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Affiliate Marketing Costs Explained

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When deciding whether to go ahead with affiliate marketing there’s a decision to be made as to whether you choose to join an affiliate network or run your own affiliate programme.

Affiliate Networks

The vast majority of companies choose to join an affiliate network to run their affiliate programme. These networks use technology that tracks click-throughs and sales through cookies and other techniques, and then reports to merchants and affiliates in real time.

Through joining affiliate networks merchants primarily benefit through having immediate access to a large number of potential affiliates, with new affiliate programmes often marketed to affiliates via the form of an email newsletter. Guidance and support from account managers is also often on hand, offering advice on the payouts you are offering and how to get the most from your affiliate programme.

In general, costs for joining an affiliate network as a merchant can be divided into two parts – an initial joining fee and a percentage fees based on sales volume.

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Set-ups fees usually start from around £500, with ongoing monthly fees sometimes charged as well. The set-up fee is charged to cover the cost of integrating your site into the network. This involves a number of tasks, including generating tracking codes, completing test sales, writing your description page, and emailing the launch of the your programme to affiliates.

The percentage fees paid to the affiliate network is a percentage of the commission that you offer affiliates. The industry standard is 30%. For example, if you pay affiliates 10% of the price of every sale that they refer to your site then you’ll pay an additional 3% of the sale price to the affiliate network, resulting in a total cost of 13%.

Cost Overview:

  • Set-up Cost: £500 – £2,000
  • Network Commission (as % of affiliate commission): 30%
  • Monthly Cost: Variable

Bear in mind that the size of the set-up cost is often a reflection of the number of affiliates currently in the network. The more affiliates there are, the more likely it is that sites able to effectively promote your programme will be found, and more successful your affiliate marketing will be.

Affiliate networks also vary in terms of their sophistication, with some only specializing in tracking sales, whereas others also offer click-through tracking, registration sign-ups, and so on. This added flexibility means that you can devise the ideal commissions to attract affiliates to your programme and ensure profitability.

Running Your Own Affiliate Programme

Alternatively you can choose to run your own affiliate programme. This is relatively rare because of the added work involved and the various disadvantages that must be overcome.

Independent affiliate programmes tend to suffer from a lack of credibility and awareness. Affiliates worry that the merchant will understate sales in order to reduce their payouts. This makes it harder to recruit affiliates and in addition to this the merchant has to work hard to raise awareness of their affiliate programme, often by approaching suitable websites directly. Affiliate networks take this workload away as they promote new programmes to their database of affiliates.

The advantage of going independently is that it is cheaper, there are no percentage fees to pay the affiliate network, and the set up cost tends to be less. Software must be purchased, generally costing in the region of £250-£350.

However, if affiliate marketing is vital to your marketing strategy and future growth it is strongly recommended to join an affiliate network.

Graphics

To make your affiliate programme suitable for as many affiliate as possible you’ll need a wide range of buttons and banners that affiliates can choose from to display on their site.

Avoid mentioning your website name on the graphics as this introduces the possibility that affiliates could miss out on sales by web users typing the name of your website directly into their web browser at a later date, instead of clicking on the affiliate link.

Banners don’t cost a huge amount to design. Simple buttons can cost from £5 up to £30 for larger banners.

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