How to Create an Affiliate Program For Software & SaaS Businesses - The Complete Guide

affiliate marketing partnerships May 08, 2024
SaaS Affiliate Marketing Diagram

So you want to build an army of affiliates telling the world about your SaaS or software product?

Affiliate marketing can be a fantastic way to reach a lot of customers very quickly. 

Here at StartupSauce, we’re big fans of leveraging Other People’s Audiences (OPA) - so affiliate marketing gets a big thumbs up from us.

That said, it can be a bit tricky to set up and manage. Especially for SaaS and Software products.

This guide will show you how to set up an effective affiliate marketing program from scratch.

 

What is Affiliate Marketing And How Does It Work For SaaS Businesses?

 

First of all, let’s quickly cover what affiliate marketing is and how it differs for SaaS compared to other industries like physical products, courses/infoproducts etc.

An affiliate is another business that promotes your products and services to their audience in return for a cut of the revenue.

Note that affiliates, partners, influencers and referrals are all related but slightly different things and require different approaches. 

Sometimes being an affiliate is their core business and primary source of revenue - many bloggers and content creators fall into this category, for example. 

So do review sites that compare and contrast different software tools. 

 

Example: SaaS Genius (a review site) with an affiliate link to ActiveCampaign.

 

But quite often the best affiliates don’t promote affiliate offers as their core business. 

Instead they sell their own products and services that are complementary to yours and are targeting a very similar audience to your own. 

I’ll explain why they often make better affiliates a little later on ;)

 

How to Create an Affiliate Program

 

If you’re starting an affiliate program from scratch, you’re going to need a few basic things:

1 - A product for the affiliates to promote

2 - A group of affiliates who are keen to promote your product

3 - A landing page for them to send the traffic

4 - A way to track sales and pay affiliates accordingly

Firstly, we should also talk about when to launch an affiliate program.

I typically encourage the founders I coach to start with a combination of cold email and content marketing/SEO at first, and only look at paid ads and affiliates later.

Why? Because early on your conversion rate is going to suck - your product will be buggy and missing features, you’re still working out messaging, you have limited social proof and have not optimized your marketing funnel or landing pages at all yet.

And that means if an affiliate promotes your product, they likely won’t see many signups.

You don’t want to risk burning bridges with affiliates you may need to grow in the future by involving them too early.

So wait until you’ve got some other channels working first, you’ve refined your messaging and positioning, have a bunch of reviews and testimonials etc. and you have an acceptable conversion rate. 

The key difference between SaaS affiliate programs and affiliate programs for other categories (like physical products, services or courses/infoproducts) is how and when payment is received.

If I buy a pair of shoes or an email marketing course, I’m generally paying up front once and I own the item forever (in theory at least, my running shoes generally wear out within 6 months!)

Whereas in B2B SaaS, we have the advantage of higher margins and expansion revenue. Customers will graduate to higher pricing tiers naturally as their business grows.

But the downside is that revenue trickles in slowly over time rather than arriving all in one hit.

I touch on this idea of the SaaS “Valley of Death” in this video by the way.

So how does this relate to affiliate marketing?

Simple: most affiliates aren’t patient - they want to get paid ASAP. 

But therein lies a problem - even a lifetime commission may not be that appealing to affiliates. Especially if your SaaS pricing is fairly low-ticket.

Hostgator, for example, has plans starting from just $3.75 per month.

Even if they paid 50% lifetime commission, it’s hard to imagine affiliates getting excited about earning a whopping $1.87 per customer per month…

But Hostgator really knowsknow their metrics inside out. They know that once they get a customer, they can keep them for years, even decades. 

And many will upgrade their plan or purchase additional products and services.

So armed with that knowledge, Hostgator pays its affiliates a flat fee of $100 per new customer referred. 

As you can imagine, this is a lot more attractive to most affiliates than $1.87 per month…

That said, this is very risky unless you really have your metrics dialed in. 

So for the vast majority of SaaS businesses, it’s much safer to go with offering a lifetime commission instead.

 

Should I Join an Affiliate Network For SaaS or Start My Own Affiliate Program?

 

Next you need to decide if you want to join a pre-existing affiliate network or if you want to build your own from scratch.

It can be very tempting to join an existing network as they already have a huge pool of affiliates to work with and most will provide you with an affiliate manager to help you.

All of this comes at a cost though. Most affiliate networks charge a one-time setup/joining fee as well as charging their own commission on every sale in addition to the commission you pay to the affiliates.

For example, CJ.com - one of the largest affiliate networks in the world - charges a $3000 joining fee plus commission.

Some will charge an ongoing account management fee every month as well as/instead of the commission.

Also, while having a huge pool of affiliates may be tempting, what are the chances that many of those affiliates will have an audience relevant to your SaaS product? 

