Shibo Xu is the co-founder and COO of Refersion, a fantastic application that helps retailers start and manage private affiliate and referral networks.
Shibo runs us through a quick and dirty Affiliate Marketing 101 course today, teaching us how to set ourselves up for success and and use affiliate marketing and influencers to add revenue to our Shopify stores.
In This Conversation We Discuss:
- [5:00] What is affiliate marketing (AKA referral marketing, brand ambassadors, etc.)?
- [11:05] What businesses have the most success with affiliate programs?
- [14:00] How do you start an affiliate / referral / ambassador program?
- [22:15] The perks of using an affiliate management app
- [25:45] Commission and compensation strategies
- Learn more at http://www.refersion.com/honestcommerce
- LinkedIn: https://www.linkedin.com/in/shibo/
- Twitter: https://twitter.com/shiboxu
- Start a Simplr free trial: simplr.ai/honest
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I think the biggest difference between influencers today and affiliates from the 90s was that affiliates had a blog and they didn't really know their readers so they didn't really care as much.
Whereas influencers on social media, they engage very actively in the comments. They read those comments all day long. So for them, the audience is really important.
Welcome to Honest Ecommerce where we are dedicated to cutting through the BS and finding actionable advice for online store owners.
I'm your host, Chase Clymer.
And I'm your host, Annette Grant.
And we believe running an online business does not have to be complicated or a guessing game.
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And let's get on with the show.
Welcome back. This is take two.
I lost the original of this podcast. I'm being completely honest.
Way to go, Chase. (laughs)
So I'm sitting next to third chair trumpeter, Annette Grant.
And today we welcome back but you've never heard it, (laughs) Shibo from Refersion. I lost the first recording into cyberspace. I don't know where it is. But Shibo, welcome back.
Hi, Shibo. I actually deleted it because I wanted to talk to you again. So...
(laughs) I really love to talk to you guys, so thanks for inviting me back. It's exciting.
Yeah. So they actually had me out in New York speaking at their event and I let Shibo know in front of only 150 people, that I lost the podcast.
(laughs) That was fun. That was a good message delivery and I couldn't get angry about it.
Yeah, you can't get angry when I do it on stage. So that's great. So all right, let's get into it. Shibo is second in command at Refersion. Refersion is a sponsor of our meetup here in Columbus.
They're a fantastic application that helps with your affiliate marketing. But this isn't going to be salesy, about their app, it's actually going to be all about affiliate marketing, and how to best set yourself up for success with something like that.
That's a great strategy to have within your business. And people ask us all the time about it.
And before I say, "Let's use these apps." It's like, "All right. What system? What's your process? How are you going to best utilize affiliate marketing within your business?"
So with that being said, let's take it back, though. What makes you such an expert at Affiliate Marketing?
And even before you ended up at Refersion, what were you doing and what’s your history in marketing and sales and in this tech space?
Sure. Yeah. So,I actually started my tech career in college. I ran a startup in college and got an investor. And this is way before the time of like VC capital.
And Facebook was like my main competitor at the time because they were still so small. And it was like a social media thing. And through that investor, I jumped into tech. So after college, my app and my company wasn't making any money.
So I joined the investor's boutique consulting firm called Huge. And so from Huge, I walked around and did projects in New York, LA, some in Europe and Asia as well.
And I was really helping merchants and companies build digital products and figure out like, "Okay, how do we kinda translate, let's say, CNN.com or Target into a new modern brand that can help boost their sales and make them more relevant?"
So through Huge, I got a lot of good experience building websites, digital products. After that, I wanted to start building things on my own. I wanted to work on a product and work on the same thing every day instead of jumping between clients.
So what I ended up doing was meeting Alex very randomly at a meetup. And he told me about this Refersion app. And the first thing we did was build out an onboarding guide and onboarding experience so that it's easier to integrate our software.
And we saw our integrations rise by like, 3x within like a month or two. And we thought, "Okay, there's something here." And we started thinking a little further.
So I come into the space with a lot of experience in building products, building great products and looking at the data and making sure that we solve some of the core issues that this space needs.
And then I fell into the affiliate space. So, we look at things a little differently here at Refersion.
Let's talk to our audience, though. Let's peel it back a little bit and just define Affiliate Marketing. Because I do think affiliate marketing has been on the rise with social media and social media influencers.
So let's define what affiliate marketing is and then walk through the process of how people become affiliates. Let's just start at base zero with Affiliate Marketing.
Sure, sure. So, affiliate marketing is essentially like word-of-mouth marketing on the internet. It's whenever you see something on a blog that you follow or a YouTube channel, and they mentioned, "Hey, go to Skillshare and use our coupon to learn something new."
Anytime that happens, that kind of referral marketing, that's pretty much in essence affiliate marketing.
From the technical perspective, essentially what we're doing is that we're embedding artifacts and data artifacts into the users’ browser or storing coupon codes on our site, and then we're matching all the data back.
Let's say, "Okay. Of the thousands and millions of orders, you get every day or every month or every year, which of these orders came back from a referral?" So a YouTube person, an influencer, or like a blogger.
And how much commission do you give them? And this commission might be variable. Based on what their size of the audience is, how much you really want to work with them.
So, for example, a YouTuber with millions of subscribers might command a higher commission rate on your brand than say a lot of micro-influencers who just want to be brand ambassadors and want to work with your brand and get a sense of it, feel closer to your product or company.
