Until late 2009, Groupon was considered a massive failure. If you looked at their Alexa rankings before 2010, you would notice they had very little traffic.
Fast forward to the end of 2010 and their traffic exploded… and there was even speculation that Google would buy Groupon for $5 billion dollars.
Groupon eventually turned that offer down and went on to float the largest IPO by a web company since Google.
What accounted for that huge turnaround? Two words: “affiliate marketing.”
Why Groupon grew so quickly
Groupon owes a huge debt to affiliates.
And one important part of their strategy was to cut out the middle men, affiliate networks like Commission Junction and the Google Affiliate Network, which took huge cuts from the revenues generated.
Instead, Groupon focused on creating relationships directly with affiliates.
Key takeaway: Unlike most marketing channels, you only pay per transaction with affiliate marketing. In other words, you only spend money when you make money, which makes it easier for small businesses who are cash constrained to grow.
What it looks like to be a daily deal affiliate
Lets pretend you are a social media nut with a Twitter following of 40,000 and a social media blog with a subscriber count of 11,000. You’ve joined Groupon (and a handful of other daily deal sites) as an affiliate, so each day an email is sent to your inbox with the daily deal.
When these deals are relevant to your audience you share it. Obviously, you include your unique affiliate links and watch the money pour in.
Now, you probably won’t be able to retire off of this income…but it’s not chump change either. You can stuff it away for that trip to Las Vegas or your kids’ college education.
Key takeaway: It’s easy for anyone to become an affiliate. Because of Twitter, Facebook, and for the social web you don’t have to own a website to be an affiliate.
How they made life easy for affiliates
Groupon knew that if you made things hard for affiliates they wouldn’t promote your company. So they made things really simple by giving you banners for you to place on your websites or blogs. The beautiful thing about their banners is that they changed with the deal of the day.
Everyday your website traffic is exposed to these deals…all tied into your affiliate ID. And because these ads change on a daily basis and are tailored to your audience, they convert better.
Can you see why joining Groupon’s affiliate program would be attractive? That’s why Groupon took off.
Key takeaway: If you make things hard for your affiliates, no one will want to promote your program. In addition to that you have to be creative as people have banner blindness. Groupon did this by showing new deals in their ads each day and by making them targeted to each website visitor.
How to develop great relationships with affiliates
I’ve found that in my own experience and the experience of my client’s that there is huge value in creating relationships with the right affiliates.
But how do you find those relationships?
- Bloggers – Approach some individual bloggers who are aligned with your product and industry and ask them if they would be interested in being an affiliate. And don’t just target big-name bloggers. A hundred mid-to-small range bloggers can drive as much quality traffic…if not more…to your site.
- Social media – Like your approach to bloggers, hunt down some mid-to-small range social media enthusiasts who might be interested in joining your program.
- News sources – Ask those who run sites that develop original news stories (TechCrunch) or aggregate news (like Huffington Post) to talk about your affiliate program. Most big news sites won’t write about it, so you will probably have better luck approaching mid-to-small range news sites.
And when approaching these people, make sure you spell out the benefits…in other words, why they should care to join your affiliate program or talk about it.
Key takeaway: Don’t expect affiliates to come to you. Go out there and recruit them by building relationships.
Setting your affiliate program apart from the crowd
Around 2007, entrepreneur Mike Geary, of Truth about Abs, joined the Clickbank affiliate program. He quickly noticed that most affiliates were paying out 35 to 50% to their affiliates.
Because Mike was selling a digital product, he decided to raise his commission payout to 75% since he didn’t have any overhead (and it’s the maximum you can pay out to affiliates).
That might sound excessively generous…which it is. And you might wonder is if you can actually make any money off that.
Well, immediately hundreds of affiliates noticed his generous payout and switched their traffic to point to his website.
Out of more than 10,000 products being sold on Clickbank, in just a few months Mike’s product shot up to being the number one sold, which naturally brought more attention to his product.
According to Mike, his monthly revenue is around $1,000,000. Yes, that’s one million dollars…a month. That’s what happens when you have a great product and promote it properly by standing out among affiliates.
