There's a ton of information published about how affiliate programs can be great for your bottom line as an online product seller, but not much about how those programs are actually run from the inside - from a merchant point of view.
And by going even deeper into the e-commerce space, you will discover that there are certain niches that have been around for a long time, and they have affiliate programs, but not much has been revealed about them ... until now.
One particular niche is the hosting niche. I'm talking about companies that sell you various hosting plans for you to power your websites.
The hosting niche is very competitive, and at some price points such as shared hosting, it can be viewed as a commodity.
As hosting matures and moves into new areas such as cloud computing providers, I am taking a closer look at how hosting companies run their affiliate programs.
Some of the questions I have are:
Hosting Series on Affiliate-Software-Review.com Blog
I've already interviewed a couple of well known hosters and more are on the way. To be notified of future interview posts simply sign up to my free affiliate industry newsletter here.
I should mention that here and there I might have an affiliate link, but to show my interviews are unbiased I also give a direct "naked" link to the company at the bottom of the blog post, so you can decide if you want to visit through my affiliate link or not.
Affiliate Marketing Audience
I would expect most readers of this post are affiliates in the hosting niche, or affiliate/marketing managers who are looking for ideas from other successful affiliate programs.
First up in this series is LiquidWeb, a well known provider of managed and dedicated hosting solutions with a strong focus on customer support.
I recently talked to Bret Hitchcock, Affiliate Program Manager and Sales Engineer for LiquidWeb.
Here's what Bret revealed to me:
Overall Philosophy of their Affiliate Program
The affiliate program is critical to LiquidWeb's (LW) success.
Their overall strategy is to provide high levels of support to their customers and affiliates. Marketing focus is on their services, whereas their affiliate program is marketed by their existing happy affiliates.
They have an affiliate program for their VPS and shared services as well as their dedicated servers.
In addition, LW has a reseller program where resellers get a discount on the products and take care of invoicing to the customers.
The affiliate program is LW's #1 traffic source.
In Bret's experience, he has found that the best referrals from the web are those where someone has given an honest review with good AND some "needs improvement" points mixed in.
Positive reviews with no balance to them appear biased and are not as successful in referring business to them.
They also have a "word of mouth" program but this doesn't deliver as many new customers as web traffic. This is surprising because in the case of web traffic, the affiliate most likely doesn't know the customer who ends up signing up.
However the volume more than makes up for the lower conversion rate when compared to word of mouth, which has better conversion but much less traffic contribution.
Affiliate Management Platform
LW's affiliate tracking system is an in-house platform. It can produce spreadsheets for management, that show referrals and screen out invalid referrals (20%) or where someone is already a customer.
To reduce fraud, LiquidWeb waits to pay their affiliates until well after the cancellation/refund period. This has reduced fraud significantly.
The one downside to having a custom platform in-house is that it puts a strain on their resources.
For example affiliates are asking for subid tracking which is currently not supported, so as a workaround they can get multiple affiliate accounts. This then results in more work for Bret's team to sort out tax reporting across multiple affiliate accounts.
To further support affiliates, Bret's team will often help them with custom banners that are better suited to their websites or blogs.
Affiliate Program Financials
The largest % of total revenue comes from their affiliate program, including forum posts on certain forums.
Twitter and other social media is getting them traffic but the question is how many orders would have come from social discussions anyway...
As for product mix, 70% of their referral business comes from dedicated server customers. A higher quantity of accounts are buying shared hosting, but this results in less actual revenue due to the lower price points of shared hosting.
LiquidWeb pays out over $40,000 per month in commissions to affiliates - as customer "bounties" plus recurring commissions for the life of the customer.
Processes and People
LiquidWeb doesn't spend on advertising, for their affiliate program. Instead, they focus their recruiting in an indirect way.
They try to treat their affiliates as well as possible, and trust that they will talk highly of them in affiliate industry circles and forums.
Screening of affiliates is taken seriously, so that fraudulent affiliates are filtered out early in the process. A PIN is actually mailed to affiliate applicants, to help verify physical addresses.
Who makes the best affiliates for LiquidWeb? According to Bret there are many well trafficked sites amongst bloggers, who refer new hosting customers to them.
Many of these sites are personal blogs where they help their readers explain how to set up their own blog sites and where the hosting can be ordered.
With these affiliates, their affiliate income from LiquidWeb is a small % of their total income, so it can be a challenge to motivate them to increase promotion of the LW offers.
What makes the LiquidWeb program unique?
According to Bret, one of the main differentiators of their affiliate program is that they pay a lifetime recurring commission to their affiliates.
Other affiliate programs offer a one-time payment or a commission that is time limited.
Because LW will pay a 5% residual for the lifetime of the customer, affiliates can earn much more in the long run.
To keep a focus on the affiliate program, it is managed by just one person. Some industry hosting shows are attended but so far they haven't looked at more internet-marketing shows such as Affiliate Summit.
Looking forward, Bret sees a continued focus on being honest and supportive of their hard-working affiliates. This is expected to pay off in their affiliate program, further contributing to LW's success.
A new "cloud computing" offering from LiquidWeb will mean some enhancements to the affiliate program, as customers will only pay for cycles used.
Currently the compensation plan is being reviewed to see how it can apply to this new model of hosting.
Whatever compensation plan is chosen, LiquidWeb will continue to focus on giving solid support to their customers and affiliates in the future.
Naked Links to LiquidWeb
To discover more about LiquidWeb, visit their site here. Their affiliate program is explained on this page.
Credits
Thanks to Bret for sharing this information with my readers!
To receive notifications of future blog interview posts, simply sign up for my free newsletter at http://www.affiliate-software-review.com
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