Getting the Most from Your Subscription-Based Affiliate Program
Subscription-based advertisers continue to expand their marketing efforts into the affiliate channel to secure new sources of traffic and revenue. How should a subscription-based affiliate program be positioned for growth? A subscription-based affiliate program must be structured to compensate the affiliate adequately, drive appropriate affiliate behavior, be monitored for quality, and be optimized continually. These programs have an inherent complexity due to the nature of the purchase process, but can generate significant online gains if set up correctly.
Types of Subscription Models
There are three main types of subscription models: free trial, freemium service, and straight subscription. The free-trial version offers the customer limited time, free use of the product (generally 15 or 30 days) after which point payment is required to continue. The payment can be taken by securing a credit card at the beginning of the free trial sign-up process and charging it automatically or requesting it at the conclusion of the trial period.
A freemium service allows customers to use a service for an indefinite period of time with limited functionality. If the customer wishes to utilize the full functionality, they must convert to a paying subscriber. Lastly, we have the straight subscription service. This model doesnâ€™t employ a free aspect to the service, but instead charges the customer from the onset for use of their product. The affiliate program will need to be structured based on the subscription model that the advertiser uses.
Affiliate Commission Structure
The commission structure is the most important aspect of setting up an affiliate program for a subscription-based service. Fundamentally, commissions are calculated based on the level of action required by the customer. For example, the advertiser should be paying more for a free trial that requires a credit card up front than one that requires a credit card after the trial. The commission payout should be even greater if the advertiser is requiring payment up front without a trial or freemium aspect to the program.
The lifetime value of a consumer should also be rolled into the commission calculation in order to compensate that affiliate properly. For example, a service priced at $99 per month should be paying a larger commission than a $14.95 per month service. If an advertiser offers a longer subscription-retention rate, up sells are more commonplace than compensating the affiliates for these items to drive significant growth in the program.
If cancellations are high and the up sell path is non-existent, it is recommended that those items are addressed and improved prior to the launch of an affiliate program. Most importantly, affiliates are generating customers that create a recurring revenue stream and should be compensated for the long-term value of the customer instead of the initial payment collected.
The next important phase in managing a successful program is recruiting, vetting, and engaging the affiliates. Advertisers should recruit affiliates that are reaching the serviceâ€™s target demographic so that the customers obtained will stick around for the long term. When running a freemium or free-trial program, itâ€™s extremely important to vet the affiliates closely to ensure fraud is kept out of the program. I discuss this in greater detail later.
Affiliates also appreciate communications that cater to them on an individual basis. When reaching out to affiliates, the goal is to receive a response. This can be achieved by customizing your communications rather than sending out large, generic messages. When talking with an affiliate, itâ€™s essential to share the â€œwhatâ€™s in it for themâ€ aspect of the program. Advertisers shouldnâ€™t just focus on promoting their company and product. At the end of the day, each relationship should be mutually beneficial and generate revenue for the advertiser and the affiliate.
Quality management plays a large role in running a subscription-based affiliate program. In a free-trial program itâ€™s vital to keep the signup to paid subscription rates at an acceptable level. Thereâ€™s nothing worse than paying out commissions for customers that donâ€™t turn into paying subscribers.
On the flip side, advertisers shouldnâ€™t expect every customer to convert. Free-trial programs should be managed more as a lead-generation program versus a cost-per-sale program. The affiliate is responsible for generating the free-trial signup and the advertiser is responsible for converting that customer into a subscriber. For a straight subscription service the retention rate of each customer should be monitored to ensure that commissions are aligned with the average life-cycle of a subscriber.
The advertiserâ€™s analytics team should communicate regularly with the affiliate program manager or agency to make sure that metrics are monitored. Checkpoints must be put in place to manage lead quality. Creating the process to track this when launching a program will help create a sustainable, ROI-positive affiliate marketing campaign.
As with any affiliate program, optimization is paramount. Programs seldom remain exactly as they were set up and every aspect of the program should be continually optimized. If the commission structure isnâ€™t generating affiliate interest, then research should be done to see if rates can be increased.
If the reverse is true and affiliates are active but the results arenâ€™t generating revenue, then commissions should be adjusted down. This can be done across the board, but itâ€™s recommended to only reduce rates for specific segments of affiliates that generate lower-quality traffic. Media can almost always be optimized for increased click-through rates.
Banners should be attractive, actionable, and include an offer statement for the potential customer. Program communications should be fine-tuned to receive response rate increases. The bottom line is that optimizing an affiliate program is essential and requires regular effort.
Subscription-based services can generate significant revenue through the affiliate channel with the right amount of up front research and continual refinement. Affiliates will be excited to run an affiliate program if the basic fundamentals described in this article are implemented. Affiliate marketing is the perfect performance marketing channel for subscription-based services.