Key takeaway: The affiliate world is a crowded space and your program is competing with all of the other affiliate programs out there. You have to think like an affiliate and ask yourself “why would someone promote my program over a competitors?” In most cases people will promote your program if you offer higher payouts.
How to start your own affiliate program
So, want to start an affiliate program? Well, here are five things you need to think about.
1. Look at your current audience
The key to getting your affiliate program off the ground is to find the right affiliates for your brand. You should start by looking at your blog subscribers, email newsletter readers and social media followers. These people have been exposed to your product for quite some time and probably have even paid for it. Identify those who will make good targets.
2. Define how you will market your affiliate program
If you want a successful affiliate program, you have to market it outside of your current user base. This means you have to look outside of your blog subscribers, email newsletter readers and social media followers. Affiliates won’t just randomly come to you. You have to recruit them.
- One approach is to go out there and find affiliates on your own. Hunt down bloggers and website owners who could promote your product or service. Also look for people who have email lists as some of the people on their list could benefit from your product or service.
- Another option is to go through networks like Epic Advertising and have them recruit affiliates for you. They already have thousands of affiliates in their system and they can plug you right in with relevant ones. Keep in mind though that affiliate networks take a middleman fee.
- You could take a middle road and do a bit of both. This is the route that most companies go.
3. Understand how to drive traffic
You will fail at your efforts if you don’t understand what it takes to generate traffic. I know, it’s your affiliates driving traffic to you, but if you can’t help them succeed then you won’t succeed. So you have to know what they will be getting themselves into.
- Find the secrets -Â I’ve written about this a lot and have even created a product that is designed to drive massive traffic to your site using SEO, content marketing social media and email newsletters.
- Diversify your traffic – Make sure your traffic comes from more than one place. If you lose one stream you won’t immediately go under. This means you can’t just rely on affiliates.
- Use paid traffic – Drive paid traffic using tools like Google AdWords or ReTargetter is a great way to figure out what converts for you and what will potentially convert for your affiliates.
- Build relationships with bloggers – Like I mentioned above, your best route is to develop relationships with some serious bloggers. As they can drive tons of traffic and push a lot of sales.
4. Announce the program
Once you’ve understood how to drive traffic, your next step is to announce your affiliate program. Here’s a template I like to use:
- Blog post – Write a blog post that explains your affiliate program. Share it throughout your social media network.
- Social media – Schedule tweets and Facebook posts using Hootsuite that will pepper your audience with opportunities to join your affiliate program.
- Email – If you have an email newsletter list, shoot them an email announcing the program. Plus, don’t forget to email all of your contacts and let them know about it!
- Guest posting – Write an article about a topic that is relevant to the audience of the blogger you are going to write for…and then figure out how to weave your affiliate program into the post (assuming they are ok with it).
- Directories – Publicize your affiliate program on directories like OfferVault, PointClickTrack or  5 Star Affiliate Programs and even go after relevant forums.
In the end, it’s not about how many affiliates you have…it’s about the quality of those affiliates. A handful of enthusiastic, driven affiliates are worth way more than a bunch of lazy affiliates who do nothing.
5. Measure your results
This is such an important step because you can’t grow something you aren’t measuring. So, use your analytics tool (read How to (Finally) Make Your Web Analytics Work for You and Which Web Analytics Is Best for You…and Why for more information on web analytics) to figure out what is working and what is not working
Here are some questions you should ask yourself:
- Which affiliates are driving the most traffic? – Can you encourage them to drive even more? It may be a huge site who is putting minimal effort into your program. If you dangle some incentives out there to the site owner, he or she may only have to put in a little more effort to double your traffic. Get them to throw their whole weight behind it…and you could explode!
- Which affiliates are driving the least traffic? – Can you encourage them to drive any? Are they worth your time? Should you even cut them off?
- Is the revenue worth it? – Are you getting a ton of complaints and refund requests? Some affiliates will drive customers who won’t be happy. Find out which affiliates are driving you good customers and cut off the ones that are driving you bad customers as you can lose money.
