

After expired cookies and voided transactions let’s talk about a component that is without any doubt a major factor for your affiliates and definitely can be an important leverage against your competitors: the payments.

This is also a situation, where you can choose your preferred payment methods and your own conditions without following certain mandatory rules or industry standards, but you should know, that according to AMNavigator …

More than 60-70% of affiliates prefer direct deposits and weekly or bi-monthly payments.

There is only one rule: don’t get greedy! Use a reasonable payment threshold associated with a well balanced frequency and release your payments without delays.

6. Creatives

The well-chosen, professionally designed creatives are literally key elements for the success of your new affiliate program.

You’ll have to invest time, effort and even money in order to develop an impressive, truly diversified creative arsenal and a wide variety of options that can used efficiently by your affiliates in their promotional efforts. If you want results from your affiliates, you have to do your part …

Obviously, there are many types of creatives you could use, but there are three main must-use creative elements that must be defined before launching your new affiliate program: banners, data-feeds, and text links.

6.1. Banners

The banners are extremely important especially if you are going to focus on services. The lack of the data feeds – available for products – must be counterbalanced with a truly efficient set of visual tools.

Here is a list with the most common and popular banner sizes (pixels) you should consider when developing your creative arsenal.

• 728×90

• 720×300

• 468×60

• 392×72

• 300×250

• 250×250

• 254×331

• 234×60

• 160×600

• 125×125

• 120×600

• 120×240

• 120×90

You should create at least 2-3 banners for each selected size, using various eye catchy words, graphics and different color schemes. Is a good idea to try keeping the file sizes somewhere between 30-40 KB. Also, keep in mind that the true purpose of these visual “aids” is not to raise a certain level of interest, but to generate a specific well-defined final action or outcome.

According to Invescpro ...

The average person is served over 1,700 banner ads per month, but only half of them are ever viewed.

What does it mean? It means, that you’ll have to create visuals with real converting power. Include call to actions and focus on banners linked to given well-performing pages, categories, products, etc. Avoid anything – I mean ANYTHING – that could harm your conversion rates:

• don’t use poor, low-quality graphics

• don’t use too small or unreadable fonts

• don’t commit any grammar crimes

• don’t use excessive animations; even better, don’t use animations at all

• don’t use too many colors and choose wisely your color schemes to create contrast

• your banner must be clearly distinguishable from the surrounding – standard – page content; a “gentle” banner border can be very useful

• use color psychology to increase CTR; red captures attention, green increases clicks, blue generates trust and orange encourages action

• don’t use unbranded banners; pay attention to your visual identity

• use fallback images – static versions, different formats, etc – to avoid any possible display error

• don’t forget to create mobile-friendly banners too

Wrapping it up: define and use a wide collection of attention-grabbing branded banners to display engaging content and strong call to action elements; and if you want to be really smart, you can also create custom banners for your affiliates in order to maximize their results (for example, unique copy for better audience targeting).

One last note. I’ve seen several comparisons regarding the importance and the effectiveness of these creative elements and categories … In my opinion it would be a quite big mistake to start ranking your creatives in a given order of importance or significance. Why? Because each one can be incredibly effective or disappointingly inefficient depending on where and how will be used by your affiliates. Just one example: in a B2C environment a data-feed based individual product link most likely will be more efficient than a banner, while in a B2B approach a search box widget will probably get a higher CTR than an individual product link. The bottom line: develop an impressive variety of engaging creatives and let your affiliates to decide on their own promotional strategies.

6.2. Data feeds

These organized lists basically are huge files containing specific product details – image, description, marketing copy, keywords, price, stock availability, etc – about each incorporated item. They are widely used especially by affiliate networks, search engines and comparison websites.

They are extremely popular because they allow affiliates to target specific products or product categories. These data feeds can be imported by affiliates into their websites. As a result the visitor will be able to search, browse, view and compare products right on the given affiliate website! To put it simply, you must offer a regularly updated data feed, especially if you are operating in the retail sector.

In order to find the best tool for your needs, you’ll have to evaluate your options carefully.

While the price is indisputably a major factor, the real challenge is to find the perfect balance between price and benefits; the goals and the needs of a small business owner and an enterprise-level retailer are different, so as a very first step you’ll need to understand and to decide which functionality is really important or helpful for your approach; once you know your exact needs, you’ll be able to find the perfect tool for the best price; also, you should focus on modular pricing opportunities to avoid fixed fees that will make you to pay for inessential or unneeded functionalities.

