Manage An Affiliate Program - In-House Vs Outsourced

Businesses whether established or fresh are looking at non conventional and efficient mediums to connect to their audience effectively. It’s a perpetual objective for the Marketing Manager & Founders to ensure that the best returns are sought on the marketing spend made. Sometimes you occasionally come across businesses, especially Startups, who are weary about having to incur a high expense initially and research on growth hacks, or cost efficient alternatives inorder to reach out to their targeted audience. This is why the Performance Marketing channel, Affiliate Marketing, has been adopted by a lot of businesses in recent times to help with customer acquisition, and offer the ROI advantage of having to pay only on a Sale or Lead.

However, managing an Affiliate Program is a lot more important than simply starting up a channel. It also depends on what are the goals set by the business on the Affiliate Channel. For instance, are you looking at short term gains or long term gains? Is knowing who your top publishers are, important? Would you have the resources to manage your own publisher base? Do you have the time to invest in nurturing the Affiliate Channel? These are some of the questions that need to be answered before a business decides on how they plan to start up their Affiliate Program.

This brings us to the two methods that are popularly used by businesses to manage their Affiliate Program.

Managing An Affiliate Program – In-House & Outsourced Affiliate Management

Let me start by clearly defining both the independent management styles:

In-house Affiliate Management – this involves the business setting up their own private labeled Affiliate Program. An investment is made in third party Affiliate tracking software which is then used for all Affiliate Tracking and Management purposes.

Outsourced Affiliate Management – this involves the business outsourcing their Affiliate Program responsibilities to a network. The network will comprise of a mix of Publishers/Affiliates that are made available to an Advertiser.

Initially you may come across a lot of Startups that prefer setting up their Affiliate Program with networks given the dearth of important resources. In this case the shortage of time, money and skilled manpower, and the need for immediate results would have a Startup consider taking advantage of the pool of assets offered by a network. However, as a business you also need to assess whether the benefits that you accrue or gain in the short run, are aligned with the goals and objectives that you have formulated for your business keeping in mind the long run. It’s a well known fact that about 80% – 90% of your business coming in through the Affiliate Program is from the 20% top performing Affiliates, and building a rapport and nurturing them is important. You get more control over this through an In-House program.

Furthermore some businesses outsource their program since they feel they don’t have the understanding or skill to drive and successfully manage an Affiliate Program. This is similar to the situation that existed a decade back when the importance of Search Engine Optimization for Google was realized. People had outsourced their optimization activities to agencies believing that it would be easier to have a skilled professional work on the process. But now after seeing the results that organic search can drive, businesses have taken the entire process In-House and use tools and have efficient resources to manage and over see the optimization activities for the business Website.

Similarly it’s a call that new and established businesses need to make about their Affiliate Program. I have listed down some of the Pros & Cons, with regard to managing your Affiliate program In-House and Outsourced; you should then decide what works best for you.

Outsourced Publisher Management aka Affiliate/Publisher Network

PROs

1) Plug & Play – setting up your Affiliate Program with a network gives you the advantage of expediting your setup process. From day 1 of signing up with a network you have all the essential tracking for your Affiliate Program ready and in place.

2) Affiliate Pool – an Affiliate network can give a Merchant access to a ready pool of approved publishers from the get go. Affiliates of all types either proactively or reactively sign up with networks in order to monetize their web property. The network can action a Merchants Affiliate Campaign by publishing details of the campaign to their large publisher base, and the Affiliate can start promoting the campaign immediately with a push of a button.

3) Paying Commissions – the network helps manage one of the most tedious and sensitive tasks of running an Affiliate Program; paying out commissions. There are pay cycles that are pre-decided between the network and the advertiser while signing the contract. These pay cycles depend on the type of campaign that you’re operating. For instance, if you’re running a Lead Generation campaign, it would normally be a 30 Day payment cycle. If you’re running a Sales Generation campaign, and depending on whether you have a trial period, the pay cycle could go upto either 60 or 90 days.

On the payment day, the network will collect the amount from you, and the commission payouts are made to the Affiliate.

4) Insight & Experience – the networks know what work best. They have dealt with multiple campaigns, steered numerous advertiser Affiliate Programs, and might also be operating your competitors Affiliate Program. Setting up with a network can help you get the essential mileage required for your Affiliate Program.

CONs

1) Setup Fees – some networks charge an upfront setup fee to get the advertiser started with their Affiliate Program. This might not be tough to swallow for some of the well established businesses, but it certainly ends up becoming burdensome for Startups given the restrictions they have on their marketing budget.

