What's the best way to grow your SaaS business? Ask any entrepreneur, and they'll tell you that there's no one silver bullet. But, if you're looking for an effective (and cost-effective) way to grow your user base, you should consider setting up a SaaS Affiliate Program.
This post will break down the different types of SaaS affiliate programs and explain how to choose the right one for your business.
Let's get rolling.
Table of contents
- What Is a SaaS Affiliate Program?
- What Is the Difference Between a SaaS Affiliate Program and an Influencer Program?
- What Is the Difference Between a SaaS Affiliate Program and a Referral Program?
- What Are The Different Types of Affiliate Programs?
- How to Choose the Right Affiliate Marketing Program For Your SaaS Company
- Types Of SaaS Affiliate Programs: FAQs
- What Are the Next Steps?
What Is a SaaS Affiliate Program?
An affiliate program is a performance-based marketing channel where you pay affiliates a commission for every new customer they bring in.
We can think of it as outsourcing your marketing and sales efforts. After all, why spend time and money on acquiring new customers yourself when you can incentivize others to do it for you?
Affiliate programs are a popular growth strategy for SaaS companies because they're relatively low risk. You only pay when an affiliate delivers results, so there's little or no downside.
In addition, affiliate programs have the potential to scale quickly. Once you have a few successful affiliates promoting your product, you can exponentially grow your customer base without increasing your marketing spend.
Why Should You Start an Affiliate Program For Your SaaS?
Affiliate marketing is a bit like putting your SaaS product on autopilot.
You set up the program, find some affiliates, and then let them do the hard work of promoting your product. In return, you only have to pay them when they deliver results.
Of course, there's a bit more to it than that. You'll need to set up tracking and payouts, for example. But, overall, SaaS affiliate marketing is a relatively hands-off way to grow your business.
Besides, it's not like you're giving away equity in your SaaS company. With an affiliate program, you're simply paying for performance. So, if an affiliate partner doesn't deliver results, you're not out any money.
Some other reasons to start an affiliate program for your SaaS include:
- Get control over your customer acquisition costs. Since you only pay when an affiliate partner delivers a new customer, you have 100% control over your customer acquisition costs.
- Scale with a small network. A small handful of critical affiliates can generate most of your new customers. So, it's essential to find and nurture relationships with your top affiliates.
- Low maintenance costs. Once your affiliate program is up and running, it costs meager maintenance. You'll need to periodically check in on your affiliates and make sure they're still promoting your SaaS product, but that's about it.
What Is the Difference Between a SaaS Affiliate Program and an Influencer Program?
A SaaS affiliate program is a performance-based marketing channel where you pay affiliates a commission for every new customer they bring in. On the other hand, an influencer program is more of a content marketing strategy.
With an influencer program, you pay influencers to promote your SaaS product or brand. The goal is usually to increase brand awareness and reach new audiences, not necessarily to generate sales.
SaaS affiliate programs and influencer programs can, of course, be used together. In fact, it’s often beneficial to combine the two.
After all, influencers can be powerful affiliates. They have a built-in audience of loyal followers who trust their opinions, so they can be especially effective at driving sales.
What Is the Difference Between a SaaS Affiliate Program and a Referral Program?
A referral program is like an affiliate program, except that you pay people to refer their friends to your SaaS product. Referral programs are typically much more straightforward than affiliate programs.
They can be a great way to get started with SaaS growth.
The main difference between a SaaS affiliate program and a referral program is that an affiliate program pays affiliates for their efforts, while a referral program pays customers.
This can be beneficial because customers typically have more incentive to refer their friends than an affiliate has to promote your product.
What Do You Need to Start an Affiliate Program?
Now that we've talked about the benefits of starting an affiliate program, let's go over what you need to get one up and running.
Even though affiliate programs are relatively low maintenance, there are a few things you'll need to take care of before launch.
Here's what you'll need:
- A great product. The first and most obvious requirement for a successful affiliate program is a product people actually want to promote. Otherwise, you'll never find any affiliates.
- Affiliate tracking. To pay your affiliates, you need to track when they send you new customers (e.g. affiliate platforms provide you with an affiliate link for conversion tracking).
- An affiliate network or marketplace. An affiliate network is a platform that connects advertisers (i.e., you) with publishers (i.e., affiliates). They typically provide tracking, payments, and support for both sides.
- A way to pay your affiliates. Once you have tracking set up, you need a way to actually pay your affiliates. This can be done through an affiliate network, PayPal, Stripe, or a direct bank transfer.
- Marketing materials (optional). Although it's not required, it's always helpful to have marketing materials like banners and landing pages ready for your affiliates. This makes it easy for them to start promoting your product and helps you track their performance.
Some platforms offer all these features in one place, while others require you to piece them together yourself.
For example, Reditus offers an all-in-one affiliate marketing solution that includes a built-in marketplace, affiliate tracking, and payments. So, all you need to do is sign up and promote your program.