One of the main reasons it’s so important to figure out what works is because you need to reinvest in the things that are working and cut off the ones that aren’t.
Conclusion
Groupon harnessed the power of direct relationships with affiliates to go from nearly being broke to becoming a powerhouse that attracted over $700 million dollars for an IPO. And I don’t believe that kind of success is limited to a company with hundreds of employees, because you also see it in the success of Mike Geary and his “Truth about Abs” company.
What’s most encouraging about Groupon’s success, however, is the amount of time it took to grow so big. We’re not talking a decade or even years…but in reality were just talking about one year.
But don’t think that it’s easy because if it was that easy everyone would be doing it. Creating a good affiliate program will take a lot of blood, sweat and tears…
Did I miss any affiliate marketing secrets that should be shared?
This amazing course will teach you, step by step, how to double if not triple your traffic over the next 30 days.
This is one of the best deal, one can have an affiliate business to grow over a period of time, groupon has become biggest in this niche vertical & recently they have started acquiring small companies, as they are cash rich guys. All the best guys for starting your affiliate program with groupin
)
Definitely, Groupon has done well in their niche. Hopefully you have been able to take away a few tips from here on how to start doing the same.
This proves that a great idea can be transformed into something huge if you know how to apply it. We have to learn from these kind of ideas and maybe we can have a great idea also.
Yep, it is all about execution.
This is great info Neil, thank you so much, my head is spinning with ideas stimulated by your email. I market health & nutrition products and this would be great. I already do a referral fee to (face to face) customers. If they get teir program AND tell 4 people that buy, their next program is free. So now to figure out for affiiliates online.
If you’re talking about platforms (for taking your affiliate program online), the ones to look out for are Clickbank, ShareASale and Comission Junction.
Thanks Gregory, I appreciate you sharing your recommendation.
Awesome, glad to hear it. Let me know if you have any questions along the way.
Kay,
Some shopping cart software has affiliate programs built in like EJunkie.
If you are running WordPress there are many premium plugins that allow you to run your own affiliate program as well.
Some options are:
WP Affiliate Platform
http://www.tipsandtricks-hq.com/wordpress-affiliate-platform-plugin-simple-affiliate-program-for-wordpress-blogsite-1474
Magic Affiliate
http://www.magicaffiliateplugin.com/
Affiliate Royale
http://www.affiliateroyale.com/
I have not used any of these solutions, but it would cut out some of the fees taken by third party solutions like Clickbank.
Thanks Johnny for sharing these links with everyone.
As always, great information and something everyone can benefit from. Affiliate marketing is such a gold mine when done properly, although most people for whatever don’t get it right. Thanks for the info on Groupon’s affiliate program as well, I looked at it awhile back and will take another hard look as well.
I use a similar model with ClickBank, where I pay out 60% commissions for my Microsoft Project 2010 training series (www.msprojectvideos.com), and have done well with it. Offering higher payouts is a no brainer I think, especially for digital products as you mentioned. You get customers you wouldn’t have had otherwise, and it costs you nothing to acquire them. It’s win-win for everyone. I’ve been happy with ClickBank so far, especially once you switch over to their direct deposit payment method.
I’m interested to hear what other affiliate networks people use and have had success with (as a product producer).
Thank you Christopher,
Definitely, affiliate marketing can be extremely beneficial when utilized properly. Sounds good I hope you do take another look into it and see if you can benefit from it.
Thanks for sharing what has worked best for you.
Groupon’s success story shows us that it’s not enough to have a good service or products without having a great business vision.
Thanks, Neil.
Yep, you have got it. You need to have direction if you want to succeed.
Groupon is leading marketer in online his success story gives clear view for our business promotion
Definitely, I agree.
Groupon team done an smart way to market their business really Inspires me
They are good at what they do. Just look at their market cap.
I really love this idea. On top of everything, it is all about content marketing. It is all about how we pitch ideas to grow our business.
Another awesome post by you Neil, just like always.
Thank you Tim,
It is all about content and like you said, hot to “pitch” business ideas that will be beneficial to growing the company.
