Affiliate marketing · Revenue sharing

What's the range for an affiliate fee / rev share for a SaaS business?

Jay Gilbert Founder @ Biirdie Golf

April 15th, 2016

I am working on a couple deals with potential partners and we are looking at an affiliate model where they'll earn an affiliate fee for sales which originated from the partner's site / email marketing.

We have a SaaS model - so a couple questions around this.
  1. What is the proper range in % to kick back to the partner?
  2. How long should the kick back be eligible for? Since this is a subscription service, it is not a one time payment (it could be, but looking for best practice here). The backbone to this question is - the model compensates the partner for the lead gen - but if we retain the client's business - how long does the lead gen partner get to share the revenues?
  3. What should be the timing of payments to the partner - quarterly?
Very appreciative of the insights in this community. Thanks!

Peter Jordan Revenue hacker for startups - journey to the $1 of revenue

April 15th, 2016

Jay, In the SaaS model the affiliate should be paid just once. I am not sure what your CAC is but if an affiliate should only make 1 month worth of revenue to you, I believe it would be of value to you and the affiliate.

Kim Albee Marketing Automation & Content Marketing Strategist

April 17th, 2016

Hi Jay. 
I have a SaaS software company - one of our newly released products is the ONLY completely integrated marketing automation offering accessed from within your WordPress admin. 

I have been exploring the affiliate and JV world for several years now as we have learned the vast majority of your affiliates will never produce much in terms of revenue. 

So with our new WPMktgEngine offering, we are making connections with some top affiliates who sell to small business & entrepreneurs.  You don't get them to work with you for less than 50% of the front end sale. Most are not interested in recurring commissions - it's too hard to track. 

Our solution is an annual subscription.  We also offer a payment plan - but it's more expensive and there are three or four payments that are automatically processed every 30 days until done. 

We did a few internal launches to a small list, to get an initial EPC (Earnings Per Click) -which is what they are interested in to evaluate whether they will promote for you. 

Then we did a Webinar that was promoted by one of our first big affiliate partners. With that Webinar and subsequent offer, we returned approx $6 EPC total, so the affiliate earned approx $3 EPC. 

Understanding the EPC allows an affiliate to look at their list (and they know what their clickthrough rate is likely to be when they send out emails promoting your offer) and know what sort of revenue they are likely to bring in from it. 

Our first "launch" with an affiliate in this manner brought in 499 new leads to our system in the span of 2 days. Plus we got some great new customers. 

So we now don't have an 'anyone can sign up' affiliate program. We are interested in the affiliates who will promote us to their list - not just put an affiliate link in a blog post or page. We are looking for JV's in the small business & entrepreneurial market that will promote for a launch - which includes us providing some free training videos, and an offer to buy our solution (at the end of the free training).  

Hope this helps. If you'd like to check out our training go to WPMktgEngine dot com and click the button that offers our free training right on the home page. 

There is also the Marketers Cruise event - held in January each year. I went this past year - 8 days - and met some fabulous marketers who became friends and are also helping me promote the product. I'll be going next year also - it was a great event. That might also be a good resource to check out. 



Anonymous

April 16th, 2016

Hi Jay, Personally I believe there are many variables you need to consider. I've seen a wide spread of SaaS applications offering all sorts of "Partner" (affiliate) compensation scenarios. We really don’t have enough detailed information to offer any “real” advice here, but I’ll do my best.

I know of one application that has a monthly cost of $300. Their profit margin after paying their affiliates is 32%. They have 72,000+ current monthly subscribers, and they payout 30% to their affiliates in monthly recurring commissions. Their main expense is payroll supporting their help desk and their marketing budget. They have enterprise level bandwidth all hosted through Amazon. Needless to say, it’s a profitable business.

Here are some things I think you should consider (the first three are critical):

