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…

Did I miss any affiliate marketing secrets that should be shared?