In this webinar, Joran Hofman, CEO of Reditus, will show how to set up an affiliate marketing program for your SaaS. This is a webinar done for the StartupWiseGuys accelerator program. You can find the full transcription & video below.
Link to Reditus
Link to StartUpWiseGuys
Table of contents
- Webinar Introduction
- Agenda & Introduction Joran Hofman
- Defining your Ideal Customer Profile
- Direct vs Indirect Marketing
- Why start an indirect marketing channel?
- The difference between Referrals, Affiliates, Partners & Technical Partners
- Why start Affiliate Marketing for your SaaS?
- Affiliate Marketing Process for SaaS
- When to start with Affiliate Marketing?
- Affiliate Management Tools
- Where to find your first Affiliates?
- How to find competitor affiliates?
- Calculate success of Affiliate Program
00:10 – Joran Hofman
Today we’re going to discuss how an affiliate marketing program can grow your SaaS, where basically I chopped things up, where we’re going to go in the real basics. Somebody mentioned he doesn’t have a startup yet, so that’s really going to be beneficial for you.
For the ones who are already a bit further down the line, we’re going to get more detail along the presentation. We’re definitely going to COVID hopefully everybody’s going to get everybody’s involvement here. I will ask some questions during the presentation because I don’t want to keep myself hearing talk all the time.
Please make sure you’re going to be watching and interacting with the chat. It’s going to help me also to get some interaction going, and feel free to interrupt me with questions. In chat, I have it open, so I can see if something is unclear or what we’re going to discuss.
Agenda & Introduction Joran Hofman
01:05 – Joran Hofman
Affiliate marketing is an indirect marketing channel. We’re going to discuss direct versus indirect marketing channels. I’m going to explain to you what indirect marketing channels are and then we’re going to dive a bit deeper, as in why, when and how to start with an affiliate marketing program. Maybe even more importantly, how to define success.
Let me know if this is good. If you have any other expectations, type in chat, and then I might be able to COVID that as well. Why should you listen to me, or more a bit about me? I’ve been working at SaaS, I think now around 10 or 12 years. I built now my own affiliate management platform. That’s why I can talk about this topic for hours. I started it out of pure frustration, just to summarize, I guess like five years in 1 minute.
I used to work at Leadfeeder, a big scale-up from Finland, joined a company where I was the first Dutch salesperson, and I left the company last February when I was head of Customer Success, CS as you call it.
Related: How to implement Customer Success from scratch.
02:14 - Joran Hofman
In my time, especially during being a salesperson and a Customer Success manager, basically talking to clients the entire day, I always got the question, this is a great tool, which tools should I use more? At one point my answers weren’t really scalable and I like to do things in a scalable way. I started a website called saleslovesmarketing.co
Which basically has the best sales and marketing tools listed on there. I grew the website to around like two decades, organic visitors per month. So it was really nice. I ran some ads on there, but it wasn’t really driving me that much revenue and I wanted to create a passive income out of it. And that’s when I discovered affiliate marketing.
With that side, I am around, or not anymore, but I used to be around like 80 SaaS tools I’m an affiliate from. Basically I would direct traffic to them and then earn money if they would buy a subscription.
What I found out during that time, I had around 15,000 clicks in one program where I managed to the affiliate marketing programs, and I did not make one sale for me, that’s technically impossible. In the other programs where things did work, I had to log in separately to all these different portals. I decided this can go better or this can be better. At one point I decided to build my own tool. That’s kind of how Radius was born.
Bootstrapped. No external funding and we’re growing basically at a long-term pace. That’s what I’m doing. If you want to learn more about that, let me know. But that’s not the topic for today. One question I would like to ask, so get ready to type in Chat. Do you have an ICP defined for your company or for the future company you want to build? Type in a simple yes or no.
Defining your Ideal Customer Profile
04:10 – Joran Hofman
Whether you have an ideal customer profile defined, also known as ICP. Good, we get some yeses, we get some nos. This is why I did include it in the slides. I would start with this. Whether when you’re going to do direct marketing or indirect marketing, you have to have a clearly defined ICP. I still talk to a lot of businesses that don’t have one, which makes it a lot harder to actually grow your business.
