[ Updated Jan 19, 2023 ]
In the SaaS space, word of mouth is known as one of the most powerful marketing tools. There are companies that became established simply by focusing on building an excellent SaaS product. Trello is a good example of that.
In this article, I will explain how SaaS companies can use affiliate marketing to drive growth and how it blends with their word of mouth marketing. I will finally also evaluate the attractiveness of SaaS affiliate programs from the affiliates’ perspective.
Support word of mouth with affiliate marketing
A product-led strategy is fueling the growth in most SaaS companies. Just by looking at their conversion funnels and the shares of direct and referral channels in driving their conversions, it’s obvious that word of mouth is a key ingredient in their success.
But relying solely on a good product and forgoing other marketing channels involves risks. Word of mouth is an unpredictable channel. If you want to achieve stable growth and attract investors, you might want to make room for other, formal marketing strategies, too.
Satisfied customers recommend the product to others and send referrals to your website, either directly or through other websites. While this happens organically, we can also push it a little further and offer an incentive for those customers to give recommendations. This is where referral and affiliate marketing come along. It is affiliate marketing that goes one step further by expanding the partner network from customers to anyone who wants to benefit from referrals.
When talking about word of mouth, we’re mostly concerned with direct and referral traffic. And in terms of conversion attribution, these two channels have substantial overlap.
This overlap means that the conversion path involves more than one channel. For example, when an affiliate recommends the product to a potential customer who clicks the affiliate link but doesn’t purchase, only to visit the website later again directly and finally purchase the product.
In a first-touch attribution model, this conversion would be attributed to the referral channel. The customer’s first touchpoint was the affiliate link, so a commission should be paid to the affiliate.
In general, the more overlap there is between channels, the more you should focus on creating synergy between them. If word of mouth is one of the key drivers for your conversions, you can promote it through various channels—investing in product development, customer success, and onboarding as well as expanding your reach by launching an affiliate program.
What to consider before launching an affiliate program?
A precondition for starting an affiliate program is that you have established a sales funnel that already converts. You cannot expect affiliates to drive all of your conversions for you.
An affiliate program is for scale and distribution. Affiliates have no incentive to build landing pages to a website that doesn’t convert. Conversion rate is an important selling point when trying to attract the most influential affiliates to join your program. In the same way that customer engagement plays a crucial role in your sales, engagement with affiliates matters, too.
A successful affiliate program needs product-market fit, i.e. your product has to satisfy a strong market demand first. After this, it’s about continuous optimization, covering the entire customer experience and creating tested, up-to-date landing pages and marketing materials for affiliates.
What else goes into launching an affiliate program? Check our article on B2B affiliate marketing.
Benefits of affiliate marketing for SaaS businesses
Here are some benefits of affiliate marketing that are specifically important for SaaS:
Expand word of mouth
As already pointed out, SaaS companies rely heavily on word of mouth. When affiliates recommend products to their network, they not only bring actual sales but also build awareness by contributing to your word-of-mouth marketing.
Given that your customers are ideal affiliates, it’s a good practice to set up an automated flow to promote your affiliate program to new customers. The affiliate commission gives your existing customers an extra incentive to spread the word about your software. An influential affiliate who really knows your product can provide an authentic voice that users trust. Rather than selling the software, it becomes more like a personal recommendation from a friend.
Improve ROI and lower CAC
Compared to other marketing channels, running an affiliate program is very cost-effective. You only pay for sales after they occur, which means that no major investments are needed up front.
You avoid spending on ad campaigns that don’t bring customers. As a result of improving your ROI, you end up lowering your customer acquisition cost (CAC). Keep in mind that it shouldn’t be the main purpose of your affiliate program. The ultimate goal is to accelerate growth. Affiliates help your business reach new segments that you might not reach on your own.
The improved ROI and lower CAC are, however, of particular interest to SaaS businesses that are in the early stages of their growth and want to attract new investors. Affiliate sales can boost their annual growth rate and profit margin substantially when measured against the rule of 40.
Get targeted audiences through affiliate-generated content
Partnering with affiliates who are specialized in the same niche where your business operates will bring new targeted audiences. Those affiliates who provide consistent targeted traffic have a built-in audience that they can leverage. Their content has authority and people come to their websites looking for expert knowledge and insights about specific topics.
Build credibility and brand loyalty
Thanks to the subscription-based pricing model, SaaS affiliate programs lend themselves to recurring commissions. This attracts the most influential top affiliates and builds your credibility.
Recurring commissions will not only motivate affiliates to concentrate their marketing efforts on your affiliate program but also reward your satisfied customers for sharing their experiences. This way, your customers will have a vested interest in remaining loyal to your brand. They’re also motivated to bring in qualified leads and loyal customers because it means long-term passive income for them.
Still not convinced by the power of affiliate marketing? Find more benefits from this article.
Benefits of SaaS affiliate programs for affiliates
From the affiliate perspective, SaaS offers many attractive niches with a steady stream of passive income. Recurring commissions allow affiliates to obtain more income in the long term.
But there are also other features about SaaS products that make them lucrative for affiliates. They’re surprisingly easy to sell when your targeting is done right. Most SaaS companies have free trials for potential customers, which makes the affiliate’s job much easier. All you need to do is to convince your prospect to register for the free trial and the rest is up to the product itself and the seller’s onboarding process.
Another appealing feature about SaaS is that its implementation and use are almost as simple as it gets. SaaS users are free from any installation or maintenance and have instant access to an already-developed cloud-based software application using their web browser. This kind of instant gratification makes them easier to promote.
When evaluating affiliate programs, it’s also crucial to consider the product’s lifetime value and market demand. We already know that the subscription pricing model makes the SaaS customer lifetime value higher than what it is for most products offering only flat commissions. Given that the SaaS market is expected to grow to $220 billion at an annual growth rate of 13.1% through 2022, it’s safe to assume that SaaS products remain in high demand for a while. As an affiliate, you’re better off entering a growing market that is not saturated with competitors.
SaaS and affiliate marketing make an exceptionally good match. Being mutually beneficial for the SaaS business and the affiliate, there’s simply too much potential for growth to dismiss it.
It’s the obvious next step for any SaaS company that wants to fully tap into word-of-mouth marketing. For the company, it’s about driving growth through expanded reach and more conversions, whereas the affiliate can expect a stable source of long-term passive income.
In case you’re in doubt what kind of partner program to run, check out this article on running a referral vs affiliate program.
About Johannes Rastas
A Partner Marketing Manager at Supermetrics, Johannes focuses on expanding the Supermetrics partner program and collaborating with their existing partners. He also works with SEO and content on a daily basis. Feel free to contact him on LinkedIn.
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