Tough competition is one of the defining features of the SaaS industry.
As we speak, there are roughly 30,000 SaaS companies in operation around the world. Sure, not all of them will be direct competitors—but many will be. And many will have access to the kind of funding that puts your marketing budget to shame.
This means that, as a SaaS company, you can’t just rely on your product to sell itself. You need to have a comprehensive marketing strategy that covers all the bases—and that includes having an affiliate program. If you want a broader perspective on SaaS marketing, have a look at this detailed guide on SaaS content marketing.
In this article, I’ll give you an overview of what SaaS affiliate programs are, how they work, and what makes them so effective for SaaS founders (bootstrapped or otherwise). I'll also give you some tips for creating a successful affiliate program for your SaaS company.
Let's dive in.
What Are SaaS Affiliate Programs?
You probably already have a solid understanding of how affiliate programs work in the general sense. Well, SaaS affiliate programs don't deviate much from that basic model.
You (i.e., the product owner) have a product. You find people who want to promote said product (i.e., affiliates). When the affiliates direct leads, paying customers, or clicks your way, they get some kind of reward—usually a commission.
Affiliates can be bloggers, social media personalities, YouTubers, publications, notable users—anyone with a sizable online following that overlaps with your target market. They promote your product to their audience in the hopes of making a commission.
It's a simple (but highly effective) model that has been used to drive millions of dollars in sales for SaaS companies just like yours. According to data from a Salesforce report, affiliate leads convert at a rate of 3.63% compared to a rate of just 0.78% for marketing leads.
Sound like something you’d be interested in implementing? Read on.
Key Elements of a SaaS Affiliate Program
When you cut away all the fluff, there are really only four key elements to a SaaS affiliate program:
The Affiliates: This is who you partner with.
The Benefit Structure: This is what incentivizes your partners to promote.
The Rates: This is how much you pay your partners for their efforts.
The Tracking and Reporting: This is how you and your partners track leads and sales.
In a well-designed affiliate program, each of these elements works in tandem to create an affiliate program that generates sales with an efficiency that's hard to replicate through other channels.
Now, let’s talk about the details of actually creating one.
1. Choosing Affiliates
As I said, anyone with a sizable online following that overlaps with your target market is a potential affiliate. That said, it usually makes sense to build your affiliate program around a specific kind of affiliate (e.g., bloggers or educators).
Why? Well, the main reason is that different kinds of affiliates can respond differently to the same benefit structure.
Dropbox runs an insanely effective affiliate program that awards individual users with extra storage space when they refer their friends and family. Would that same benefit structure work for enterprise-level company affiliates? No way—they'll just pay for extra storage.
So, what are your options when it comes to SaaS affiliate programs? Here are a few of the most effective:
A. Business Affiliates
This type of affiliate is ideal for B2B SaaS companies. Instead of targeting individual users, you partner with other companies and offer them a commission when they refer your product to their clients or customers.
This kind of affiliate partnership can take a few different forms:
Integration Partnerships: You partner with companies who integrate your product into their services or vice versa. Canva currently has a successful integration partnership with HubSpot that allows users to draft email templates without leaving HubSpot's ecosystem.
Strategic Partnerships: You partner with companies whose products or services offer a natural complement to your own. The Xero Partner Program gives bookkeepers and accounting firms free access to Xero HQ and training in exchange for getting clients to sign up for paid plans.
B. Creator and Publisher Affiliates
Creator and publisher affiliates are influencers who have a large, engaged audience that overlaps with your target market.
You'll want to partner with creators in the same vertical as you, and look for those that are already familiar with your product or industry. It's also important to make sure the creator is comfortable promoting your product—they need to genuinely believe in the value you offer in order for the affiliate program to be successful.
If you want to go this route, you're free to reach out to content creators and publishers you’d like to work with directly. That said, it may be easier to join an affiliate network, so you don't have to start from scratch.
C. Educator Affiliates
For every popular SaaS product, an ecosystem of educators and educational content exists to fill in the gaps of official documentation.
You can partner with these educators and offer them a commission for getting their students to sign up for your product. This type of affiliate partnership typically works best when you offer some kind of educational resource (e.g., templates, guides, or tutorials) that the educator can use as part of their course materials.
In addition to offering commission on sales, you may also want to offer educators additional incentives, such as discounts or free access for their students.
2. Choosing a Benefit Structure
You'll notice that I'm using the term “benefit structure” here rather than the far more common “payment structure”.
This isn't by accident—plenty of successful affiliate programs aren't built around sending money to affiliates. Dropbox’s affiliate program is a great example. So is the Xero Partner Program. That said, the vast majority of benefit structures do involve giving your affiliates some kind of financial incentive.
So, how should you structure those payments? There are a four main payment models to consider:
One-Time Commission: You pay your affiliates a one-off commission for each sale that they refer.
Recurring Commission: You pay your affiliates a recurring commission for each customer they refer, usually based on their monthly or yearly subscription fees. This is a popular one in the SaaS industry.
Hybrid Commissions: A mix of the two, where your affiliates receive a one-time payment as well as recurring payments.
Variable Commissions: Variable commissions paid out based on the performance of affiliates.
Think carefully about which model works best for you and your affiliates. It’s usually better to start off with a universal commission for all affiliates (i.e., one-time, recurring, or hybrid commission). Once you have a bit of data, you can start to identify high-performers—these are the affiliates who may deserve a higher, variable commission.
