Creating a Budget for your Affiliate Program

If you’re considering setting up an affiliate program, you will need to think about your budget. While you may wonder why affiliate programs need a budget, once you start exploring the costs, you will see that it can actually help you to develop the structure of your program and avoid making any costly mistakes down the line. 

There are three key areas for affiliate program budget allocation:

Your Affiliates:

The first thing you need to plan into your budget is the affiliate payouts. You will need to set a compensation structure for the people who will be promoting your program and products. 

There are several ways that you can accomplish this. The most common are a flat dollar cost per action (CPA) or a percentage cost per sale (CPS). However, you can also use Cost Per Link, (CPL), Cost Per Click (CPC), or a custom structure. 

Some affiliates will offer additional promotional services, so there may be premium placement, allowing you to feature your products, but it may require a fee to retain your spot or an increase in commissions. The cost will vary according to the specific affiliate, so you may wish to have a discretionary budget in place. 

If you plan on using influencers, you will need to think about how you will pay them. Many influencers prefer a hybrid model system, where they are paid a fee and an affiliate commission. However, you will also need to budget for vanity and coupon codes or free products. 

Technology:

You will also need to budget for the technology associated with your affiliate networks or tracking platforms. While it may seem like a more cost-effective solution, it is a good idea to avoid the plug-ins associated with affiliate networks. These often have biased data where the revenue figures can be manipulated. So, potential affiliates may be hesitant to join your program, as they may not receive the proper commissions.

A third-party platform will typically cost you a little more, but it will provide unbiased data that both you and your affiliates can access for accurate, fair tracking. 

Your budget should also include funds for a tech team if you need help to integrate, provide custom coding or simply provide tech support. 

Management:

Finally, you need to consider the costs of your affiliate program management. If you’re hiring an inhouse management team, you will need to budget for salaries, employee benefits, training, and hardware costs. 

The alternative is to work with an affiliate agency. Established agencies already have systems in place, so you won’t need to pay for employee benefits and hardware. There are also no training costs, but you will need to budget for a flat monthly retainer or a percentage. 

You will also need to budget for management for any additional teams, for example, content creation. However, agencies will often include these, so you shouldn’t incur additional costs. 

If you’re planning an affiliate program and need assistance with your program management, be sure to speak to us. Our team would be delighted to discuss your requirements.