This past weekend, I flew out to New York City to attend Affiliate Summit East like I have done every year for the last 6 years. One of the attendees asked me for advice on setting up their own affiliate program.

Since I have been in the affiliate marketing space for the last 11 years and have had this discussion countless times, I shared with him the #1 biggest mistake every new company must avoid when setting up their own affiliate program.

But before we get to that, let’s cover the basics first.

What is an Affiliate Program and What are the Benefits?

An affiliate program is a referral system where you incentivize others to recommend your product by offering them a commission for every sale they refer.

It’s like having a sales army without having to pay a salary.

This is why I call it the ultimate low-budget high-impact marketing plan for startups.

Setting up your Affiliate Program

The most important decision that you have to make when creating your own affiliate program is the platform you choose to power it.

And this is where most beginners go wrong.

The biggest mistake you can make when setting up your own affiliate program is using a self-hosted affiliate tracking and management software.

Now I understand that often people choose this route because it’s cheaper.

But in the grand scheme of things, you ALWAYS end up losing!

Here are 6 reasons why I always use a third-party affiliate management system and you should too.

1. Better Tracking

Most self-hosted affiliate management software come in form of plugins that run on your web hosting server.

But the reality is that your hosting server is not optimized for accurately tracking all the clicks.

A simple error can result in you paying double the commission for every sale. Trust me, I have been on the receiving end of double-commissions many times, and as an affiliate I love it.

But this is precisely the reason, why I always use a third-party affiliate tracking platform.

2. Better Fraud Detection

I should start by saying that most self-hosted affiliate software don’t have ANY fraud detection.

If they claim they do, you should triple check every details and learn exactly how it works (because it doesn’t).

When you use a professional platform, they regularly monitor the clicks and referrals.

Their fraud department will email you to let you know about any suspicious activity or affiliate, so you don’t lose money.

I have witnessed too many businesses payout commissions only to realize they were duped. One of my friends’ company fell victim to this and lost six figures before they made a switch.

There’s a reason why some of the largest brands in the world rely on hosted affiliate tracking platforms rather than building an in-house software.

My tip: learn to learn from others mistake.

3. Automated Payouts

As a business owner, time is money.

You shouldn’t be wasting that on sending out affiliate payments.

The best part about using a hosted affiliate management software is that they handle all payments (domestic and international) automatically.

Your affiliates will always be paid on time which only improves your relationship.

4. No Accounting Overhead

If you’re a U.S. business, you’re required to issue a 1099 to each person you paid more than $600 to.

If you’re in EU, then regulations are even worst.

As a business owner, you shouldn’t have to worry about this.

The overhead and hassle on this part alone is worth paying the negligible fee for using an established affiliate marketing platform.

5. Easier for Affiliates

Believe it or not, by using an existing network, you make it easier for your affiliate partners because it’s one less dashboard they have to login to.

It’s one less W9 or tax papers, they have to fill out.

It’s one less payment they have to worry about because the networks consolidate the payments and send it in bulk.

As a super affiliate, I prefer to work with companies who go through a network because it helps build trust. There’s no way they can cheat me because they can risk losing their account (and vice-versa).

6. Network Effect

When you join a larger affiliate network, you allow your business to get more exposure which helps in recruiting more partners.

This is precisely the reason why some companies are part of multiple affiliate networks.

I hope after reading all the above reasons, I have convinced you to not make the mistake of using your own self-hosted affiliate management system. Usually it does.

The next question I get asked is: what are the best affiliate platforms out there?

Best Affiliate Network & Platform

There are dozens of affiliate network and platforms out there. The ones I recommend are:

1. ShareASale
2. Impact Radius

There are distinct advantages of each, so I’ll break it down below.

ShareASale

They’re one of the largest affiliate platforms with a huge network of affiliates. They have been around for 15+ years. I use them for our business.

The biggest advantage of ShareASale is low costs: $650 to get started and then you pay a small commission on each sale your partner refer.

This is good for small businesses, because you don’t have any monthly commitment. You only pay when an affiliate makes a sale.

For example: your product costs $30, and you offer your affiliates 10%, then they’ll get $3 and ShareASale will get $0.60 cents.

My biggest pet peeve with ShareASale is their user-interface design looks like it was made in 2000 (which it probably was).

However, I can personally vouch for the team because I see them twice a year, every year, and they’re an outstanding group.

Update: I didn’t know that ShareASale also offers an Enterprise pricing plan where you can pay a flat fee (again because we don’t fit the bill for an Enterprise client). But Brian (CEO) pinged me to let me know about it.

There’s a UI update coming in a few months. Super stoked to hear this.

This is why I love ShareASale because their team is always helpful. On top of that, he showed me some other feature that I never used but plan on doing so:

– Marketing Automation for Affiliates
– Promo Code Tracking (we use this already)
– SKU based tracking for large retailers.

Impact Radius

This is one of my favorite platforms, and I recommend every large company to use them. I have referred several companies their way.

Why? Because their technology is top-notch. They offer more tracking options than you can think of.

Their user experience is leaps and bounds ahead of ShareASale.

The only downside is their network is not as large as ShareASale.

I have been seriously contemplating switching OptinMonster’s program to them because we’re at a point where it financially makes sense.

The biggest downside of Impact Radius for smaller businesses is that they require a monthly fee and usually a 1 year commitment. Most of their deals are privately negotiated, so their pricing isn’t as transparent.

Conclusion

If you’re deciding on creating an affiliate program for your business, it’s a good decision – go ahead and give it a try. It’ll almost always grow your business.

If you’re thinking about cutting costs on affiliate management software and going self-hosted, then I recommend you scroll up to the top and re-read this article and keep doing that until you come to the right conclusion:

ALWAYS USE A THIRD PARTY AFFILIATE PLATFORM!

That’s all for today. Hope this article help you setup an affiliate program the right way.