What I also notice is that people sometimes mix up basically ICP and buyer persona. Buyer personas are not the same as your ICP, so they’re a part of your ICP, but they’re actually not the same. Just to make it really practical, when I look at my company, we focus on B2B size. Companies with 20 plus employees have a minimum of 10K monthly recurring revenue (MRR), a hard time growing due to higher advertising costs, and a big focus on payback ratios.
05:20 – Joran Hofman
I’ll explain more later about that, what that is. Having an accurate idea of customer profiles to find it will also help you to find those companies a lot quicker. Within those companies, you will have people who make the decision to either buy your tool or not. And that’s what you call personas.
You do not see the slides. Am I oh, I am sorry. I’m just talking in thin air here. There we go. This was the agenda. So we already covered that. So I can skip that. We do see the slide right now, right? Yes. Okay, perfect. This was the slide about myself. So we could skip that one. This was the ideal customer profile.
This kind of doesn’t mean it’s good that I just talked through it, but these are things you have to consider basically when either building your ideal customer profile or your buy persona.
Direct vs Indirect Marketing
06:24 - Joran Hofman
Look at the heuristics that make those. So employees, vertical geography, et cetera. There is a free template. Let me actually just send this in Chat right now to everyone. Like if you are still starting or you need help and even if you have one defined. Hubspot has a really good template or a good ebook, that can help you guide routines, cool that’s out of the way because that’s really back to basics.
Now we’re going to talk about direct versus indirect marketing. Direct marketing is basically the efforts you do to target your ideal customer profile directly. Can be done by various channels. Think about SEO, email marketing, paid ads, outbound sales, and social media.
The message you create is going to target those companies directly. Whether you are going to use a different tool in between doesn’t matter. You’re going to create a message to ideally attract your ideal customer profile to buy the product or service you’re selling.
07:35 – Joran Hofman
When you look at indirect marketing, there’s basically somebody or a company in between. They’re in your name, going to reach out or going to have contact with your ideal customer profile. You can think of influencers, bloggers, agencies, consultants, publishers basically or in short, any company or individual who has access to your ideal customer profile and then often on a big scale.
To conclude, direct versus indirect, there are both ways to get to your ideal customer profile who eventually of course, you want them to either buy your product or buy your subscription. All clear, let me know again in Chat. Again these are the basics. This is definitely important to know before we go any further.
A simple yes or no would do in Chat as well. I will just keep on talking. Let me know indeed if it’s not clear, then I can go deeper. You might ask yourself, why would you want to have somebody in between?
Full guide: Setting up a SaaS Affiliate program
Why start an indirect marketing channel?
08:54 – Joran Hofman
If I can also sell them directly, why would I have an indirect channel? This is what it could look like. Because with direct there’s a lot of effort of course from your end. When you start an indirect channel, you’re basically going to leverage somebody else’s network and somebody else’s audience. The people who are going to do the marketing for you, already have those things.
It could look something like this, where influencers and publishers already have a big following within your industry. Consultants and agencies are already in contact with your potential clients or they’re already clients of them. VCs or accelerators help many businesses which are always looking for tools to grow faster.
Those could sometimes be a hand for some of the companies who of course offer that kind of service. Going indirect basically helps you to step into that network and to grow faster than that route.
10:01 – Joran Hofman
The people already have a product or a service and have been selling it. I think they can really relate to this. This has been a quote from a study done by Gartner. Basically like people are doing a lot of research themselves nowadays, right? Where you go, of course Google, you go to G2 reviews, you go to Captera, Trustradius, you find basically different platforms, you’re going to check out their websites and before you even talk to a person, you have done your research quite a bit already and then you decided to sign up.
Starting like an indirect channel actually helps you to influence the people who are already still doing that research. It allows you to basically get in touch with them before they talk to your sales rep or you as a founder. If you’re still early stage when we dive into go to market plan, go to-market strategy, then again, it’s really high level, but direct can be of course SEO, which is a bit longer term.