Besides, Reditus costs a flat monthly fee, so you don't have to worry about variable costs like you would with other platforms. It's a great way to get started with affiliate marketing.
What Are The Different Types of Affiliate Programs?
We can differentiate affiliate programs based on two major factors:
- Commission structure
Let's go over the different types of affiliate programs based on these two factors.
The first way to categorize affiliate programs is based on what mission affiliates are working towards. Should they generate leads, drive traffic, or make sales?
The two most common types of affiliate programs based on mission are:
A pay-per-lead program pays affiliates for every new lead they generate, regardless of whether that lead converts into a paying customer.
This type of program is best suited for companies that have a long sales funnel or sell higher-priced products, as it can take time for a lead to turn into a paying customer.
You just need to ensure that your affiliate's leads are high quality and likely to convert. Otherwise, you'll pay for many low-quality leads that will never turn into customers.
- You only pay for leads that meet your criteria. With a pay-per-lead program, you can specify a lead's requirements before paying for it. For example, you can set a minimum lead score or require leads from specific geography. This ensures that you only pay for leads that are a good fit for your product.
- Leads can be generated relatively cheaply. It's often cheaper to generate leads than to acquire new customers. So, a pay-per-lead program can be a cost-effective way to grow your business.
- You have to pay for every lead, even bad ones. Unless you set rigorous criteria, you'll pay for many bad leads. This can be a waste of money, and worse, it can harm your brand if leads have a bad experience with your product.
- It can be hard to track leads. Tracking leads can be difficult, especially if you have a complex sales process. You'll need to have a way to attribute leads to specific affiliates and track them through your sales pipeline.
- Longer feedback loops. Since it can take time for a lead to turn into a customer, you won't get immediate feedback on whether an affiliate marketer is generating good leads. This can make it challenging to identify and correct problems early on.
With a pay-per-sale affiliate program, you pay referral partners a commission for every new customer they refer.
This type of program is also sometimes called a "cost-per-acquisition" (CPA) program.
Pay-per-sale programs are the most common type of affiliate program. They're also the most straightforward to set up and manage.
Pay-per-sale programs align the interests of potential affiliates with your own. After all, they only make money if they generate new customers for you.
- Highly motivating for potential affiliates. Affiliates will only make money if they generate new customers, so they're more likely to drive high-quality traffic.
- Lower risk for you. With a pay-per-sale program, you only have to pay affiliate marketers when they generate new customers. You don't have to pay for leads that might not convert or customers who cancel right away. So, there's minimal risk for you.
- Simpler to set up and manage: Pay-per-sale programs are simpler to set up and manage than other types of affiliate programs. You can track sales reasonably quickly, and there's less room for error.
- Shorter feedback loops: With pay-per-sale programs, you get immediate feedback on whether an affiliate generates sales. If they're not, you can quickly stop working with them.
- High payouts. Payouts can be increased since you're paying referral partners a commission on every sale they generate. If you have a low-priced product or a very long sales cycle, this can be a problem.
- Harder to scale. Pay-per-sale programs can be more complex to scale than other affiliate programs. That's because you must find talented affiliates, which takes time.
2. Commission Structure
The second way to categorize affiliate programs is based on how you structure commissions. Should affiliates be paid a percentage of the sale, a flat fee, or something else?
This is a sub-type of a pay-per-sale affiliate marketing program, where affiliates are paid a percentage of the sale amount.
For example, let's say you offer a 10% commission on all new customers. If an affiliate refers a customer who spends $100, you will pay the affiliate $10.
- Fair to affiliates. Percentage-based payouts are fairer to affiliates than fixed-amount payouts. That's because they take into account the price of your product. So, if you have a high-priced product, affiliates will make more money per sale.
- Incentivize affiliates to generate higher-priced sales. Since affiliates make more money per sale as the sale price goes up, they're incentivized to generate higher-priced sales.
- Harder to predict payouts. It can be harder to predict payouts with a percentage-based program. That's because the amount you pay out varies based on the sale price.
With a fixed-amount pay-per-sale program, you pay affiliates a set amount for every new customer they refer, regardless of the sale amount.
For example, let's say you offer a $50 payout for every new customer. If an affiliate refers a customer who spends $10,000, you would still pay the affiliate $50.
- Easier to predict payouts. With a fixed-amount pay-per-sale program, you know exactly how much you'll pay for each new customer. This makes it easier to predict your affiliate marketing expenses.
- Higher margins: Since you're only paying affiliates a set amount, you can keep a higher percentage of the sale regardless of the sale amount. This leaves you more room to invest in other marketing channels or grow your business.
- It can be unfair to affiliates. Fixed-amount payouts can be unjust to affiliates, especially if you have a high-priced product. They'll make the same money regardless of the sale amount. So, if an affiliate refers a customer who spends $1,000, they'll make the same as someone who refers a customer who spends $10.
