Imagine having 5,000 people eagerly recommending your product or service to all of their web site visitors. People all over the web are doing your advertising for you. Although you used to spend money advertising, now you sit back and relax letting others use their time, energy, and money to promote you.

Affiliate programs are the ultimate "results only" form of Internet advertising. Other people advertise for you, and you only have to spend money after a product or service is actually sold. It drops your RISK to absolute zero. Instead of spending money on ads...you spend money on results.

They are also one of the cheapest and easiest ways to roll out a successful product quickly. Purchasing millions of email, banner, or web site impressions is expensive and a very risky proposition. Once you have a successful product, opening up an affiliate program and recruiting high productivity affiliates is the quickest way to get FREE exposure to millions of potential customers.

The major mistake most people make in regards to their own affiliate program is they open it too soon. DON'T open an affiliate program the same moment you release your first product. You will want to do some ad tests first and prove you have the right offer, product, price, etc. for the marketplace. Don't build a huge program and find out later you have to make major changes to achieve the best sales.

Test first...and then rollout in a major way with a powerful affiliate program.

Affiliate Program Options

There are a few decisions you need to make before you run out and setup the affiliate program software for your web site. Is it going to be a one-tier program or a two-tier program? How much are you going to be paying your affiliates? What method do you want to use to track your referrals?

One-Tier or Two-Tier - These phrases are basically referring to whether you pay people just on their own personal sales or if you allow them to refer other people into your affiliate program and get a portion of the sales created through their referrals.

For example, you may decide to pay a total of 30%. You could pay 25% to the person who makes the sale and then 5% as a second tier payment to the person who referred this new affiliate to you.

The advantage of using a two-tier payment structure is that it encourages your affiliates to recommend others to join the program. So, your affiliate program grows much quicker this way.

The disadvantage of this method is that you end up having to pay a little less money to the person actually making the sale...since a portion has to go to the person who referred them.

If you decide to go with a two-tier program, you'll just have to make sure it is an available option for the affiliate software you plan to use.

Commission Structure - How much is your program going to pay? Will you have a one-tier program and pay 20%? Can you have a two-tier program and pay 40% and 10%? The higher your commission levels, the easy it is to recruit good affiliates and keep them motivated.

How much you can pay is dependent on the profit margins of your product. If you only have a profit margin of 30% on the product you're selling, then it would be next to impossible to pay more than 20% commissions overall. If your profit margin is 90% or higher (this is normal for a downloadable ebook with only processing and hosting expenses), then you can afford to pay much higher...such as 50% or 60% overall commissions.

Try to structure the program so that more than 50% of the profits are available for commissions on a product. For services you have to render (such as consulting, web design, web hosting, search engine placement, etc.) which is limited to your investment of time, then you may want to offer 20% to 25% of the profit margin as commissions.

If you have a two-tier program, then you should split up the payments with the majority of the money going to the person who actually makes the sale. Then, a smaller percentage can go to the person who referred them to your program. For example, if 50% is available for commissions, then you could pay 40% to the affiliate making the sale and 10% to the "manager." If 20% is available, then the cut could be 15% and 5%.

Tracking Method - There are two major ways that affiliate programs track. Some of them track visitors by sending them to a specific link on your web site...and then if the visitor purchases on this visit, then they are credited with the sale. Other programs track by "cookies" which means they install a small file note on the visitor's computer so that if this specific computer ever visits again, the affiliate will be credited.

Each method has it's advantages and disadvantages. The cookie system is better for tracking long term visitors (people who may visit and then come back six months later to purchase)...if you want your affiliates to get credit for these sales that occur later down the road. Please note that if an affiliate refers someone today, and they don't buy, but they return 6 months later through an ad you place, then the affiliate will still get credit for the sale.

The biggest disadvantage in the cookie system is that a small minority of people have cookies blocked on their computers because they see them as a privacy concern. For these people, less than 5%, if you are just using a cookie system, then they will not be tracked later on down the road.

The second method of tracking is to track by specific web site. On these programs, they generate a web site page for every affiliate...and then the affiliate receives credit for anyone who purchases through their assigned web site. This is actually a more simple method of tracking, but it can take up a lot of space on your web site (for all the affiliate pages) and it doesn't track visitors who come to visit, but don't purchase till months down the road (unless they go back to the same site to purchase which is often the case anyway).