2) Override Fees – the override fee is the amount that you pay as a fee to the network on every commission that gets paid out. It basically is a percentage of the Commission amount being paid out for every successful Sale or Lead received by the business. The override fee makes it tough for the merchant to incentivize their Affiliates better since a higher Commission amount would mean a higher fee paid out to the network.

This can make the strategizing process expensive for a business given that an additional amount would also have to be paid to the network.

3) No Access to Affiliate – while working with a network the advertiser is not exposed to the publishers that are promoting the advertisers campaign. This is done so keeping the best interest of the network in mind; however, building a relationship with your Affiliates is equally important. When you’re unaware of who your Top Affiliates are you will not be able to devise customized promotions and strategies that can help you achieve your customer acquisition objectives. Moreover, as a business you will be unaware of the type of Affiliates joining your program. For an Affiliate Program to be successful, you need to be continuously recruiting the right types of Affiliates keeping in mind your business.

4) Limited Data – most publisher networks record a very limited set of data. This data is mostly restricted to the number of conversions that have been delivered. Being aware of the number of impressions and clicks being delivered month on month, and by which Affiliate, can lead to better strategic decisions being made by a business.

5) Pattern Driven – most networks end up getting used to a particular pattern to promote their Advertisers. The amount of customization with campaigns and publishers selected will be very less as compared to what an In-House manager can do given the awareness they have of the businesses requirements. An In-House manager can clearly explain to an Affiliate the specifics of the business, and the opportunities available.

In-House Affiliate Management

PROs

1) Complete Access to Affiliate – this allows complete control over which Affiliates get recruited on the system and promote your business. You have a better idea of who are your top performing Affiliates, through the data accessible, and can incetivize them better. You can also filter Affiliates that aren’t performing well, or may not be the right fit for your program and take necessary action.

I have done a separate article that elaborates on the different types of Affiliates that every business should consider while recruiting Affiliates for their program.

2) Better Data Capture – as mentioned in the former point, you’ve access to all the essential data required to manage an Affiliate Program effectively. For instance, you have access to the number of clicks generated, this helps you with information on who are your best traffic driving Affiliates. You also record data on which Affiliates are providing you with the highest number of Leads and Sales which can lead to the creation of better customized offers

3) Better Commission Payouts – it’s always an exciting thing for Affiliates to receive better Commissions than what is being currently paid out. Since there is no intermediary in between the Merchant and the Affiliate, it becomes easy to viably increase the Commission rates and offer better payouts to your Affiliates.

4) Relationship Building – an In-House program helps you cultivate a one on one relationship with your Affiliates. This helps you precisely understand the needs of your Affiliates, and what promotional tactics are working and what isn’t. You can directly discuss and offer exclusive benefits to your Affiliates like special discounts to users coming in through specific Affiliates, really cool landing pages with Affiliate Branding and so on. This certainly helps forge a better relation with your Affiliate.

5) Catching Fraud – the data available to the In-House Affiliate Manager makes it easy for him/her to spot referral fraud that may be done by some Affiliates.

6) Lower Cost – the cost in operating an Affiliate Program goes down drastically. The investment made by the business is only the software, and the salary paid to the individual to manage the Affiliate Program. In most companies, the individual handling the Affiliate Program could also be handling a few more critical Digital Marketing activities for the business. So the cost is essentially divided.

CONs

1) Takes Time – like anything new it does take a while for a business to get the hang of managing an Affiliate Program effectively. It will take time for the business to be able to recruit its best Affiliates, and it does take a few months before the Affiliate can start delivering.

2) Learning Curve – managing an Affiliate Program does require a certain amount of skill which might not be available with resources within the company. Recruiting the right Affiliates for your Affiliate Program requires a certain amount of understanding that networks can offer immediately.

3) Connections – networks have a larger amount of connections with Affiliates which isn’t available with an In-House manager. The network can leverage on those connections to build other connections that help quicken the Affiliate recruitment process for a business.

Conclusion:In my opinion both styles are important for a business when managing an Affiliate Program. The In-House style helps you focus on the 20%-30% Affiliates that are crucial in bringing in around 70%-80% of your customer acquisitions through the Affiliate Channel, while the Outsourced Publisher Management style can help the business recruit the 70%-80% Affiliates that bring in the significant 20%-30% of the revenue.

Have you successfully integrated an Affiliate Program for your business? What is your opinion on both of the styles listed above, and how have they been working for you?

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