If you have a B2C SaaS or sell to a very mass market SMB audience - think brands like AppSumo, Shopify, Square, SEMRush, Zenefits etc - then yes, joining an existing affiliate network can be a great way to accelerate growth.

On the other hand, if you’re targeting a more niche audience you may be better off starting your own affiliate program and recruiting affiliates directly. 

Tools that allow you to run your own affiliate network are generally much cheaper than the cost of working with a pre-existing network - but you’ll need to put in a lot more work to recruit and manage the affiliates.

Whether you choose to join an existing network as a merchant, or want to create your own - remember that you’ll want to be proactive about recruiting new affiliates and encouraging existing affiliates to continue promoting your offer.

 

Affiliate Software Tools For SaaS

 

Here are some popular affiliate networks and affiliate software tools for SaaS.

 

Existing Networks

Impact.com

CJ.com

ShareASale.com

Partnerstack.com

Reditus

 

Roll-Your-Own

Tapfiliate

Rewardful

FirstPromoter

PostAffiliatePro

LeadDyno

 

How To Get Affiliates For Your SaaS & How to Manage Them

 

Finding and recruiting affiliates is half the battle. Getting them to devote time and energy to promote your offer instead of someone else’s is the other half.

 

1 - The lowest hanging fruit is usually your existing network

I’m amazed how often SaaS founders launch an affiliate program and never mention this to their audience at all.

So, send a few emails out to your list announcing your shiny new affiliate program. Post it on social media. Talk about it on your YouTube videos or your podcast.

 

2 - Add a page to your website - and maybe a footer link - with information about your affiliate program

Also include a form where they can apply to join. It’s more work, but you do want to manually screen anyone applying to join as an affiliate.

There are unfortunately some dodgy affiliates out there who will abuse any affiliate program that isn’t water-tight (more on that later). 

You can generally filter many of them out by asking them to fill out a form and then spending a few minutes manually checking each one before approving them to join your program. 

 

3 - Reach Out Via Cold Email

It can be a little difficult to identify affiliates to approach. What you can do though, is identify good partners and mention your affiliate program as one of the ways you could work together.

Start by writing out a list of all the products and services your customers use before, after, and at the same time they use your product. Then do some googling and start building a list of these companies.

In an ideal world, you’d find some directories or sites that have lists of these sorts of companies already. 

For example, some categories of software businesses on Capterra or G2 might make good affiliates; if agencies would be great affiliates then Clutch.co may be a fruitful hunting ground for you.

Next, you want to write a short-but punchy intro email. 

Personally, I’ve had more success just by being upfront about what I want from them and what I will do in exchange rather than being vague and asking them to get on a call to explore the possibility of working together. Try both approaches and see which works best for you.

Of course, there’s a LOT more to effective cold email outreach than just writing a nice email and sending it out. You need to worry about deliverability, spam trigger keywords, how to optimize open and reply rates and a whole lot more.

If you’re keen to try cold email then check out my course: The Cold Email Secret Sauce for SaaS. 

In it I break down the exact email I used to land partnerships with VCs that generated over $100K in revenue per year for my 2-person agency; it’s a great template to use for reaching out to affiliates.

 

Tracking Sales & Attribution

 

One of the biggest issues with affiliate programs is attribution

How does the affiliate prove they referred the customer to you? 

If multiple affiliates refer the same customer, who gets the credit for the sale?

If a customer comes via an affiliate, but doesn’t sign up in the same session and later returns to the page via some other channel, does the affiliate still get credit for the referral?

Needless to say, it can get a bit…complicated.

For this reason, there are two main ways to track affiliate referrals:

 

Using unique coupon codes

Coupon codes are relatively easy to track, and don’t require any sophisticated software or setup. Just make a special coupon code for each affiliate to send to their customers and you can manually check sales each month and pay the affiliate accordingly.

You will need to provide a meaningful discount for the affiliate to promote - this will help with conversions, and gives a tangible reason for customers to sign up using the specific coupon code rather than just going to your website.

This method is fine if you have a small group of affiliates you trust. But it becomes a pain to manage once your affiliate program expands.

But the biggest downside of this method is that it will eat into your margins considerably offering a discount as well as a commission for the affiliate. 

Plus, you run the risk of cannibalizing your margins long term if those coupon codes become publicly available, or if some affiliates pressure you for steeper discounts and then your other affiliates ask you to match.

For this reason, there are SaaS affiliate program software tools that make it easier to manage affiliates; most of these allow you to create unique tracking links automatically for affiliates.

 

Using unique affiliate tracking links

If you use affiliate tracking links, generally this also includes a cookie (small code snippet) that gives the affiliate credit for the sale if the visitor they send converts within a specific time period.

