Why and how to set up an affiliate program in small business
An affiliate program can be a great way to connect with other like minded individuals and businesses. Both of you (i.e. you and the affiliate) can benefit from the arrangement and it doesn’t involve a huge financial investment on your part. With so much to potentially gain from this unique marketing approach, it is worth understanding how to set up an affiliate program while also understanding how to avoid possible risks. In my view, the most important step is to get the right types of affiliates. People and businesses you trust, whose audience is engaged and interested in your products and ideally who share your values.
At Ready to Boss Legal we have affiliate partners who are fellow like minded, small business owners. This works well for us as we know we have built positive relationships over time and support each other in our small business goals.
Below we will cover:
Exactly what an affiliate program is
The benefits of an affiliate program
The disclosure requirements
What should be included in an affiliate program’s terms and conditions
Why payment conditions are essential; and
Some extra tips to save you from learning from your mistakes.
This article has been written to help business owners understand how an affiliate program can benefit a business, give you confidence as to how to set up an affiliate program and avoid the common issues that arise along the way.
What is an affiliate program?
An affiliate program is where a person or business (the affiliate) promotes the products or services of your business and drives customers or clients to your business. The affiliate is then given a rebate or an affiliate fee based on actual sales in your business.
This can look different for different depending on your business setup, but what is usually offered is a code or a link in a blog or email. New customers enter the code given by the affiliate partner or follow the link provided and the business owner can track how many customers and sales they get from any given affiliate partner.
The affiliate is usually paid a commission for each sale made from their referral and your business is able to tap into an audience that you may otherwise not have had access to, increasing your sales and the visibility of your brand.
What are the benefits of an affiliate program?
An affiliate program has the potential to connect your business with the right clients at the right time and connect with people that you may not have otherwise had contact with. Marketing strategies like Google or Facebook ads are a great option, but the unique strength of an affiliate program is that you are connecting your brand with an individual or business that already potentially has an engaged and trusting audience.
That’s where the magic lies in an affiliate program. If you partner with the right person or business, one that already has their own loyal following, their recommendation of your product or service will hold value. You may have experienced something like this in your own life, I know I have. When it comes time to start Christmas shopping, there are a handful of businesses I follow on Instagram. They will often share their children’s favourite toys and offer discount codes, along with their affiliate link so that I, and probably many others can purchase their recommendations at a reduced price. By looking at these accounts I already trust, I feel confident in my purchase and am less likely to shop around for other ideas, options or prices. They are also strategic about when they promote these affiliate products and target me when I’m likely to be starting my Christmas shopping.
This targeted advertising is highly effective. It puts your product in front of a new and broader audience that is already engaged, loyal and often, ready to buy upon a recommendation.
Important legal considerations you need to be aware of when setting up an affiliate program
1. Be forthcoming with the relationship
Any person or business who is promoting your business as part of an affiliate agreement, must comply with the Australian Association of National Advertisers’ code of ethics. This means they must be honest in disclosing their affiliate relationship with their audience.
If they are using email as a way to share their promotional content, then they also need to comply with the Spam Act 2003. Recipients of any promotional content via email must have consented in advance to receiving advertising material and also have a means of opting out or unsubscribing.
These expectations fall on the affiliate partner, and the financial consequences, through fines, will be their responsibility. But, the reputational risk could also spread to you and you must also be careful as Australian Consumer Law, which guards against misleading advertising can come back to you. When looking at how to set up an affiliate program, ensure that any agreement made between yourself and your affiliate partner includes conditions that outline the affiliate partner’s responsibility to comply with these laws when promoting your product or business.
2. Ensure you get the Terms and Conditions (Rules) right
When done right, everyone should benefit from an affiliate program. But what if things go wrong? Just like any business agreement, having Terms and Conditions in place will provide everyone with some level of legal protection and, importantly as the business owner, some control.
An effective Affiliate Program Terms and Conditions should cover aspects of your agreement including the following:
Compliance with relevant laws
payment, commission or other benefits agreed to
How to terminate the agreement
What your affiliate may or not say about your product and business
This last point is critical, as you are placing trust in your affiliate to not only speak positively about your business, but more importantly, that they will comply with laws around advertising and any industry specific legal requirements.
Consider for example, you sell exercise equipment. Your affiliate claims that anyone who buys the equipment will have a guaranteed result such as you will lose 2 clothing sizes within 2 months. This may earn them more money in the short term and in turn get you more sales but there are laws around claims that can and can’t be made. While this is an extreme example I have used it for a reason - you as the business owner can be held accountable for this misleading content, even if you aren’t aware of what is being said. Keeping an eye on the affiliate’s words and actions in relation to your product is highly recommended. You can always refer back to your agreement if you need to correct inappropriate marketing strategies or if needed, to terminate the agreement.
Being clear about what your affiliates can and cannot say, as well as monitoring how your affiliates act when promoting your product or service is a critical element in how to set up an affiliate program effectively.
3. Money matters
While any good affiliate program is built on trust and positive relationships, quality terms and conditions that cover the specific details of your financial agreement should always be a part of how to set up an affiliate program. How often you will pay your affiliate partner and how much is your decision to make. Including a regular process for reporting, invoicing and making payment should also be included in the Terms and Conditions.
There is no guarantee that having an affiliate program in place will generate sales. An affiliate partner does not have targets like staff in a sales position might. The assumption is that they are motivated by the commission they will receive themselves. In fact you will have some great affiliates and others who it just isn’t the right fit with, and that is okay. That is why you generally have a number of affiliates on your books.
Start your own affiliate program
With some confidence now, around how to set up an affiliate program, you can get started by looking around at the business contacts you have or like minded business around you. With effective terms and conditions in place to protect your business and your reputation, your affiliate program can bring benefits to both you and the affiliate for as long as you both wish to keep the agreement going.
Related: Referral Partner Programs and Introduction Fees
How to approach Micro Influencers
How to disclose you are an affiliate to a program
We have developed templates specifically for affiliate programs:
Emma also offers Business Planning or Mentoring sessions, for personalised support with your affiliate program. Go here to Book a Business Planning Session.
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