3. Choosing Rates that Incentivize
The same goes for setting the rates—you want to make sure the benefit structure you choose is attractive enough that your affiliates will actively promote your product.
Now, there isn't a ton of existing benchmarking data available when it comes to SaaS affiliate rates. Luckily, there are some fairly comprehensive lists of SaaS affiliate programs that we can use to draw some general conclusions.
Recurring commissions are the most popular benefit structure: Recurring commissions are the structure of choice for roughly 60% of SaaS companies. Among these companies, the median commission is 25% per month with a range of 10% to 50%.
One-time commissions are still fairly popular: Roughly 30% of SaaS companies opt for one-time commission models (with the remaining 10% being split between other models). For these companies, the median commission is 20% with a range of 3% to 100%.
The rate you choose is ultimately a personal decision, but do make sure that your rate is competitive and attractive enough to incentivize your affiliates.
How To Set a Sustainable Affiliate Rate
The process of setting affiliate rates deserves a blog post of its own, but I still think it’s important to give you a few methods for setting rates:
Copy your competitors: If you have a competitor who has been running a successful (and sustainable) affiliate program, their rates will be a solid guideline. You’ll need to approximate or beat them if you want to attract affiliates.
Use your CPA: Affiliate rates are an expense that goes towards acquiring new customers, so it makes sense to look to your existing CPA when setting rates. If affiliate marketing is going to double your CPA, it may not be worth it yet.
Use your LTV: This one probably goes without saying, but your affiliate rates need to be considerably lower than your average LTV. Low retention means lower rates. High retention means higher rates.
4. Choose an Affiliate Tracking Tool
Affiliate tracking platforms let you launch, manage, and optimize your own affiliate or referral programs. Most tracking tools are feature-rich and allow fine-tuning affiliate marketing campaigns for any business needs. Due to comprehensive dashboards and real-time statistics, advertisers can easily calculate commissions, track conversions, and store affiliate-related data under one hood.
Here are a few things to consider:
Compatibility: Check that the tracking tool is compatible with your website or app.
Payment Processing: Is it easy to distribute payments to affiliates and keep track of commissions?
Reporting & Analytics: How much data can you access on referrals and conversions?
Integrations: Does the platform integrate with other platforms you already use?
Security: Is the data stored securely and backed up regularly?
Once you've chosen a tracking tool, you'll be ready to launch your affiliate program. But before you do that, make sure to set up a few rules. Doing this will help ensure that your affiliates are following the rules and keeping everything above board.
You can also set up a program agreement or Terms of Service to make sure that your affiliates know and understand the rules. This is important because it helps protect you from any legal or financial repercussions that may arise from an affiliate not following the rules.
Best Affiliate Marketing Tools for SaaS
To help you get started in your search for an affiliate tracking tool, here are a few of the most popular ones in the SaaS industry:
Rewardful: All-in-one affiliate tracking, management, and payment platform for SaaS companies.
Tapfiliate: Feature-rich affiliate tracking platform with advanced reporting and analytics.
LeadDyno: Affiliate tracking platform with a focus on simplicity.
Refersion: Comprehensive affiliate tracking for large to enterprise-level companies.
These platforms make it easy to launch, manage, and optimize your own affiliate program for SaaS companies. Choose the one that is the best fit for your business needs, and you’ll be ready to start recruiting affiliates and growing your business.
How To Measure SaaS Affiliate Program Success
So, you've set up your affiliate program. Now it's time to measure its success.
There are tons of ways to measure success depending on your overall goals for the program. Are you trying to increase brand awareness? Are you looking to generate more leads or sales?
Common metrics that you might want to track include:
Number of registered affiliates
Number of active affiliates
Conversion rate (traffic vs. sales)
Average order value
Total revenue generated from affiliates
Number of unique clicks and impressions
Cost per acquisition (CPA)
Return on investment (ROI)
It's also important to consider the lifespan of customers brought in by affiliates. If there's a high churn rate for these users, it could indicate a mismatch from affiliate referrals. Delve into Understanding and Reducing SaaS Churn for insights.
Tracking these metrics can help you understand your program's performance and make adjustments as needed. You may also want to run A/B tests to see which adjustments are the most effective.
Final Thoughts on SaaS Affiliate Programs
Affiliate programs are one of the most efficient ways to generate leads and sales for your SaaS business, but they require careful planning and execution.
Remember: the success of your program depends on choosing the right benefit structure, offering competitive rates, and having a system to track affiliates' performance.
Pulling all this off is no easy feat—that's why many founders seek out outside help from experts. Since I found my passion for coaching, I have helped tons of entrepreneurs scale their businesses, test buyer personas, and launch successful affiliate programs.
If you need help launching your own SaaS affiliate program, don't hesitate to reach out! I'd love to hear more about your project and help you develop a successful strategy. Plus, if you’re just starting up your business, consider joining SaaS Camp, where I help SaaS founders in methods which increase revenue.
Let's get started today!
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✋ Hey, it's Denis! Thanks for reading :) If you want my help with your startup, the quickest way to reach me is at firstname.lastname@example.org. I upload my best content on YouTube. Let's connect on Twitter, LinkedIn, and Instagram.