  1. Know your end-users: Conduct a thorough customer analysis, actually talk to people and get their feedback.
  2. Know your affiliates: Conduct a thorough affiliate analysis, again actually talk to people and get their feedback. You’d be amazed at how many up-sell situations you can create doing this.
  3. Know your competitors: Conduct a thorough competitive analysis. Do live shopping calls! You will be amazed at how much information they will give you if you approach them correctly.
  4. What is the end-users 'perceived value' of your application? What will the marketplace pay based on their perception of its value to them? Don’t get hung up on; “I put $1 in and I need to get $2 back out.” You may discover the perceived value is much larger. Is it a $5 per month application? A $50 per month application? A $300 per month application? Is your application disruptive - meaning is it a complete replacement making all others obsolete -vs an add value application? You may have a direct cost of $5 per subscriber-per month to support it, but a perceived value of $50 per month. So, do you sell it for $10 per month?
  5. What is your cost to deliver? What is your profit margin before a "Partner" (affiliate) is given their cut?
  6. How important is the "Partners" (affiliates) influence on the sale -or better yet, in maintaining ongoing monthly subscribers? Example: Let’s say you developed a mobile training application supporting golfers. Only your application uses the camera function with its facial recognition tech from the phone to ID the approximate distance to the flag / hole. And based on the calculated distance and the direction the flag is blowing, the AI pulls from the database suggested clubs to use, loft, wind direction, suggested torque, etc.; plus your database includes easy access to quick-cheat videos and suggestions on how to make the best approach on the green or at the tee. The app might even offer a help desk where golfers could ask questions a panel of pro golfers you’ve cut a deal with on how to do things better. Entry level pro coaching without the huge fees, what a concept?  Needless to say, all of this could offer tremendous value, especially for new beginning golfers.
  7. How much value does promoting your application bring to your "Partner" (affiliate)? Should you pay them -or should they pay you? Think of ways you can up-sell them to a value added "Partner" (affiliate) desktop application, and make them subscribe also. How can your application make them money, bring in more sales? Going back to the golf example: If your application included ‘tee times’ at all the affiliated golf courses, discount green fee QR code coupons, proximity marketing at the club and/or pro shop, built-in mobile shopping cart for the pro shop, a built in marketing platform, etc. Tremendous value, right? Now all you need to do is sell them on why they need to subscribe and promote your application to all of their members. It’s called fishing with a wide net -vs a pole. What manufacturers or fabricators can you build a version of your application for and tie them into the revenue stream as well? Get them to endorse and promote your application to all your would-be "Partners" (affiliates). Look for WIN / WIN scenarios.

Make sense? I hope this helps. Happy building!

Angel Djambazov

April 18th, 2016

Hi Jay,

Having managed multiple SaaS affiliate programs in a variety of verticals (education, finance, administrative, entertainment) the payouts very greatly. The floor for a CPL to be competitive is around $30 with some payouts going as high as $90.

I disagree with Peter in the earlier comments. A competitive payout usually amounts to 2-3 months subscription value. But I do agree that by far the majority of SaaS payout only payout on the the initial CPL and do not offer continuing incentives. The only reason to offer such incentives is if you are hoping to leverage the affiliate channel to move subscribers into a higher echelon of service. It then may be worthwhile to implement some sort of bonus payout based on LTV but it is tricky to implement properly.

Timing of payouts should be no more than 30 days after the initial trial period, if any, of the software. Longer payout times or waiting for quarterly payouts will significantly impact your ability to recruit additional partners.

Finally something no one seems to have mentioned is fraud. I am not talking about credit card fraud, although for really aggressive payouts that may be an issue, but I am talking about affiliate fraud. The more aggressive the payout on a CPL the more incentive for affiliates to cheat by either sending you fraudulent signups or by stealing credit from other affiliates. You should work closely with your internal team and your affiliate network/tracking provider to help mitigate.

Bill Lennan Red Rope Social - everyone is an influencer.

April 15th, 2016

I'd take a look at the payouts on the existing affiliate networking platforms. 
Not knowing your business model or pricing or cash reserves makes answering a challenge :-)
As a data point, years ago Netflix payed $47 to affiliates per signup that lasted past 45 days. Despite taking months to recoup the upfront cost - they had data to support the lifetime value.

Jay Gilbert Founder @ Biirdie Golf

April 17th, 2016

Thanks everyone for your inputs - I appreciate you sharing your insights! To provide some extra context, we have an application for coaches and players to use in order to capture and evaluate mental game performance. We are looking to partner with one of the largest golf apps (who does digital scorecards and yardages) using an affiliate model. They would promote our product for an affiliate fee.

Chicke Fitzgerald

April 19th, 2016

Jay - I run a cloud based trip planning service that is a free widget plug in for venues, companies and events.   We can trip-enable any webpage, photo, video, blog or confirmation email with an address or lat/long.  We are different from every other travel product in that we do a proximity search for the venue, versus searching based on city centers and airports.

The widget can be installed the same day.  Easy peasy.

We have a transactional revenue stream, so we pay our affiliates 10% of the ongoing revenue stream into perpetuity.  That way, they can build their portfolio of clients and we are ensured that they will stick with us.   We prefer that they sign enterprise clients and they make more when they do, just based on the sheer volume. 

We also share our revenue stream back with our clients.  We offer 10% and if they are an enterprise platform (versus just a single venue or event), providing their capabilities to their own client base, assuming they do it on an opt-out basis (versus selectively implementing) we give them another 10% for a total of 20% perpetual royalty on the enterprise activity.   

We pay affiliates monthly and clients quarterly (unless they reach a certain threshold).

Lastly we contribute 10% of their total revenues to their charity of choice annually. 

Our launch client for this service was a funeral home software company, where we "trip-enabled" the obituary for 2300 funeral homes, serving the people attending 24,000 funerals a month.

Our ideal clients include CRM software provider, a calendar software company, an event ticketing/registration company, an event venue, a chain of venues (hospitals, museums, etc.).