Take your campaign to the next level by following these 12 steps.

By Tom Dellner

It's easy to see the appeal of affiliate marketing. With an extremely low cost of entry and a pay-for-performance model, your financial risk is minimal. And, properly executed, the upside can be tremendous: Imagine a team of hundreds--perhaps thousands--of websites acting as your cyber sales force. Envision an educated and fully engaged distribution network of brand advocates bringing in hundreds of thousands of dollars in revenue each month--or perhaps even millions, as is the case with the channel's largest and most successful retailers.

Of course, the operative phrase above is "properly executed." Electronic Retailer surveyed some of the keenest minds in affiliate marketing to assemble the following 12 steps to energize your affiliate marketing program.

1Set Aggressive, Yet Achievable, Goals
According to Chris Henger, vice president of affiliate marketing of DoubleClick Performics, you can project a realistic target growth rate for your affiliate marketing program by synthesizing a number of factors. "First, look to the third-party research firms--for example, JupiterResearch and Forrester--for the projected overall e-commerce growth rate. Then see what these firms say about the growth rate in your particular business category," says Henger. "Next, look at native traffic to your own website to determine your overall e-commerce growth rate. Then, look to the growth rate associated with your paid marketing initiatives. You can then systematically decompose this data to arrive at an overall figure. In our experience, with a concerted effort by you and your network partner, you should be able to exceed this figure by three to five percent in the affiliate space, depending on how aggressive you are in the channel."

Kristopher Jones, president and CEO of Pepperjam, one of the country's fastest-growing Internet marketing agencies--with a thriving affiliate marketing division--puts it this way: "Managed correctly, your affiliate program should represent as much as 15 to 20 percent of all the revenue generated by your online marketing efforts."

2Mind the Store
Affiliate marketing is not a "set it and forget it" channel. "It may sound obvious, but it's a problem we see time and time again," says Jones. "Major brands come to us a year after starting a program. The program got off to a great start, but it's flat-lined because it's not being actively managed."

Most experts agree that it will take the equivalent of one to one and a half full-time staff to properly manage an affiliate program. That staff can be in-house, or outsourced to an agency specializing in affiliate marketing or to one of the major affiliate networks (the "Big Three" include DoubleClick Performics, LinkShare and Commission Junction), all of which offer a variety of program management services.

Affiliate program managers will communicate regularly with affiliates of all sizes to keep them engaged via education, marketing tools and strategic compensation and incentive plans. In addition, they can monitor the program to avoid channel conflict (e.g., affiliates undermining your search efforts by bidding on your brand terms, trademarks and other high-converting keywords that you are bidding on, as well).

3Choose the Right Partner
Perhaps the most important decision you'll make when launching an affiliate program is deciding which network provider you would like as a partner. Of course, some marketers may choose to assemble their own, small, handpicked network of affiliates. However, that's a difficult and time-consuming task. In addition, most of the largest and most successful affiliates are associated with one or more of the large network providers, which help them manage their many marketer partnerships.

The aforementioned Big Three are established, highly successful businesses that have been around since the channel was first developed in the '90s. But each has different strengths and offers different services and attributes. How do you go about finding the right fit?

Conduct face-to-face meetings with network providers. Do it at their offices. Instead of having the network fly a couple reps out to see you, ask the network to pay for your ticket to visit its headquarters and get a feel for the company and its employees, Henger suggests. "In that meeting, ask the right questions. What strategic methodology will you use to put together my program and how often will you review it? Who will work my account? What will you do on my behalf? What are you expecting me to do? Who is communicating with the affiliates? How frequently?"

"You'll also need to ensure that you're joining a network with quality affiliates," says Brandon Ramos, director of merchant services for LinkShare. Inquire about how the network screens its affiliates up front, and what it does to police the network for fraud and non-compliant marketing activities.

Beyond this, Ramos suggests choosing a network that has the ability to expand on the channel front. "You may want to eventually synchronize your search efforts with your affiliate program or develop a customer acquisition piece. Make sure your network provider does search and lead generation and has a formidable set of relationships set up in these channels."