For example, Amazon’s affiliate cookie duration is only 24 hours. If an affiliate sends a customer to Amazon, they will receive a commission on any sales made for the next 24 hours.

But if a customer goes back to Amazon directly a few days later and converts, the affiliate gets nothing.

That’s all well and good for impulse purchases made by consumers from big, well-known brands like Amazon.

But most B2B SaaS sales cycles are much longer, involve more research and often multiple decisionmakers and stakeholders. 

For this reason, we generally recommend 30 days minimum as the cookie duration for SaaS affiliate programs, and realistically 60-90 days is probably more common.

Be generous with the cookie duration. Yes, you might make more money in the short term if affiliates send you traffic, but it converts after the cookie duration has expired and you don’t technically need to pay your affiliates for the sales.

But if affiliates are sending you lots of traffic and not making any commissions from it, they’ll drop you quickly. Worse, they might start promoting your competitors instead. 

And the last thing you want is a bunch of important affiliates being pissed off with you and telling the world to use a competing product instead of yours!

Either way, you’ll most likely need a software tool to manage affiliates, track sales and handle payouts accordingly - and most affiliate programs use one or both of these tracking methods.

 

How To Encourage Affiliates To Promote Your Business

 

So you’ve joined an affiliate network and/or put together a list of great potential affiliates you’d love to work with. 

You’ve reached out to them and they’re keen to promote your product to their audience. 

They’re interested. They’re happy to promote you to their audience and get paid a commission in return. So far so good.

All of that is the easy part, though. Are you ready for the hard part?

The hard part is actually getting the affiliates to take action.

This is especially true of partners whose core business is not promoting affiliate offers. 

Most people would rather focus on building their own business rather than helping you build yours. Shocking, I know…

So here are a couple of tips you can use to encourage your affiliates to actually promote you.

 

1 - Send them a Partner One-Pager

Sometimes affiliates don’t promote you because they’ve actually forgotten what you do, or who your Ideal Customer is. Or they can’t remember the details of the deal. Or the person you made the agreement with has moved on and the incoming person doesn’t know about your affiliate arrangement.

In all these scenarios, when people are unsure, they err on the side of doing nothing.

To prevent this from happening, you should send them a document I call a “Partner One Pager”. 

Here’s our Partner One Pager for StartupSauce by the way. Feel free to make a copy and use it as a template.

It’s a silly name in hindsight - ours is actually 2 pages long - but a “Partner Two Pager” just doesn’t sound as good…

Anyway - the whole point of this is a document that provides some context and bullet points that the partner can refer to in future, so that they can feel confident in referring customers to you.

This is basically a stripped-down affiliate agreement, without the legalese.

 - What your business does

 - Who it’s for

 - Why it’s awesome

 - How your pricing works

 - How and when you pay affiliates and how your sales attribution system works

 - Any exclusions or conditions (only certain traffic types allowed, max discounting allowed etc)

 

2 - Follow Up Proactively

You don’t want to nag your affiliates - but completely ignoring them will get you nowhere either.

Instead, create a spreadsheet with a list of all your affiliates, the name and email of your contact there, as well as a link to the affiliate agreement for each of them (if you don’t have a one-size-fits-all standard agreement).

Aim to reach out to each affiliate AT LEAST once per quarter, but ideally once a month or so. 

Additionally, reach out if you have some exciting news to share that they can do promotion around - launching a killer new feature, winning a prize, releasing a case study with a well-known brand as a customer etc.

Oftentimes people just forget to promote you and so some gentle, polite-and-friendly nudging goes a long way. The hardest part is getting them to launch that first campaign - once they see the commission dollars rolling in, they’ll be motivated to continue.

 

Advanced Tips and Tactics

 

1 - Affiliate Sniping

Identifying good affiliates is always a challenge. You’re not only looking for partners who have a huge audience or a lot of traffic, but ones who will be proactive about promoting you.

One elite-level approach is to google “competitorname + review” and you should find a lot of blogs and review sites that have affiliate links pointing toward your competitor’s offer. You can reach out these via cold email and make them a better offer.

Beware though - affiliates who will drop a competitor when a better deal comes along will drop you just as quickly. Or if your offer fails to convert. Professional affiliates are ruthless like that. 

So this tactic is nice for expanding reach quickly once you’ve got an affiliate program that works and is converting well. But you don’t want to be over-reliant on these partners.

 

2 - Do it For Them

The more the affiliate has to think and plan and do work, the less likely they will be to actually go through with it. 

Make it as easy as possible for them to promote your product. 

This has the added benefit of giving you more control over messaging, and setting a high standard - showing them what good looks like.

There’s nothing more annoying than an affiliate misunderstanding your product, misrepresenting it to their audience, seeing low conversions as a result and then deciding to drop you because they aren’t making any money. 

