Many successful online companies use affiliate marketing to sell their products. Simply speaking, it's an essential tool for rapidly scaling an online business. In this article we will look at the specifics about, how affiliate marketing can be useful in the SaaS field, how expensive its implementation is and how to cost effectively use it to scale a SaaS business.
What is Affiliate Marketing
Only a decade ago, it was unusual to hear about the concept of affiliate marketing. However, now it has become extremely widespread and entered the mainstream. This is due to the rapid development of the Internet and a high level of personalization. Not only is the number of online businesses growing, but also the competition for users' attention. And affiliate marketing is a tool that contributes to the success of companies in these precarious conditions.
Let's first establish what it is. Affiliate marketing is a promotion scheme on the Internet, which is carried out by leveraging a partner’s network. Independent partners publish content, recommend products / services and distribute links to their target audience. Target audience uses these links to make the purchase. Basic strategies which they adhere to are quality content, social media, and upselling. In this way, partners help the company to sell its products or services. Companies provide lucrative commission to affiliates in order to motivate them. This commission is typically a percentage of each successful sale.
SaaS companies are also increasingly using affiliate marketing for selling to its customers. First, because their products and services are inextricably linked to the capabilities of the internet. Secondly, because affiliates are keen to respond to the possibility of cooperation - SaaS products are often less expensive, promise significant recurring commissions and are profitable to market. Additionally, there are a number of non-obvious advantages compared to other ways of promotion on the Internet. Let's look at some of these advantages for SaaS companies.
Why do you need Affiliate Marketing
First and foremost, affiliate marketing provides a way to enter new markets. By working with partners that are present in different markets you can reach new customer segments that you would not be able to reach in other ways. Sometimes affiliates have access to a niche audience that they know how to speak to. And cooperation with them is a sure way to reach these people. Additionally, affiliate marketing provides an opportunity to increase brand awareness. When all the marketing elements are organized correctly, it can help your brand appear in front of a wide audience and this can do wonders for your visibility and coverage. Brand awareness is an important factor in the growth of sales for a SaaS company. Also, affiliate marketing will allow you to identify the latest trends and needs that you can focus on for future product development. Affiliate marketing generates measurable results and quite accurate statistics. You will know who buys your product, what messages resonate with the customers and how they respond to it. This can be leveraged in rapidly scaling your SaaS business. And finally, affiliate marketing can save you money and time. The great thing about it is that companies pay only for results, it's actually a risk-free form of advertising. Your company will not have to employ a large direct sales force to engage customers, your professional affiliates will do this job for your company.
What are the hidden costs of Affiliate Marketing
Of course, affiliate marketing has its undeniable advantages. However, it comes with a “but” - its independent implementation results in several hidden costs. Affiliate marketing is cheap, but let's be honest, it's hard to call it free of administrative and accounting costs.
To get started with affiliate marketing, you need to find someone to recruit a team of affiliates who will introduce your products to your audience and encourage them to buy. You need someone who will remember each of these partners, establish agreements with them, track their performance and other key aspects of your affiliate program. Since affiliate commissions often vary by product, affiliate’s influence level, individual arrangements, someone has to negotiate and keep track of the specific details of the contract. Quite honestly, there is a large amount of work involved with regards to paying affiliates and accounting for these payments. This work linearly increases as you scale the number of affiliates in your network.
An accountant has to record all income and expenses, process documentation, pay taxes, track commission paid to affiliates and execute the payouts. And if your SaaS company sells globally, it is also necessary to deal with different currencies, monitor their exchange rate, and understand tax legislation of countries you sell your product in. Customers also can pay in various ways and affiliates can ask for remuneration in different currencies.
Additionally, using an affiliate network can create a physical nexus in various tax jurisdictions that may require a SaaS company to file and remit corporate income tax.
Therefore, as you can see, the implementation and usage of affiliate marketing comes with additional costs. But it is quite natural to aspire to reap all the advantages of affiliate marketing at minimal costs. And there is an ideal solution for achieving this which is Transaction Cloud’s affiliate marketing platform.
How does Transaction Cloud save these hidden costs?
First and foremost, with Transaction Cloud the entire integration requires no more than a week. With one simple and robust integration your SaaS company has access to an automated system that makes your affiliate marketing process efficient, convenient and economically feasible.
is the most comprehensive affiliate marketing platform. You don’t need additional tools and integrations to carry out onboarding, tracking, crediting commissions, and making payouts to affiliates. Everything is in one place, systematized, and automated;
provides the ability to perform payments processing, subscription management and fraud prevention. With one integrated system you can track payments from your customers and ensure that the actions of subscribers are recorded and processed accordingly;
simplifies the accounting process. The system automatically tracks commission earned by affiliates, sales, discounts, refunds and chargebacks;
automatically makes payouts to affiliates. There are no extra fees for utilizing the affiliate marketing feature;
is the merchant of record for the affiliates hence SaaS vendors do not inadvertently create physical nexus in various tax jurisdictions.
With Transaction Cloud’s affiliate marketing platform SaaS companies can focus on doing productive tasks that grow their business rather than be burdened with administrative and accounting work. Any company is able to set up an affiliate marketing system quickly, automate most of the processes and significantly save time and costs. With Transaction Cloud’s platform you can implement affiliate marketing even without a huge team of marketing specialists, managers and accountants. Additionally, affiliates will be delighted with their experience and motivated to promote your product.