Learn more about the technological tools the network has at its disposal. Can it accommodate video links on affiliate sites? Can it automatically detect adware or spyware in the network? Is the network doing any mobile marketing?

Henger offers a final bit of advice for conducting due diligence. "After you've spoken with one or more of the networks, talk to some of the larger publishers [affiliates]. They are on all the big networks. Ask them for help evaluating the networks."

4Segment Your Affiliates, And Work Them Accordingly
You may have several thousand affiliates in your network. To manage the channel effectively, you'll need to segment these affiliates and work each of these segments strategically. Henger suggests the following four groupings: 1) superaffiliates; 2) rising stars; 3) newly engaged; and 4) the long tail.

Superaffiliates are the five to 15 percent of the affiliates that will drive the majority of your volume. They're a known subset of affiliates that are real producers. They tend to be loyalty/rewards sites, shopping and promotions sites, community sites or sites that are professional search marketing specialists. More on working with superaffiliates later.

Rising stars are those sites that are emerging from the long tail as potential strong volume drivers. Consider incentivizing this group with contests, bonuses or bumps in commission if they reach certain volume tiers. These affiliates may be the superaffiliates of tomorrow; build relationships with them today.

The newly engaged are those who have recently joined your program. Welcome materials clearly communicating your company's value proposition are a great idea, says Ramos. Institute an activation campaign with modest incentives for achieving attainable initial volume targets.

The long tail is comprised of the rest of the affiliates, which give your program scale. They may be smaller, less sophisticated "mom and pop" sites or niche sites. More to follow on managing the long tail.

5Superaffiliates: Relationship Building
"I refer to a '95-5 rule' which is to say that five percent of the affiliates within a program are going to drive 95 percent of the sales volume," says Jones. "The five percent are your superaffiliates, and your affiliate manager must go above and beyond to build relationships with these people. These top affiliates are very sophisticated, successful and extremely busy entrepreneurs. I suggest sending your managers to affiliate marketing conferences like the Affiliate Summit. These top affiliates attend these conferences. They speak at them. They participate in sessions. It's a great opportunity for the manager to meet these businesspeople and begin to separate themselves from the competition--these are the people who will drive your affiliate business."

"Don't think of the affiliates as working for you, but rather as working with you," cautions Henger. "If this positive tone is evident in your communications--to all your affiliates, but especially to your top affiliates--you'll see it reflected in your program's performance.

"For example, even though networks set forth terms and conditions with their affiliates regarding acceptable and unacceptable marketing and transactional practices, most merchants, when launching a program, will want to enforce additional conditions," explains Henger. "But these should be communicated in an inclusive way. For example, instead of flatly stating, 'here are eight brand terms and keywords that you are prohibited to play on,' explain which terms they can't use, but then provide them with the top 50 category level terms or secondary brand terms that you've found to be very good converting terms."

6Superaffiliates: Compensation
Being top revenue drivers, these superaffiliates are in a position to command more compensation than most affiliates. There are a number of ways to approach this, the most basic of which is to offer these affiliates a greater revenue share--say 10 percent on a sale instead of five or eight. Top affiliates may also require an initial setup fee.

You can also offer a tiered commission structure. "Say you do some historical analysis and you determine that your top affiliates are generating around $23,000 in monthly sales," says Jones. "You could offer an additional percentage point or two to those who hit, say $25,000 or $30,000."

While LinkShare's Ramos acknowledges that paying increased revenue share to top affiliates is a very real aspect of the affiliate space, he points out that there are other options. "You don't want to overpay these affiliates by paying more and more commission. Instead, give them more tools to be successful with your products. These could be exclusive coupons or promotions, better, more dynamic rich media or a detailed product feed that allows the affiliate to do more sophisticated, database-driven merchandising. You're not going to maximize the channel's potential simply by throwing money at the affiliates. Get the affiliates interested and turn them into true brand advocates through a combination of cash incentives, giving them the tools they need and educating them."