11:12 – Joran Hofman
Paid ads if you want to go fast and you’re able to burn money outbound sales likewise. Social media of course for the long term strategy. But those are channels. Again, you manage directly. The strategy could be is you need to hire more content writers, you want to spend more budget, you need to hire more people either in sales or in marketing. When you look indirect, you basically have those again, those affiliates agencies influencers bloggers where you actually have to recruit those to make sure you grow the indirect channel.
Different strategies where indirect might be a bit longer term, but it could also bring you huge benefits. When you look at partner marketing, affiliate marketing, referral marketing, a lot of the times things are a bit confused, as in what is what and you think you’re doing partner marketing where you’re actually doing referral or affiliate.
The difference between Referrals, Affiliates, Partners & Technical Partners
12:12 – Joran Hofman
So I hope this slide covers everything. So there’s basically four, there’s four differences. Referral to start with, typical example is Dropbox. Dropbox basically gives me 10GB free storage room if I invite somebody else to join Dropbox. It’s a real referral program, there’s no money involved and it might be a two way benefit where the person I invite also get 10GB for free. Often works in app, so I don’t have to leave Dropbox. It doesn’t require an integration with any other tool because they often build it themselves. Affiliate can be one way or two way. Like most of the time it is one way where the person referring somebody else would get a kickback fee. It is really money orientated. If somebody purchases a tool via somebody else, they will get a kickback fee or that person who referred the person will get a kickback fee.
13:18 – Joran Hofman
They will use affiliate link for that. If somebody clicks their link, a cookie has been placed on that person’s device and then from there the Attribution can take place and I can show that in a second. Bit more in depth doesn’t require too much integration, just a purchase of an affiliate management tool and then from there you’re already good to go. Partners you can think of agencies for example, who refer clients on board them and then make the end clients successful. They’re not always money orientated because in the end they are their clients as well. They want to make sure their clients stay or become successful so they can keep their business. Your tool is just a way for them also to make their clients successful and then the last one is technical partners. Think about building an integration with another party with the goal of getting more clients both that way.
14:19 – Joran Hofman
You could actually have a part of your tool, maybe your entire tool, in somebody else’s tool to both give benefits to the end clients because the volume of how many you can find in every bucket will be different. And I think you can already imagine. Where they help you in the buying cycle is also different. You look at the differences, affiliates, top of funnel, they basically generate traffic for you which should convert via the normal route, which means they divert traffic to your website and then after that everything happens as normal. People sign up, book a demo, start a free trial, whatever you have on the site, that flow should remain exactly the same. Same goes with referrals. With referrals it’s a bit different as they’re only your clients who log into the app and then actually recommend friends. The traffic will be less but it probably will be more of a high quality just because they’re really recommended often one one, so it will probably have a higher conversion ratio.
15:34 – Joran Hofman
When you look at partners, they will send over clients, they would probably invite their selected network of clients but they probably want to also have more things to manage for them. Think about a HubSpot where you have a lot of integration partners who can basically set up the HubSpot instance for clients. It will require a lot more work from the partners but in the end, if they bring you clients they often will convert because they know exactly the value of your tool and they will probably do the sales process for you as well. You will have less but they’re easier to manage and as you can see going down, technical partners, they might even take everything out of your hand and they just want to use your technology. Your complete processes might change based on the technical partner you acquired or you got. The more you go down, the more processes, internal processes might change just because they will have more demands.
Why start Affiliate Marketing for your SaaS?
16:37 – Joran Hofman
Basically for today we’re going to focus on affiliate marketing as mentioned in the title. Basically, starting with why would you consider setting up an affiliate marketing channel for your SaaS company? The benefits in short, I mean it’s really cost-effective just because you don’t have any upfront cost as it is a paid performance channel. What does it mean? You would not pay the affiliate something unless they give you paid clients.
From here you’re going to give them a certain percentage of the money they generated for you. It’s really easy to calculate how much are you going to pay them when they deliver. You paid clients and in the end you get the money first, so you can pay them from that money a certain percentage.
So you already have that money. Increased reach, increased and targeted reach. Because in the end you are going to leverage somebody else’s network.