The more niche/complex your product is, the more hand holding you’ll need to provide.

So - write the email sequence you want them to use. 

Write a few sample social media posts.

Record a video review of your product that they can just add an intro and outro to. 

Put an infographic together that they can share to their audience.

However you want them to promote you, do as much of the work for them as possible.

 

3 - Evergreen Content and Baked-in vs Bolted-on

In my experience, the most successful affiliate partnerships occur when the offer is promoted in a systematic way, rather than a one-shot shoutout.

This means baking it into an existing workflow or using evergreen content rather than content that is going to disappear momentarily, like social media posts or a single email.

If you have other SaaS businesses promoting your product, two of the best places for your promotion to live are in the onboarding email sequence and in the dashboard of the actual product.

Especially when the offer being promoted is relevant to that particular part of the onboarding sequence or workflow.

For example, Adam White ran a backlink management tool called SEOJet. He was making an ok amount of revenue from subscriptions, but then he came across something that drastically increased his revenue in a short space of time, and ultimately allowed him to lead the business to a lucrative exit.

What did Adam change? He realized that the real value for his customers wasn’t in just identifying backlink opportunities (which is what his tool did).

What his customers actually wanted was the backlinks themselves, not just the information about where to build them. 

So he partnered with an agency that did the actual backlink outreach for clients. And then offered that service on an affiliate basis - from within his product’s dashboard UI directly.

When you work with an affiliate - especially if they run a complementary SaaS product to your own - ask about baking your offer into their onboarding sequence or into their product dashboard. 

You’ll have a steady stream of highly relevant prospects seeing your offer, and the affiliate partner will only have to make a change once and keep collecting affiliate commissions forever, without having to do any additional work. 

AND they’re helping their customers be successful at the same time by introducing them to complementary products. Like yours.

 

Common Mistakes & Pitfalls When Managing Affiliates as a SaaS Business

 

Avoiding Bad Affiliates

One other factor to consider when creating an affiliate program for your SaaS is this: 

Who are these affiliates

Are they legit businesses who can drive traffic and customers to you? 

Or are they sketchy opportunists who will pull all sorts of stunts to trick affiliate tracking software into giving them credit for sales that they didn’t really drive?

Like cookie-stuffing, bidding on brand-name keywords or using bots to sign up instead of real customers.

Make sure you set some rules and boundaries about what affiliates can and cannot do to promote your product. Including which traffic sources they can use. 

One common one I’d recommend is “You can’t use our brand name in your ad copy, cannot bid on our brand keywords and must make it clear that you are a third-party not a representative of our company”.

Otherwise you’ll get lazy affiliates just creating google ads and targeting your brand traffic and you’re suddenly paying 30% lifetime commissions for customers you would have likely received for free anyway.

 

Offering Discounts

Affiliates love when you give them a discount code to share with their audience, especially if it is exclusive or at least not available to the general public. 

This is because a discount both improves conversions and provides a tangible reason for someone to click the affiliate’s link or use the affiliate’s coupon code - which means they get credit for the sale and make more money.

However, as the merchant you need to be really careful about authorizing affiliates to offer discounts. If word gets around, this can completely cannibalize your margins. 

Customers will learn never to pay full price and just look up a discount code, and new and small affiliates will expect you to authorize them to offer the same discount as larger affiliates…who, in turn, will push you for an even greater discount as a point of difference.

You can very quickly find yourself in a race to the bottom.

Instead, it’s usually a better idea to run specific limited-time promos with specific partners rather than offering a blanket authorization to discount your prices.

 

Final Advice

 

Launching an affiliate program can be a powerful marketing strategy for SaaS companies.

 

Unless you absolutely know what you’re doing, though, I wouldn’t focus on affiliates as your primary channel. Not at first anyway.

You want to make sure you nail your product, positioning, messaging etc first, and have a funnel that you know converts well.

For these reasons I generally advise SaaS startups to start with cold email outreach and SEO/Content Marketing at first to get some initial traction. And then test affiliates and paid advertising later, once you have some revenue coming in and have somewhat optimized your funnel.

If you’re new to affiliates, you may be tempted to join an existing affiliate network.

And that can be a wise choice IF you work with the affiliate manager and are very careful to weed out any unsavory affiliates.

And if you make sure you don’t destroy your margins by offering blanket discounts for affiliates as well as commissions as well as the fees you pay to be a part of the affiliate network.

Whether you join a network or not, it’s worth reaching out to complementary businesses and inviting them to join your affiliate program - even if affiliate marketing isn’t their core business.

If you can establish a good relationship with these affiliates and get them over the hump of the first few referrals, you’ll find you have a powerful source of new leads that will keep coming in month after month.

 

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