For Netbreakthroughs, we're using the "cookie" tracking system through a CGI program installed to work with iBIll. When an affiliate refers someone, they will get credit if they purchase during the visit...plus our cookie system is also designed to track this visitor for 3 years if they ever come back to buy. If someone has cookies turned off, then the visitor would be tracked on their first visit, but would not be tracked later on down the road.

My Instant Cashflow program is run by giving each affiliate their own specific web site and the affiliate CGI software we give as a bonus to Cashflow members. So I actually have experience in using both types of affiliate programs.

The Software You Need

To run an affiliate program will require you to use an affiliate program software. Don't even think of trying to run one without it! It would be a nightmare. I even recommend that people who do joint ventures with one or two people install affiliate program tracking software to give themselves the tracking ability they need.

There are three major ways to run the affiliate software...You could use CGI software you install (or pay for someone else to install), you could use an affiliate program system, or you could use a third-party credit card processor who supplies an affiliate program for you.

There are advantages to each of these applications so it is a decision you have to make based on your needs for your company.

Solution #1: CGI Software

CGI software really gives you the most capabilities in regards to what you can do with it, but it is also the most difficult format to use. In most cases, you will have pay for an installer which costs $100 to $300 in addition to the price of the software itself.

Affiliate CGI programs are some of the most difficult programs to install so be careful to count in paying for an installer when you buy this type of software. If you ever move your web site to a new host, it is an absolute nightmare to move all of the components of the software with you (when I moved one of my hosts it took us a week to move the affiliate program).

Here are 3 of your CGI affiliate program options:

Ultimate Affiliate: Available at http://www.groundbreak.com for $200.
Little Salesmen: 3 CGI Programs for $197 at http://www.cgitoolbox.com
Your Associate Program: Bonus for Cashflow Package $97 at http://www.allthesecrets.com

Solution #2: Outside System

The second option is to simply pay a fee to a company who already has an affiliate program in place for you...which they run and manage from their system. You have nothing to install and you simply plug-in to their order system with your products.

This option won't give you as much freedom as having your own CGI software program, but it will solve the CGI problems. You get great affiliate tracking without the technical hassles, moving difficulties, or install problems.

You will end up paying yearly for an option such as this, but many of the companies offering this type of package are really beginning to add a lot of value to them (such as automatic follow-up systems built-in, shopping carts, referral systems, and more).

NetofficeToolbox: Highly Recommended System $600 - http://www.netofficetoolbox.com
My Affiliate Program: $795 + $50 per month - http://www.myaffiliateprogram.com
Commission Junction: Good system and support $1250 - http://www.cj.com

Solution #3: Third Party Processors

This would be the cheapest solution in the beginning, but it will cost you the most long-term. Many of the third party credit card processing services also offer a built-in affiliate program to help you sell more products (they want you to sell as much as possible because they earn their profits by the percentage of sales you pay them). One added benefit to this type of affiliate program is that the third party will handle sending out and paying the affiliates for you.

This option is also the one that gives you the least options for your affiliate program. It is managed by a third party so you are pretty much stuck to whatever options they have available to you. The second disadvantage is that you pay more. iBill, for example, charges you 15% of your sales to handle the processing and affiliate software for you. Compare this to around 2.5% you would pay to handle your own credit cards.

The only reason we use iBill for Netbreakthroughs is because we don't want to mess with recurring billing and the problems which go with it on our own merchant account (we actually have 2 of our own merchant accounts we use for other products we sell).

iBill: Charges 15%, allows 2-tier, and pays affiliates - http://www.ibill.com
Clickbank: Charges 7% plus $1, only one tier, pays affiliates - http://www.clickbank.com
Verza/Verotel: Charges Vary, one tier, pays affiliates - http://www.verza.com

Sales Tools You Need For Your Affiliate Program

Once you've decided on affiliate program software to use, then you will have to start preparing the tools your affiliates need to promote your program. Even though your affiliates would actually do better by creating their own marketing materials (then each one would have unique materials to use), you will find that 99% of them will just use the stock materials you provide them with. If you don't provide materials, then they won't promote for you.

Here are just a few of the tools you should provide:

1. Endorsements - You should write up sample endorsement letters affiliates can use in their ezines and on their web sites. These should be three to five paragraphs about the benefits available from your product and about your company. They should also be written as if they were coming from the affiliate themselves.

2. Banners - These are the least effective tools your affiliates could ever use to promote your program, but you will still find a large percentage of your affiliates asking for them. They are good tools for affiliates who have high traffic web sites and advertising space they aren't able to sell. They just insert your banner ad into their unsold space and can generate a good income to replace the ad space income.