17:41 – Joran Hofman
This means if you are able to reach a lot more people and in the end, if they would recommend you will have higher conversion ratio than probably the other channels you’re currently using. Of course the more affiliates you gain, the more potential end clients you can reach as well.
There are basically no limits to the number of affiliates you can have. The only caveat is that they will be of course in your industry active. It has to be relevant like that. Of course the key to this as well, it has to have relevancy. How does affiliate marketing work? This is now currently the flow for a typical SaaS company that does not use affiliate marketing just yet.
This is basically how people sign up to SaaS and go from there. Like you would create them on basically with direct marketing you’re currently doing. Either SEO, Paid, that LinkedIn posting, or reaching people one on one.
Affiliate Marketing Process for SaaS
18:46 – Joran Hofman
People would sign up. For some companies, this could be book, a demo or a contact form. When you look at Self serve south companies, it will be signed up. If you have a freemium model or a free trial, they could never move to Paid, right? So they just never stop paying you. When they move to paid will be on a recurring basis depending on how you charge them, either monthly, annual or quarterly, it doesn’t really matter.
The SaaS model is of course that it is recurring. Which time frame you have decided. When you look at affiliate marketing, it becomes a bit longer. So the beginning is almost identical, right? The demand is not being generated by yourself, but by the affiliate. The affiliate is going to generate a traffic for you and then from there the sign up has been changed to name convention referral as somebody has been referred to your business.
19:52 – Joran Hofman
Still, they could always follow the exact same flow. They could start a free trial or stay in the free version and never move to page. When they start paying you, it becomes a paid referral and then from there you will receive a payment. The affiliate will receive a commission or you have agreed a commission with them and then from there you can approve it and then from there they will get a payout. They would not get anything unless this happens where you receive a payment from somebody they referred.
This is why it’s again like really cost-effective because you don’t have that much high upfront costs. This as well for the affiliate is going to be recurring and that’s why it’s really interesting for them just because you can agree with them, they’re going to get for example 20% for the first twelve months somebody becomes a client via them.
20:49 – Joran Hofman
You will also see examples where people are going to give lifetime commission. However long that client will stay with them or stay with you, they will receive a commission. In that case for them, it’s really interesting, I’d say like the revenue stream because they can accumulate the commissions basically, and if they do it for multiple companies, they can accumulate the different commissions on top of each other. Does this make sense?
Again, a simple yes or no would suffice in Chat. If it’s no and let me know as well what is missing or what you want to have any explanation about just because then I can dive into that. Got one? Yes. Okay for me. Okay, good. So all clear. This is kind of mean a visual how it could look, right? You have your SaaS that you have affiliates and they have access to a certain network.
When to start with Affiliate Marketing?
21:50 – Joran Hofman
In the end, they will generate referrals for you which is going to help you basically to get that scalability in here. I wouldn’t recommend affiliate marketing for everybody. Would you need to start with affiliate marketing? I think I made up this term affiliate marketing fit, but what I would recommend is first start off with paying clients.
Don’t start off an affiliate program if you don’t have any paid clients yet, just because you don’t know the objections. You haven’t figured out the conversion from site to sign up to paid. If you haven’t figured that out and you haven’t figured out your sales process, then the affiliates can do a lot of work for you. If they don’t convert, they would stop referring you and then it doesn’t work in the end. You want to give the affiliates basically brand materials, which is the third point, but you also want to give them anything you have like sales materials, email, copy, basically anything you have to make sure they can help you get more clients.
23:04 – Joran Hofman
If you don’t have any paid clients, you probably don’t have the other things. So I would start with that. Make sure you focus on that and then start an affiliate program you might consider if you’re more early stage because I know there are some, you might consider them to start off with, for example, more lower down that triangle we just showed.
Finding partners, maybe find agencies, find companies who are willing to help you, who really believe in what you do and then they can help you to sell your software. Again, they don’t might not even want to have a certain kickback fee or anything like that. Those would be the ones to definitely start with. When you go more volume then go into affiliate marketing. It will take time of course, to start this channel. So that’s the last point. As in you will need some time to invest basically into growing this revenue channel.
