Each affiliate is then given a unique link—something like https://www.outseta.com?via=geoff—that they can use to promote Outseta. Anyone that clicks that link and then signs up is considered a referral from the affiliate. We then pay a 25% commission on any revenue that we earn from the new customer to the affiliate—forever!
Almost exactly 25% of our first 500 customers were generated by referrals from affiliates.
While this sort of program is quite common in SaaS, I think there are a few things to learn from our experience. As I mentioned, I’m guilty of doing exactly what you’re not supposed to do—I basically launched our affiliate program, then did very little to support it.
Sure, the page on our website to sign up as an affiliate is quite prominent. And yes, I mention the program frequently to people who are enthusiastic about Outseta. But beyond that, this channel has been completely on auto-pilot. You’re really supposed to engage proactively with your affiliates, build communities for them, host events where you talk about what they can do to promote your company more successfully, share content strategies, etc. I’ve done none of that and fully realize that’s a missed opportunity.
Still, today we have 203 affiliates—33 of which have successfully referred paying customers to us. I’ll take it!
Does an affiliate program make sense for your start-up?
I ultimately decided to launch our affiliate program largely because of our business model and target audience. Outseta is a massive product sold at a low price point and we’re bootstrapped—this predicates that we make some sacrifices in other areas of our business in order to run a viable business.
One of those sacrifices is we’ve decided to grow the company without building a sales team. Our affiliate program serves to replace that sales team in many ways—rather than taking on the expense of internal headcount, we simply pay people who are excited about Outseta to refer business to us. I look at our affiliate program very much as we’ve had 33 sales reps successfully make a sale without taking on any overhead.
Beyond that, a critical decision with any affiliate program is your offer. We decided to pay out a 25% commission in perpetuity, which is both generous and a little bit crazy. We decided to do this because of our decision not to hire an internal sales team—I felt like we needed a really compelling reason for people to promote Outseta. But in the context of most businesses, paying out that commission forever is something I’d very carefully consider.
The other decision that was pretty unique in our offer is that the commission our affiliates earn does not just include Outseta’s subscription fees, but also the revenue that we make from payment processing. As a company, our subscription fees are quite low (starting at $39/mo)—you’re simply not going to earn much money by making 25% of our subscription fees.
How we make money as a business is taking a 1% fee on successfully processed payments—so when our customers make more money, we do too (and hence our affiliates if they referred the business to us). This makes our affiliate program much more lucrative for affiliates who refer successful businesses to Outseta.
As an example, we have one affiliate who very casually referred two customers to us—almost in passing. She spent very little time introducing them to Outseta whatsoever, but without question the two customers were referred by her.
Both companies “hit” and are now making significant revenue. I see large payments coming in from both customers each month, and then 25% gets lopped off and paid out to the affiliate—this will continue to happen forever. While it’s easy in these scenarios to question whether the affiliate “earned” the type of money that’s landing in her bank account each month, the truth is it’s mostly a win-win—we probably wouldn’t have these customers otherwise and the affiliate goes on a getaway each month on Outseta.
What do you do if affiliates start running paid ads on your brand name?
One of the challenges that’s common with affiliate programs is something we’ve started running into—affiliates running paid ads on Google to promote your product. The concern here is that affiliates can target keywords or even your company’s brand name, showing up at the top of search results when people are searching for your company. Prospective customers then click an affiliate link and you have to pay out the affiliate in instances where the prospective customer would likely have clicked on your own organic search result anyway.
We have one affiliate in particular that’s been advertising on our brand name—that ad at the top of the search results is them, directly above our own organic search result.
While I’m not crazy about them targeting our brand name—or other relevant keywords that we rank—I’ve taken the approach of letting this slide for now. Again, my thinking is this enables us to do more without hiring additional headcount—if someone wants to pay to run ads on behalf of Outseta, by all means go for it. Yes, we might end up paying out some commissions in instances where we otherwise wouldn’t but we’re also eating up more real estate on search engine results pages relevant to our business.
Does an affiliate program make sense given your price point and business model?
Consider your offer through the lens of an affiliate—is it worth their time?
Affiliate’s running paid ads on your behalf isn’t always a bad thing…