3. Classified Ads - These are 5 to 8 line ads affiliates can use to promote your program in ezines, on web sites, or even as signature files in email. They're built with the first 2 lines as a headline to grab prospect's attention. The next two to three lines then make a BIG promise. The last line or two moves the reader to action such as visiting a web site or sending an email to an autoresponder system.

4. Solo Ads - These are much longer ads which can be used to buy solo advertising in ezines. In my own testing, I've found that solo ads outpull virtually any other form of Internet advertising, so I will often focus my attention in this direction. Write your affiliates a 20 to 35 line ad they can use as a solo ad. For my own ads, I will often use the headline of the web site and then a list of some of the bullet points with a call to action of having them visit my web site for full information.

5. Graphics - Provide affiliates with ebook cover graphics, product graphics, company logos, etc. which they can use to add to the appearance of their web sites along with your advertising text. If you don't have graphic ability yourself, then you will find that hiring a professional graphic designer is well worth the money.

6. Email Follow-up Series - This is probably the most often neglected tool when providing for affiliate needs. If possible (or when you get it finished), provide your affiliates with a 5 to 7 step email follow-up system for them to use in promoting your products or services. Very few sales are made on the first visit to a web site so this type of follow-up series can help your affiliates build up an opt-in list while promoting your program.

7. Article Content - One of the features of my affiliate program which draws in a large number of my affiliates is the fact that any affiliate can use all of my free articles from bizpromo.com to promote Netbreakthroughs by changing my links over to their affiliate links. For my own opt-in ezine, I have often joined and promoted an affiliate program just because they provided articles I could freely use with my link. This tool gives your affiliates content they can use to promote you with and becomes a major time saver for them.

How to Support Affiliates

Besides providing the promotion tools they need, also make sure to provide producing affiliates with personal support. You should have an email address set up for affiliates to email you with problems or concerns they may have. Answer your email promptly (this would depend on your schedule and time permitting but do make it one of your priorities).

Keep in contact with your affiliates by sending something out regularly to them. Give them promotion tips and ideas. Tell them a marketing method that is working for you or for other affiliates in the program. Offer additional ad suggestions or ad copy.

Another method that can be quite effective is to create an autoresponder follow-up system which is sent to your new affiliates when they sign-up for the program. The first message can be just a thank you message and an offer to help them get setup if they're having any problems. Another message could be programmed for three days later to check to see if they've started any type of promotion.

A third message could be sent on the 7th day to encourage them to write their own review or endorsement for the program. A fourth message can be sent the 14th day about how one of the best affiliates is promoting the program. On the 30th day, you could have another training message showing 5 ways to promote your program effectively.

Contests and prizes can also be used to encourage and get your affiliates moving. One of the contests we've used for Netbreakthroughs was to give our top affiliate a free sponsorship ad in Web Gold. Product prizes and cash prizes can also be used very effectively to the affiliates who try to reach a certain point in sales. Some affiliate programs even used a staggered pay plan where you earn more per sale if you make a large number of sales each month.

Large companies who have staff will often find it very profitable to assign one staff member as the affiliate manager and make their only job to help support the affiliates. They can be used to help affiliates get setup and going...and to also go out and actively recruit new super-affiliates for the program. If you are smaller company like ours without employees, then you have to do this job yourself.

The Key is Finding Super-Affiliates

The 80-20 rule applies to everything you do in your Internet business. Over 80% of the results will be produced by 20% of the people. Over 80% of your profits will come through 20% of your customers. The majority of your problems (over 80%) will come from 20% of your customers.

In my experience dealing with affiliate programs, it seems closer to 90% of the sales are being accomplished by 10% of your affiliates. The average person who joins your affiliate program will do little or nothing to promote it. They may put up a link or a banner on their web site, but unless they get a lot of traffic...this won't do much for you.

The key to a successful affiliate program is to take a proactive approach to finding the best affiliates. The mistake that most people make in business is to put up their affiliate program and wait for affiliates to come and sign-up. You may get thousands of affiliates this way, but you'll rarely get very many super-affiliates.

Note: We're defining a super-affiliate for the sake of this article as someone who can produce large amounts of sales for your program (someone who earns at least $1,000 or more monthly) and they may do this by one of three ways:

You need to actively go looking for the best affiliates for your program. Don't think of them as just regular affiliates. Think of them as the future superstars of your program.