24:07 – Joran Hofman
It’s not going to be setting up and forgetting. Like you will need to make sure you have things set up. And do we have questions? There any figure to the number of paying customers for credit marketing to be considered? It’s a good question. I mean, like the average revenue per account per company is different, of course.
Like I know I typically say ten k monthly recurring revenue, but you have of course some companies who have charged one k per month per client and then it might be a bit higher. I guess like as soon as you also get those requests from people saying or asking, do you have an affiliate program? I would then probably start considering, do we need one? If you already have paying clients, you often kind of know when you need one.
When people start asking for it, then you kind of already have the basis also to start with because that’s something which is going to come back in one of my next slides.
Affiliate Management Tools
25:18 – Joran Hofman
When you look at the tools like if you have decided, okay, we’re going to start one, I would recommend looking into this. Find a tool which is going to give you SEO-friendly links. There are some tools are going to give you their link which is redirected to your site. An SEO friendly link basically means it’s your domain and the tracking happens after that. The link will direct to your domain, which will also help you with SEO purposes.
Find a tool that is going to help you to motivate the partners, because recruiting partners or affiliates is already going to be hard. Motivating them to do better, to keep engaged. That’s one thing which is going to be important because it’s easy for them to drop off. Of course they have to agree to your terms and these are not your terms and conditions, but affiliate terms.
Make sure that they commit not to run for example, paid ads on your brand name. Those are things which are not done and of course all the other fraudulent things that should be detected by the platform. The other big thing I would say, as in it needs to help you to find partners outside your own network.
There are some tools out there where you can set up an affiliate program pretty quickly, but then you work in your own silo, meaning you have to invite all the affiliates yourself and in the end you’re going to walk into some kind of wall where you kind of drained your own network.
You want to grow further than that and you can’t because they don’t really help you do so. What I miss myself a lot of tools is support. If something was wrong and I tried to contact their support, I couldn’t be able to get answer in less than 24 hours.
27:11 – Joran Hofman
In the end, the affiliates will do the work for you. Make sure that they’re being helped properly. If something is wrong, either you help them or the management tool help them quickly, so in the end they are more motivated to do better for you. We have another question. What is the ideal time frame for a B2B affiliate cycle?
What factors should be considered to decide this? With B to B affiliate cycle, do you mean actually to from starting to generating paid clients or am I misreading the question? Because in the end, yes, from paid clients, it depends. You’re adding one more cycle towards in your sales process, right? I think this is one thing to really understand and that’s why I had that slide with direct and indirect marketing in there. Like direct marketing is quick. People sign up to your tool, they leave their information and then you can convert them into paid clients.
28:17 – Joran Hofman
With indirect, you have a couple of other steps, right? You need to get those affiliates in, you need to educate them and then they need to make sure that they start referring traffic for you, which converts into paid clients. If you already have your deal cycle in place, then you kind of have to add a certain time frame to it to get affiliates in to really get them active.
Plus getting them to start referring you depends a bit on how big is your current network, which you can leverage. I’m going to dive into that in, I think the next slide. There we go. Because I’m going to show you how to go from zero to ten to 100 affiliates just by walking through some steps. This is also going to define how successful or how quick are you going to get success from your affiliate program.
Where to find your first Affiliates?
29:17 – Joran Hofman
The first thing I would say is to start with people who already know you. Your current clients, your current users, they know your value, they know your product, and they probably also want to support you because they signed up to, which is maybe early stage, and they also want to help you to spread the word. Those are the people I would recommend starting with. If they are influencers bloggers, ask them to mention something about you.
They might have a newsletter, they might have something else where they can really help you to get the word out there quickly. How can you get them in is, of course, inform about your program in your newsletters, add something to your website and basically make sure that they know that you’re running one if they’re looking for it, because there are going to be people in your current network who are going to check.
30:13 – Joran Hofman
Okay, well, I want to recommend you guys. Do they have an affiliate program? The other step, the next step would be is to recruit affiliates. I will dive into this deeper, but basically you can find like the top leaders, the influencers, big bloggers, big publishers, competitor affiliates who you can really start targeting and then basically try to get them into your program. In the end also have that again, that affiliate management tool which you’re going to use.