Having run a new affiliate program, I can say this info is spot on.
Awesome, glad you agree.
Interesting one Neil, nice touch adding the takeaways to neatly sum things up, I do that when reading naturally (even when they aren’t included) to help with retention.
Thanks for the feedback, glad you like the takeaways.
Thanks for sharing Neil. I started my own affiliate program this year and I’m starting to see some big cash
One quick question? what are you using to show the slide on the right? is simplereach or your custom? I want to add something similar to my site.
Cheers
Jorge
That is great to hear. Keep it up!
The slide on the right is custom.
Great post,
I like to try for affiliate from my blogging journey. But banner affiliate links seems to be not working so well recently. Review post converts better.
Thanks for the post
Thank you Okto,
Interesting, thanks for the information.
Affiliate marketing is best way to earn more in quick time, but it’s not as easy as it looks. First of all you like to have affiliate program which gives you more commission on each sale and you have to pay less on your commission. I also heard about “ClickBank” and I heard they too don’t charge huge amount, though I haven’t used them.
Definitely, nothing worth doing ever comes easily. I have also been hearing good things about ClickBank, from those readers that comment about it. Perhaps you should look into it. If you do let me know what you think.
Its been a year i started blogging. The only program is use till now are adsense, buysell, social spark. Just wanted to get into affiliate marketing. Needed tips for that. Neil this article was pretty useful . Its beautifully written. Thanks for sharing.
Thank you Ankit,
Glad this article could help.
Great piece on affiliate marketing Neil, U always manage to post content which is short, simple to follow and easy to implement !
Thank you Anurag,
I appreciate the kind words. Thanks for reading Quick Sprout.
Great article Niel. I have been considering an affiliate program for a new product I am developing and this post helped clarify some of the questions that I had regarding affiliate programs. I was considering using zferral for developing my affiliate/partner program, does anyone have any feedback on using zferral? Good? Bad?
Thanks Raph,
I have not heard of zferral… Hopefully someone else here can help you out. If you learn anymore about if let me know what you think.
Very great article on affiliate marketing,till now i haven’t started any affiliate program. I have got an idea about this. let me try it Neil.
Thanks, Definitely look into getting started. You could really benefit from affiliate marketing. Let me know what you think.
The Groupon is an excellent medium for the affiliates to grow with the business in the market.
Yep, I think so too.
What about cutting out the middle man (Clickbank, Commission Junction, etc.) and working directly with affiliates? Is that too much work to be worth it?
That could work if you can manage to get to the direct source. It definitely could be worth your time if you get the right price.
Excellent Post !! . It is very helpful for everyone who think about to start a successful Affiliate Marketing Program.
Thank’s
Neil
Thanks Pavan,
I hope these tips have helped you.
I think they have a very good business model.
Yep, they definitely do.
Great post Neil,
I dont think many internet marketers especially the ones in the infant years appriciate the power of affiliate marketing. They see all these big companies and individuals having all this success and driving loads of traffic. And quickly assume that they need to hammer the social networks, blog posts, ppc and get loads of back links, when ironically a lot of the time these guys attentions are simply on developing and harnessing their affiliate networks!
Will be interesting to see how Groupon evolves over the next couple of years?
Yep, it should be interesting to see how Groupon does in the coming years.
Well written Neil.
Many small businesses are still unaware of what Affiliate Marketing is, let alone what it can do for them. I come across this when I try to explain our affiliate network to them. I think there are several hurdles to overcome (in addition to what you mentioned above about finding affiliates):
– Merchants have to “discover” or be open to learning what affiliate marketing is.
– Merchants have to be convinced of the benefits.
– Merchants don’t have a lot of time to give to setting it up and running an affiliate program.
– Merchants have to realize that paying a small commission for a new sale (which they wouldn’t have otherwise got) is better than not getting that sale at all – even where margins are tight. That can be hard for many to get over.
Still, many merchants reap the rewards when they take the plunge.
Definitely,
You make some great points. Thanks for sharing your added insight on the matter.
Hi Neil,
Which software do you recommend for managing the affiliates and tracking their sales?