7The Long Tail
The long tail of smaller affiliates requires the same type of tools and information as the superaffiliates. However, these sites (they may number in the thousands) aren't going to be getting a monthly call. Service them through newsletters that discuss your value proposition, available offers, the display of creative and other marketing techniques that you have found to work well on your own site. The goal is to educate these affiliates, help them to get a few orders each week and begin to grow the business. Make current creative available to these affiliates via a resource center on your site.

8Maintain a Healthy Mix
Both the long tail and the superaffiliates have important roles to play, and you need the right blend of both for a healthy program. "The long tail--the scalable core of your program--are those that will accept your standard percentage of revenue share," explains Ramos. "If you have a sizeable group of active, engaged core affiliates, this will allow you to be competitive [in terms of compensation] with some of the coveted, high-volume driving sites. The long tail acts as a weight to help keep your costs down.

"We've found that for a healthy, mature program, your top 10 affiliates should drive no more than 40 percent of your revenue," Ramos continues. "The second tier, the group that you're mining for the next top affiliates, should drive an additional 30 to 40 percent of your sales, with the core making up the remainder. There's a significant amount of turnover among the top affiliates. Maintaining a healthy affiliate mix allows marketers to absorb this inevitable churn."

9An Offer-Driven Channel
"I refer to affiliate marketing as the digital incarnation of the Sunday circular," says Henger. "It's truly an offer-driven channel. First, many of these sites are promotion-based, and the end consumer is of that mindset. Second, the affiliates themselves love offers--an offer gives them something to market, something to rally around, and they will push them for you. Be creative and put your marketing hat on. Marketers new to this channel are often floored at the amount of volume a four-day, 25 percent off sale will drive. Or an exclusive, buy one, get one free two-day sale."

But what if yours is a premium brand and you do few sales and hesitate to be associated with discounters? "Even if you're Saks Fifth Avenue, you run a two-time-a-year sale, package it and make into a real event," Henger says. "Do the same thing in the affiliate channel. If you don't want to discount your merchandise, run aggressive free shipping. Rebates are another consideration and they give you a chance to offer something exclusive to the affiliate channel: e.g., online rebates can be instant, whereas offline the customer is required to mail in a certificate and wait several weeks."

10Synergistic Search
Pepperjam's Jones suggests partnering with three to six superaffiliates in your program that are leading search engine marketers and working with them strategically to cover more real estate in the search results--and ultimately gain marketshare.

"Work with the network to identify these professional search engine marketing affiliates," says Jones. "Reach out to them and open up the communication lines. Share information about what works for you in search, giving them lists of high-converting keywords. [Jones suggests utilizing a non-disclosure agreement that prohibits these affiliates from using this list of key search terms to your detriment.] This can yield amazing results, and it only makes sense when you consider that, looking at affiliate marketing as a whole, almost 60 percent of sales are driven by search. They are very interrelated channels."

11Overcommunicate Your Value Prop
This can't be overstated. Whether it's through newsletters to the long tail, monthly phone calls to top affiliates or through attendance at trade shows, you need to constantly educate the affiliates about your company's value proposition--the reasons why your customers buy your products. "The affiliates need to know what it is that gets customers to buy from your site organically," explains Ramos. "If you can clone that in the affiliate space, you'll be in great shape. An early example of this was travel merchants who realized they could take their search box and make it part of affiliate creative. That's empowering your distribution channel and supercharging your affiliate program."

12What About Lead Generation?
According to Jones, while nearly any marketer can be successful in the affiliate channel if they are willing to devote the proper resources to it, those with broad product lines and well-branded products have an advantage. But what if you're trying to break through with a single product that's relatively unknown?

"I would recommend one of the networks we refer to as 'ad networks,'" says Jones. "These companies focus more on lead generation or cost per action-driven offers. It's a newer form of affiliate marketing that often works well for products such as these and for free trial offers and the like." Your affiliate network provider might also have a division devoted to lead generation, as well.