Have them help you to find new affiliates, for example, listing your affiliate program into their marketplace or helping you to recruit affiliates. We look at the beginning, on the right side, you see an example of prospects. They basically have a dedicated page which is fully focused on affiliates. It kind of shows them exactly how simple it is to get started, the benefits, and then of course, also how much you can earn when you start referring them and how much more can you earn when you do really well.
31:23 – Joran Hofman
Doing well basically means delivering paid clients to them. They mentioned on a specific page, they mentioned in the footer. You can also mention it, for example, in your app if you have one, where basically, of course, your most engaged users are going to be anyway. If you already have a network of Portugal consultants, agencies, etc.
You could consider also getting those in. Again, those are probably going to be the one who is going to give you the quickest results anyway because they brought you maybe some business already. By giving them a link which is trackable, they might be able to do it in a more scalable way as well. When you look at recruiting affiliates, there’s three things and I will go into these even deeper, but just, I guess as an overview, again, the affiliate platform, do they offer any kind of recruitment options?
How to find competitor affiliates?
32:33 – Joran Hofman
I am hammering on this a bit just because if you’re going to make a decision for a certain tool, make sure it helps you in the long term. You might be able to set up a program quickly, but are you sure that they’re going to help you in the long term to help you grow your program? Basically, like, what are they going to do for you?
Make sure you ask that question when you’re going to talk to help you set things up. Leverage competitive data. So think of running like a. Backlink, at least profile on your competitors using a tool like similarweb to figure out where your competitors are getting their traffic from. There’s tools like Responder which can show you high-performing content on certain keywords. They basically run Google search queries for you and then you can find the top performing blogs on those queries and then reach out to those people to also start mentioning you in those blogs.
33:39 – Joran Hofman
Let me actually just send you this because I know I sometimes mentioned a lot of tools. The ones I mentioned are SEMrushm, ahrefs, which are for backlink analytics. If you want to find high-ranking content, you could look at Respona, which does the queries for you. They all have a free version or Ahref might charge $7 for the first seven days.
You look at the affiliate management program; again, it’s going to be really hard to recruit affiliates, so make sure they also help you. This is one way where if they have some kind of marketplace where you can rank your affiliate program, it’s going to be easier to also get requests basically from people who are not in your network yet. The good part about this is they are already familiar with affiliate marketing, so they get the model or they get the model, and then if they apply to you, the only thing they need to learn of course, is more about your product.
34:45 – Joran Hofman
If you ask them the right questions, you can also learn if they actually know things about your product, if they already have people lined up, etc. It’s good of course, to have a lot of affiliates. It’s better to have qualified affiliates who drive a lot of traffic and good traffic towards you. It is quality above quantity for sure, to make sure that they have the network you’re looking for. And that again starts with ICP. If your ICP really well, you kind of also know if an affiliate is going to be a match for you or not. When you look at the backlinks, this is an example. For example, if I would just type in unbounds in Sandwich, I can quickly filter, or I can quickly select backlink analytics. On the left side, I can filter on sponsored links and then basically see the structure of the affiliate link.
35:46 – Joran Hofman
In this case, they’re actually using one of our competitors which uses the unfriendly links, which is GRSM, and that for me identifies, okay, they’re using this platform, this structure. I could go back and basically run a complete backlink analytics export on unbounds filter basically on this specific part. I can find all the blocks diverting towards unbounds within a 3D link.
It’s easy for me to find all these domains who have an affiliated link on there and then from there you can use a tool like Hunter, AO or Snoff which can basically find email addresses against those domains. From there, you can quickly reach out to people behind that domain. For this as well, there’s a link to those tools. Once you have affiliates, you definitely want to make sure you keep them motivated and engaged. They often recommend multiple tools because if they’re an affiliate, they’re probably an affiliate of more tools and they have other things to worry about.
37:08 – Joran Hofman
Either they have their full time job, right, or their agency or writing content, if you’re a blogger or an influencer, where they have other things to worry about. Make it as simple as possible for them to join, but also to keep them engaged. This is one of the reasons why I definitely recommend using a tool where they can get all the insights they need without having to ask you.