Thanks!
Hey Eric check this link out,
http://www.hasoffers.com/
Neil you missed a trick to show how the affiliate system works by getting your affil tracking code on the Has Offers link!
Great article thanks
Knowing that having some type of affiliate program is a natural evolution in this business I reworked a plr product and recently got it approved on JV Zoo for affiliates to promote offering one hundred percent commissions on the front end and fifty on the oto, but so far haven’t gotten any takers.
Though it hasn’t been up long I still feel an urgent innate pull to get some strong affiliates to test the waters so to speak yet am having some difficulty with that
But its inspirational true stories like these that help me to keep pusing, thanks!
Just keep the program up, sometimes you have to be patience. It can take a while before you see results.
Neil,
Same goes the question Eric asked..
Hey Bobby, check out the link I left Eric.
Tips are excellent for the beginners of the affiliate marketers because these will help them to understand basis of the affiliate marketing.
Thanks, hopefully they have been beneficial to you.
Awesome stuff Neil. Are there any other sites that help you set up your own affiliate program besides hasoffer?
Secondly, how do you make an informed business decision to either go with making your own affiliate program versus using a network that already exists like CJ or clickbank from someone who has no experience in both?
I am sorry but I am not sure. :/
Secondly I would try a bit of both and see what works best.
I think using affiliates is one of those overlooked strategies that many small businesses overlook. I really like how AppSumo uses these principles to encourage customers to promote their products by giving them a referral incentive.
These principles can also be used to grow your email list.
List Eruption (http://listeruption.com) and WP Subscribers (http://www.wpsubscribers.com/) are both premium plugins that allow you to reward new subscribers for referring their friends by offering multiple incentives for different milestones.
Thanks Johnny for your added input and for sharing some links with everyone.
Absolutely right and well written, Neil.
I agree about the power of affiliates. You really gave important tips on how to achieve great results just like Groupon did. I think if someone focuses a lot of energy on affiliates, they can achieve even better results than just advertising or even doing SEO. We have the story of “The truth about Abs” guy making more than a million dollars monthly just from the power of leveraging on his affiliates!
Awesome, glad you agree and thank you for your added input.
Actually Groupon’s affiliate program may harm its website too as there are people whom abused the system just to earn some quick referral commissions. I don’t think Groupon disallow that.
Groupon is an amazing site for affiliates and users alike. The name recognition alone drove people to my Wife’s offer in Mass.
Great, glad it has been useful for you.
Another great post from you, Neil. I’m seriously considering looking into affiliate marketing after reading this article!
Thank you, definitely give it a try and see how it works out for you.
Services like Clickbank to promote eproducts are really a great tool to increase your sales and visibility.
Yep, you have got it.
This is very helpful…affiliate marketing is a hard thing to learn
Thanks, I am glad these tips could help.
Everything (apart from the business model, ironically) about this company is impressive. People can learn a lot from their growth if they ignore the obvious elephant in the room.
Yep, there is a lot you can learn.
For more campaign and high payout join ACB Media
I haven’t heard of ACB Media, I will have to check it out.
hey neil,
affiliate marketing is difficult to learn, but you have given us very effective insights.good post.
Thanks.
Matt
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Hello! Neil,,,This is great info Neil, thank you so much, my head is spinning with ideas stimulated by your email.Great job Neil!,,,,
Your article says:
“And one important part of their strategy was to cut out the middle men, affiliate networks like Commission Junction and the Google Affiliate Network, which took huge cuts from the revenues generated.”
But the Groupon website is definitively stating that to be an affiliate you have to go thru Commission Junction. Is this NEW?
What are your thoughts?
http://www.grouponaffiliate.com/faqs
You are so interesting! I don’t suppose I’ve read through anything like
this before. So nice to discover another person with genuine thoughts on this subject matter.
Seriously.. many thanks for starting this up.
This web site is something that’s needed on the web, someone with a little originality!
Excellent Post !! . It is very helpful for everyone who think about to start a successful Affiliate Marketing Program.
Best,
Bang Luu Van
Bang, glad you found it helpful