At functionality and usability level you should pay attention to the following elements:

• Possible IT-requirements (subscriptions, applications, plugins, etc) and/or installation costs.

• Available demo version for testing purposes.

• Available data feed creation options (templates, error correction, regular expressions, auto mapping, custom feeds, excluded products, picture picker, etc).

• Shopping cart integration compatibility and accepted source feed formats.

• Password protected source feeds and encrypted output feeds.

• Available multi-store language versions.

• Variant generation options.

• Data merging ability.

• Product de-duplication method.

• Possibility for scheduled downloads.

• Offered shopping channels (affiliate networks, search engines, comparison shopping, etc).

• Available analytics (cost and product related stats).

• Support quality.

Finally, here are some worth to follow rules for you:

• Leverage the full power of detailed product descriptions; don’t be miser with those wanted and useful details.

• If possible, use the brand name and the most important commercial intent keywords in your product names, but avoid any keyword-stuffing crime.

• Don’t use HTML tags, symbols or special characters in your text.

• Don’t use the very same graphics for thumbnails and closeup images; don’t use watermarked images; don’t use one single image to present multiple products.

• Use common sense in creating a user-friendly category structure; a too broad or an excessively detailed category is useless and inefficient.

• Use Google product data specifications and guidelines for better results.

• Use SEO to optimize your feed especially for large files with a big number of products; if you need professional help, accept the fact and pay for it.

• Tag your links to ensure a more efficient tracking ability.

• Update your data feed regularly to reflect ANY changes that have been occurred.

6.3. Text links

Pretty much the same rules apply for text links as for banners. Just use your common sense to craft and provide enough well-written links to your affiliates. It could be a good idea to define a detailed and well categorized link “inventory” that can be easily browsed and used by your affiliates. Also, you are going to need a bunch of links pointing to the top-performing sections or categories (deep linking).

The bottom line …

The affiliates are representing your sales force; you need to help them in closing more deals and attracting more potential customers; if you want results, you must provide your affiliates with an impressive collection of engaging creatives; more than that, you must provide them with a wide range of marketing aids including not only data feeds or visual elements, but also well-written ad copies, testimonials, social proofs, email templates, etc.

7. Program description

It is a well-known fact: the program description page is usually the very first page to which a new potential affiliate will turn to when looking for a reliable and profitable affiliate platform. In other words, this is your best – and probably unique chance – to create a very good first impression. Your program description page must be attractive, well-structured and filled up with easy-to-digest content. You’ll have to cover every single detail or concept that can be relevant for a new affiliate, including:

• Detailed commission structure and payout policy with clear breakdowns for every level or tier.

• The maximum number of payouts and the exact retribution model used to compensate multiple qualified actions generated by the very same customer.

• The exact cookie life.

• Detailed information on every single available marketing tool – unique set of creatives, data feed solutions, widgets, deep-linking and co-branding opportunities, performance bonuses, tracking methods, etc – used to gain competitive advantages.

• Detailed statistics on your most important metrics including average order value, EPC, conversion rates, reversal rates, etc.

• Detailed and clear information on special terms, conditions or restrictions that affiliates should know about.

And don’t forget …

A well-crafted, outstanding affiliate program description page is the very first step in building trust.

8. Affiliate program agreement

One of the most important legal documents for your affiliate program is your TOS page. It is literally a binding contract between you and your affiliates. You are entitled to include just anything you want, and is extremely important to set up clear rules that will help you to run your program efficiently and to avoid any headache, violation or dangerous, arguable scenario that could harm your brand. You’ll need to define very precisely the responsibilities and the obligations for any involved party.

As I said, you are the plenipotentiary ruler. Here are the most important points that must be included in a solid, comprehensive agreement.

• Detailed merchant rights and obligations.

• Crystal-clear payment conditions and policy.

• Detailed affiliate obligations.

• Required affiliate disclosures.

• Your trademark policy.

• Accepted search engine marketing rules.

• Your policy regarding coupons and discounts.

• Accepted and forbidden promotional methods with clearly detailed restrictions.

• Grant of licenses.

• Limitations of liability.

• Confidentiality issues.