Keep them updated about new referrals, paid clients, product changes, different resources you have like new demos you recorded, basically anything you have which you have been using in your own sales or marketing, give it to them as well so they know exactly how to keep selling your product in the right way. Because in the end, you also want to make sure that they stay on brand. The last part is motivate them to do better.
38:03 Joran Hofman
A good example is to give them more commission if they give you paid clients or if they give you more paid clients. Both these examples are basically you would get more commission if you give, for example, the top example, 20 page clients towards this SaaS company. Yeah, this is one quote I always like to use as well, and I think this is true for most of us, right?
Put a thumbs up with an emoji if you agree, but you trust a company or a product more when it’s being recommended by somebody else and especially somebody else . It could be an influencer, it could be an agency, it could be your best friend. If they would recommend a product to you, then you’re more likely, of course, to buy that product. Again, using affiliate marketing will also help you to start leveraging this to your advantage.
Calculate success of Affiliate Program
39:09 – Joran Hofman
This is going to go a bit more in-depth. Who’s familiar with LTV CAC ratio. Can I get a quick yes or no in the chat? We have some yeses, we have some nos—more nos than yes still. There we go. Thank you. Faluk lifetime value versus customer acquisition cost. So how much does your client work? Basically? If you’re a sauce and you’re selling on a monthly subscription and you’re a bit further down the line, you kind of already notice based on the data you have. If you’re a bit more early stage, then you have to make some assumptions here. Let’s say we’re a SaaS company, we charge $50 per month and we know that clients stay with us for 36 months on average. It doesn’t mean that our clients is worth $50, but they’re actually worth 36 times $50. That amount is basically your lifetime value.
40:20 – Joran Hofman
You have c***, which is customer acquisition cost, which basically are all the costs related to acquiring new customers. If you put those together, you can calculate if you’re actually running like a healthy business model or not, just by putting lifetime value versus customer acquisition cost where they kind of say three to one or lower is bad and 401 is higher. These numbers have been changed a bit lately due to the recession and VC is looking at things differently. This has been a bit of benchmark for especially the last period, but people also now look at more at payback period, which basically means is how fast are you able to get your customer acquisition cost back? How long does it cost for a new customer to actually pay itself back and then turning it into profit? I would recommend looking either to LTV check ratio or to pay back a period when you start working with a new revenue channel like affiliate marketing.
41:31 – Joran Hofman
In general, these are definitely good metrics to look at if you haven’t done so for your business. For the ones who are a bit more further down the line and who are looking to start something like this, send me a message. We have a template where basically you can calculate your LTV check ratio pretty quickly. Just to give some examples, like how can you make it more healthy is for example, by lowering of course your commission period, lowering your commission percentage, or having a low fixed cost around your complete affiliate marketing channel. However, it doesn’t mean it’s going to help you grow the fastest. So always turn things around. As in it has to be attractive towards the affiliates to actually start recommending you, right? They have to of course get a good commission. They probably want a long commission. For you, as in for growing it, you probably also want to spend money on growing it just because the more effort you put into it, the more you’re going to get out of it as well.
42:44 – Joran Hofman
And that’s definitely true with this channel. Good example. Like for the people who are marketing, they know SEMrush, they grow their program really fast by offering 40% lifetime when they got started with it. They recently changed it to a different model where it’s not lifetime anymore and the percentage is lower. This helped them at the beginning to get a lot of affiliates who start talking about them and really grow that affiliate program a lot of money or a lot of money. A lot of people earned a lot of money by referring semrus to their network. They’re still how do you say it? Maintaining the deal for people who are in that program. But for the new ones, they’re switching. It to something else. I think I’ve been talking for 50 minutes now for the people who are looking to get started. Like we are already in the perk alumni.
43:48 – Joran Hofman
Connect with me on LinkedIn. I forgot to mention it in my intro, but I’m also a mentor on growth. Mentor, where I help people for free. Well as a mentor you have to pay I think $80 per month to get access to as many mentors as you want on that platform. Besides me there’s also people who can help with other things and most of them do it free of charge so you basically pay the platform and you don’t have to pay to get any help for anything. That’s all I wanted to say.