You can’t overestimate the importance of reaching an agreement between parties in affiliate marketing. An agreement serves as the foundation for a successful and mutually beneficial partnership between the affiliate marketer and the merchant or advertiser.
A well-defined agreement can minimize or even eliminate potential problems and conflicts. It provides a framework for resolving disputes and establishes a level of trust and transparency between the parties. This is especially essential in affiliate marketing, where the success of the partnership depends on open communication and collaboration.
Additionally, an agreement can help establish a long-term and mutually beneficial relationship. It allows both parties to align their goals and work towards a common objective. With a clear understanding of the expectations and objectives, the affiliate marketer can focus on promoting the merchant’s products or services effectively, while the merchant can provide the necessary support and resources to facilitate the affiliate’s success.
Tips for making a successful affiliate agreement
The basis of any business communication is quite simple: follow the law and fulfill your obligations. However, let’s look a little deeper into the important details of an affiliate agreement that are worth paying attention to.
Payment terms
One of the key points of an affiliate agreement is to describe the settlement of the financial aspects of the work. Affiliate program payment terms define both the financial obligations of an advertiser and amounts payable to the affiliates. It is critical to make sure that the company’s financial policy considers the interests of both parties. When reviewing the payment policy block, pay attention to the following aspects:
- Payout models
- Payout amounts
- Incentives
- Hold period
You should understand what methods the company uses to track and process payments, the amount of commission you receive for each targeted action, and how and when the advertiser makes payments. If possible, before you begin working with an advertiser, familiarize yourself with the types of bonuses their competitors offer. It is in your interest to choose the most suitable and profitable option for cooperation.
Settle all legal aspects
Every affiliate marketing agreement is a legal document. In any business dealings, it’s crucial to protect yourself legally, in case of unforeseen circumstances. Your affiliate agreement should be comprehensive enough to cover, among other things, intellectual property rights, disclaimers, and privacy policies.
Any good partnership agreement should include government regulations. In particular, your agreement should enforce the requirements of the Federal Trade Commission (FTC). Make sure it states that you will receive the necessary compensation and that this advertising will be done transparently. Failure to do so is a violation of the FTC. Also, make sure your work does not end up in a copyright infringement lawsuit.
Acceptable promotion channels
You know that there are many ways in which affiliates can promote offers. However, the advertiser needs to make sure that your methods are consistent with his general operating procedures.
It is in the advertiser’s best interest to avoid competition for audience attention between their own marketing channels and the promotional methods the affiliate chooses. To make this work, they include a clause in the contract that defines the promotional methods the affiliate can and cannot use.
As an example, check out Walmart’s policy. It addresses not only general bans but also bans on electronic communication and trademarks. For example, the use of Wal-Mart trademarks in paid search keywords, advertisements, URLs, emails, or text messages is strictly prohibited.
Financial bonuses
An essential task for you is to clarify whether the advertiser accepts coupons and discounts or not. This should be specified in the affiliate agreement template and the final contract.
Coupons are typically used in highly competitive digital markets, such as verticals that sell cosmetics, clothing, and other similar products. Also, note the clause in the contract stating that changing discounts and coupons is prohibited. The contract may include other prohibitions as well.
For example, FatCow, a shared hosting company, does not allow its partners to post coupons or discounts without prior written consent. Any changes to coupons or discounts given to affiliates as part of an affiliate marketing program are also expressly prohibited by the company.
Limitations on other partnerships
Many affiliate marketers usually choose to join more than one affiliate program to make more money. If this is your case, pay attention to whether or not there is a clause in your contract that limits your work with other advertisers. In most cases, this is really not recommended, especially if the companies you plan to affiliate with are competitors.
An affiliate agreement may not limit your affiliations with third parties, but it may include a clause stating that affiliating with another brand whose values conflict with the first advertiser’s own values is a compliance issue. You may find this in the “non-compete” section of your agreement or similar.
If you’re aiming for a multi-stakeholder collaboration, you’ll have to prioritize those companies that allow it. It’s understandable because they’re concerned about their reputation, but if your goal is multiple partnerships, you’re out of the way.
Incentive system
This block usually spells out potential bonus commissions for affiliates. This reward system acts as an incentive to encourage affiliates to work harder. If you exceed your sales plan and the contract includes bonuses for that, you have every right to claim them. For the advertiser, it’s extra profit, and for the affiliate, it’s an incentive to put in extra effort and increase the commission. You only need to properly regulate this process in the contract. Here are three main factors to consider when designing a bonus system:
- Amount — this can be in the form of a percentage or fixed bonus.
- Time — this specifies the amount of time that affiliates must spend to achieve a goal. It is recommended to choose a fixed period of time, for example, a week or a calendar month.
- Level — bonus tiers are different amounts of bonuses awarded when affiliates achieve different goals. They differentiate bonuses depending on the conversion rate.
Final thoughts
Reaching an agreement between parties in affiliate marketing is crucial for establishing a solid foundation, clarifying expectations, and protecting the interests of both the affiliate marketer and the merchant. It promotes trust, transparency, and collaboration, leading to a successful and mutually beneficial partnership. By investing time and effort into creating a comprehensive agreement, both parties can maximize their potential and achieve their goals in the dynamic affiliate marketing world.
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