- Less motivation for affiliates. Since affiliates make the same amount regardless of the sale amount, they may be less motivated to generate high-quality leads or close sales
With a tiered pay-per-sale program, you pay affiliates a different commission rate based on the number of sales.
For example, let's say you offer a 10% commission for the first 5 sales, 15% for the subsequent 10 sales, and 20% for all sales after that.
If an affiliate refers 20 customers, they will make 10% on the first 5 sales, 15% on the next 10 sales, and 20% on the last 5 sales.
- Incentivize affiliates to generate more sales. Tiered payouts incentivize affiliates to generate more sales. They know they'll earn a higher commission rate as they increase the volume.
- Flexibility. Tiered payouts offer more flexibility than other types of payouts. You can tailor the commission rates to what makes sense for your business.
- It can be confusing for affiliates. Tiered payouts can be confusing for affiliates. They need to keep track of their sales volume to know what commission rate they'll earn.
- Harder to predict payouts: Tiered payouts can also be harder to predict. The amount you pay out will vary based on how many sales the affiliate generates.
With a recurring payout, you pay affiliates a commission every month that a customer remains a paying customer.
For example, let's say you offer a 10% recurring commission. If an affiliate refers a customer who pays $100/month, the affiliate will earn $10/month until the customer cancels their subscription.
- Highly attractive to affiliates: Recurring revenue is highly attractive to affiliates. That's because they provide a stable stream of income that they can count on every month.
- Aligns incentives with customer lifetime value: Recurring payouts also align the affiliate's incentives with your business goals. They're only paid when the customer continues to use your product.
- More expensive: Recurring payouts can be more costly than other payouts. You're effectively giving the affiliate a percentage of your customer's lifetime value.
Many affiliate programs mix and match different payouts to create a hybrid program.
For example, some programs might offer a flat rate for each new customer plus a recurring commission for each month that the customer remains a paying customer.
Others might offer a pay-per-sale commission that increases as the affiliate generates more sales.
Some others might offer a combination of different types of payouts.
- Customization: It can be customized to fit your needs, so you can structure the program in the most advantageous way for your business.
- Flexibility: Offers more flexibility than other types of payouts. You can tailor the commission rates to what makes sense for your business.
- Complexity: Hybrid programs can be complex to set up and manage. That's because you need to keep track of different commission rates for different types of sales.
How to Choose the Right Affiliate Marketing Program For Your SaaS Company
At this point, you should have a good understanding of the different types of affiliate programs for a SaaS platform. So, how do you choose the right one for your organization?
To be honest, there's no one-size-fits-all answer. The right affiliate program depends on your business goals, pricing model, and target market.
That said, you might consider the following elements:
- Choose a program aligned with your goals. Ensure your affiliate program that's aligned with your overall marketing plan. For example, if your goal is to generate leads, you might want to consider a pay-per-lead program.
- Consider your margins. How much can you afford to pay out in commissions? What is the lifetime value of a customer? Answering these questions will help you determine whether an affiliate program structure is feasible for your business.
- Think about your affiliates. What type of affiliates do you want to attract? Do you want to attract bloggers, social media influencers, or email marketing professionals? Also, consider what kind of motivation will best suit your affiliates.
- Choose a program that's easy to manage. Consider how much time and effort you're willing to invest into managing an affiliate program. A simple, percentage-based program might be best if you don't have a lot of time.
Types Of SaaS Affiliate Programs: FAQs
Now that you have a better understanding of the different types of SaaS affiliate programs, let’s take a look at some frequently asked questions:
What is the best type of affiliate program for SaaS?
There’s no single “best” type of affiliate program for SaaS. The right program depends on your business goals, pricing model, and target market. Consider all the elements mentioned above before deciding which program to go with.
What is the most common type of SaaS affiliate program?
The most common type of SaaS affiliate program is pay-per-sale. This type of program pays a commission for each sale generated by the affiliate. However, many SaaS businesses also move towards recurring payouts, such as percentage-based or hybrid programs.
What are the three main types of affiliates?
The three main types of affiliates are content creators (such as bloggers or social media influencers), email marketers, and search engine optimization (SEO) professionals. Depending on your target market, you can choose the affiliate that best suits your program.
What is the average payout for a SaaS affiliate program?
The average payout for a SaaS affiliate program depends on several factors, such as the type of program and the lifetime value of a customer.
Generally speaking, pay-per-sale programs offer higher commission rates than percentage-based or hybrid programs. However, the exact commission rate will vary depending on your business model.
What Are the Next Steps?
Now that you understand the different types of affiliate programs for SaaS, it's time to put your knowledge into action.
Affiliate marketing can be an excellent way to generate leads and sales for your business. But, it's essential to choose the proper structure for your organization.
Hopefully, this article has given you the guidance you need to make an informed decision.
And, once you're ready to start, check out our free guide to setting up an affiliate program in 2022. It'll walk you through the whole process from start to finish.