You will often want to offer them special deals such as free samples, higher commissions, larger bonuses, etc. Send them a free copy of your product so they can do a review (no super-affiliate ever joins an affiliate program without owning the product). They need to see it, use it, and then recommend it for the best results.

If your affiliate program offers 25% commissions, then offer the super-affiliate 40% commissions. Just as a superstar athlete earns more than the average player on the team, super-affiliates expect to earn more than the average affiliates.

You could also offer them productivity bonuses that they would receive if they achieved a certain level of sales in the program. If they sell 25 or more products they may get a 10% bonus and if they sell 100 or more they could get a 20% bonus.

Finally, don't expect super-affiliates to come looking for you. You have to be the one to do the work and go out and find them! Yes, that's right...If you want sales with no risk, it's going to cost you some time investment.

Recruiting The Super-Affiliate

The first thing to do is to stop and think about who would be a super-affiliate for your product or service. I can tell you from experience that my very best affiliates have always had one thing in common...they all had large opt-in email lists. So this is one of the things I look for when contacting potential affiliates. If they have a list, then they can be worth a lot of profit to my business.

So when searching for potential affiliates, I'll often add the keyword "ezine" or "newsletter" into my search engine phrases to really look for sites which have ezines dealing with the subject I'm selling.

Please Note: To be a top affiliate in all programs doesn't always mean they have to have a list (although it is usually the case). Some top affiliates are search engine experts, large content sites, etc. SO...I don't always recommend you only going after sites with ezines when searching for potential super-affiliates.

One of the best tools for doing web searches is Copernic which can be downloaded for free from http://www.copernic.com. This program allows you to search the major search engines all from one easy to use piece of software...plus it allows you to save the results for later use. They have the free version you can download and they also have a paid version with a few more options. For our particular use in this report, the free version should be just fine.

Copernic works just like any of the major search engines so you can simply search for "Internet marketing" if you want to find thousands of sites dealing with Internet marketing. Look up web sites that would relate to whatever niche you're marketing in.

For this project, come up with keywords that you would want to use on the search engines for your web site...or you can also use keywords that may relate to your audience as well. Think of keywords web sites who would have your potential customers would be using.

For example, if you were selling golf clubs, "golf clubs" would be one of the words you would use on the search engines, so you would use it. You would also want to search for words such as "golf" by itself because there would be a lot of golf sites you would want as one of your affiliates. You would also use "golf ezine" or "golf newsletter" to look for other sites with ezines you may want as partners.

Copernic will go out and search all the major search engines to help you create a list of web sites who are potential matches for your product.

At this point, you will need to have a 2nd program downloaded for free from the web. You can download Alexa from http://www.alexa.com.

Alexa will allow you to see the traffic stats of the web sites you are visiting and to also look up a list of other similiar sites. So in other words, if you find a site that would be a perfect match for your product or service, then you can look in Alexa's links for that site to find 4 to 10 more sites very similiar to it for other potential affiliates.

The other very valuable information is the contact information for the domain owner which you can bring up through Alexa. It shows you their email address, phone number, fax number, and mailing address.

You are specifically looking for high traffic sites. Don't even bother with sites who only have "one star" traffic. They aren't really worth your contact time. You may contact a "two star" site if it is very targeted to your market or makes mention of having a large email list. You are specifically looking to contact all "three star" sites or above to become affiliates with you in your targeted market.

Each time you find a potential affiliate, copy down their web site address into Notepad. Then, bring up the contact information for the site and copy and paste their contact information over into Notepad.

Make a few notes on the site itself. Notice anything which may or may not make them a good potential affiliate for you and something you can mention when you contact them that you like about their site.

Part of the contact process which follows will be to make personalized letters to each webmaster and to mention things on their site you enjoyed or reasons why you are giving them a special deal as an affiliate (email lists, traffic stats, etc.).

Once you finish making notes on the site you are at, then pull up the links menu in Alexa and visit one of the listed sites. Check their traffic stats, target market, etc. This surfing and note process can last as long as you want until you have made a really nice sized list of contacts.

An Enticing Offer

 The next step is to contact all of your potential super-affiliates. The quickest method of contact is send a personalized email to all of your potential affiliates. Keep it short and it MUST be personalized for this specific individual. Don't even think of trying to send a canned email to hundreds of affiliates like this.

Remember, you're not dealing with one product sale. When you're dealing with a super-affiliate, you could be talking about hundreds or even thousands of future sales for your product or service. You must do everything in your power to make your email look as far from junk email as possible.

If you are going to email them, then you mu