How to Leverage Groupon’s Affiliate Marketing Model to Grow Your Business

Until late 2009, Groupon was considered a massive failure. If you looked at its Alexa rankings before 2010, you would notice it had very little traffic.

groupon alexa

Fast forward to the end of 2010, and its traffic exploded. 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

Groupon owes a huge debt to its affiliates.

One important part of its strategy was to cut out the middleman, 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 its affiliates.

Key takeaway: Unlike with 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

Let’s 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 them. Obviously, you include your unique affiliate links and watch the money pour in.

Now, you probably won’t be able to retire on this income, but it’s not chump change either. You can put 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 the social web at large, you don’t have to own a website to be an affiliate.

How Groupon made life easy for affiliates

Groupon knew that if it made things hard for its affiliates, the affiliates wouldn’t promote the company. So it made things really simple by giving its affiliates banners for them to place on their websites or blogs. The beautiful thing about the banners is that they changed with the deal of the day.

groupon ads

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 its 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 clients, there is huge value in creating relationships with the right affiliates.

But how do you find those relationships?

  • Bloggers – Approach individual bloggers who are aligned with your product and industry and ask them if they would be interested in being affiliates. 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 as the big ones can.
  • 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, tell them 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

truth about abs

Around 2007, entrepreneur Mike Geary of Truth about Abs, joined the Clickbank affiliate program. He quickly noticed that mostly affiliates were getting paid 35% to 50% of commission.

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…and it is. And you might wonder 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 competitor’s?” In most cases, people will promote your program if you offer higher payouts.

How to start your own affiliate program

So, you 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 lists 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 the 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 with 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 – 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 – Driving 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 okay 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 that is putting minimal effort into your program. If you dangle some incentives in front of 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 to avoid losing 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 get rid 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. 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 about a decade or even years. We are just talking about one year.

But don’t think that it’s easy because if it were that easy, everyone would be doing it. Creating a good affiliate program will take a lot of blood, sweat and tears…

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Comments

  1. 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 :))

  2. 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.

  3. 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.

  4. 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.

  5. Groupon is leading marketer in online his success story gives clear view for our business promotion

  6. Tim Anderson :

    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. :)

  7. Having run a new affiliate program, I can say this info is spot on.

  8. 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.

  9. 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

  10. 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

  11. 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.

  12. 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.

  13. Great piece on affiliate marketing Neil, U always manage to post content which is short, simple to follow and easy to implement !

  14. 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?

  15. 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.

  16. The Groupon is an excellent medium for the affiliates to grow with the business in the market.

  17. 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?

  18. Excellent Post !! . It is very helpful for everyone who think about to start a successful Affiliate Marketing Program.

    Thank’s
    Neil

  19. I think they have a very good business model.

  20. 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?

  21. 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.

  22. Hi Neil,

    Which software do you recommend for managing the affiliates and tracking their sales?

    Thanks!

  23. 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!

  24. Neil,

    Same goes the question Eric asked..

  25. Tips are excellent for the beginners of the affiliate marketers because these will help them to understand basis of the affiliate marketing.

  26. 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?

  27. 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.

  28. Health & Fitness Blog :

    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!

  29. Health Wrong :

    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.

  30. Groupon is an amazing site for affiliates and users alike. The name recognition alone drove people to my Wife’s offer in Mass.

  31. Another great post from you, Neil. I’m seriously considering looking into affiliate marketing after reading this article!

  32. Services like Clickbank to promote eproducts are really a great tool to increase your sales and visibility.

  33. This is very helpful…affiliate marketing is a hard thing to learn

  34. 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.

  35. For more campaign and high payout join ACB Media

  36. hey neil,
    affiliate marketing is difficult to learn, but you have given us very effective insights.good post.

    Thanks.

    Matt

  37. hey there and thank you for your info – I have certainly picked up anything new
    from right here. I did however expertise some technical points
    using this site, since I experienced to reload the website many times previous to I could get it
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    Not that I am complaining, but slow loading instances times will often affect
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    if ads and marketing with Adwords. Anyway I’m adding this RSS to my email and could look out for much more of your respective exciting content. Make sure you update this again very soon.

  38. Hello! Neil,,,This is great info Neil, thank you so much, my head is spinning with ideas stimulated by your email.Great job Neil!,,,,

  39. 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

  40. 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!

  41. Excellent Post !! . It is very helpful for everyone who think about to start a successful Affiliate Marketing Program.
    Best,
    Bang Luu Van

  42. Hi Neil,

    This is a very interesting article. I am also interested in learning about how Groupon actually grew the number of businesses who sign up to give coupons.

    Will be great if you could please shed some light on their strategy.

    Thanks.
    Beena.

    • A lot of it was word of mouth. They were giving away such good deals, that people signed up.

      They also paid affiliates 10 dollars for each user they brought over. Those were two of their main strategies.

      It was also timing as they were the first to do this.

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