You said quite a few terms there that I want to highlight. So you were saying referrals, brand ambassadors, affiliate marketing, influencers...
Yeah. So all these words getting thrown around, probably confused everyone then they're like, "I need an influencer program. I need to do a brand ambassador program." It's all the same thing.
But they do have different, I guess, titles for what the programs are called. But that's definitely more specific to your industry.
But at the end of the day, it is the exact same thing. You're having someone else use their presence, their clout, to drive traffic back to your website and you can call it whatever you want.
Some people think "affiliate marketing" is a dirty term, but it's the same exact thing as a brand ambassador. It's the same exact thing as... When you get close to this Multilevel Marketing stuff.
It's like the same stuff, use your friends to sell your stuff. It's not as dirty as that. But like it's... Brand ambassadors, referrals. It's affiliate marketing.
Yeah, I'm glad you brought up Multilevel Marketing because we actually have a very strong litmus test at Refersion for when we look at a network and what the merchants trying to do to see if it's an MLM system or a pure referral/affiliate system.
MLM systems will get you in hot water with some of the regulations. So we try really hard not to do those things and we don't.
So the litmus test we have internally is, "Are the people who are promoting your things --what they're promoting-- is it a product or an opportunity?
If it's a product like something solid, you can buy it, that's great. If it's an opportunity, the opportunity to sell a product, the opportunity to buy into a product, the opportunity to know, get more people underneath you, that's when we draw a line and say no, that's not a network that we want to support.
And that's fantastic to show that you guys are fitting the bill here at Honest Ecommerce you. You like things to be above board and you like it to be a real business as opposed to, you know, not.
(laughs) So historically, how would businesses track affiliate marketing before apps like Refersion? Would it be coupon codes, and then they manually have to see how many times it was used that year?
Obviously, you guys are solving a huge pain point. I'm just trying to think of historically, how would people track this prior to an app?
Yeah, yeah. So historically this tracking happened in many different ways, but most common was through a referral link.
And the best way to think about it is a unique Google Analytics tag that is assigned to an affiliate or referrer or promoter, whoever that person is.
And then anytime somebody clicks that link, there's a little bit of data that gets embedded in the browser. And then on the checkout, the app basically checks again if this data exists.
If it does, it creates what's called a conversion or a referral order, and creates that credit for the affiliate. So this is largely how it's been happening since the 90s. You know, since then we've had new technologies.
And we've moved away from like, sometimes using cookies. Now we're using local storage, which is a more standardized way of storing data within the user's browser.
But largely those technology changes, the fundamentals of embedding and a little bit of data and then reading that data back to create credit, is like the fundamental of the technology.
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Can you talk to us and our listeners about the businesses that you've seen the most success with affiliate programs, like what type of product you've seen? That's on the rise, or just, they've had the most success historically.
Let's talk to our listeners, what store they might have that should be interested in affiliate marketing.
And maybe why they had the success? If it isn't like a product or industry, just the “why”.
The implementation of their affiliate program or something like that if they had a diehard brand crowd?
Sure. Yeah. I mean, that's a good question. Like, we get that question a lot. What works in our industry, what makes sense for us, what kind of progression we run? I don't know if it's good or bad.
I have to say that looking at the data, we really look at this data, we try to figure it out because we try to figure out how do we target this person, have we built a good plan for this industry and vertical?
What we find is that there's actually very little consistency. We have jewelry companies that have very low-cost jewelry and very high margins run affiliate programs completely different ways.
Some of them would run a very big brand ambassador program with hundreds of thousands of affiliates or brand ambassadors. And their goal is to almost boil the ocean with these influencers who are interested.
Just try to promote them and get them to start promoting that first sale or motivating that first sale to their friends.
Whereas others have this very, very small curated network of bloggers or influencers and they don't let anybody else know about the program.
They are very secretive and these are very exclusive high commission deals with some of these bloggers and YouTube influencers.
And I've seen everything in between as well. And so it really depends on what you think makes sense for your brand and your audience. Especially if it's a visual product.
Let's say clothing, shoes, even makeup. Makeup works very well on YouTube because it's instructional. But clothing works very well on Instagram. And those are some of the overall high-level data guides we've seen.
And then aside from that, how you want to build that network of Instagram influencers, whether you want to work with a lot of small ones or very few big ones or something in between. It's up to you and based on the opportunities given to your brand.
One of the things I always tell merchants is if you want to start with affiliate marketing or start working through this referral marketing process, look at your customer list.
You might actually have a few big influencers already buying from you. And all you need to do is just offer them, "Hey, would you like to do a post about my product? Would you like to get a free sample? To do a review for it and I will give you a little commission on that for every order that your post drives for us.
So that's a good way to start seeing what opportunities are already open to a brand to start with referral and affiliate marketing.
Awesome. So let's talk about that. Starting your affiliate/referral/brand/ambassador, whatever you want to call it, starting that program within your business.
So what are the top things you need to get locked and loaded before you have those conversations before you even start reaching out to influencers or whatever you want to call them? What do I need to have written down and had? What's my plan? What do I need to have?
Yeah. Because I'm gonna be honest, from a store owner’s perspective. I'm sitting here I know I have diehard customers that they love our gym, they love our product but I'm like, "Oh, this sounds like, I know I should be in the affiliate/referral, doing that for the business."
And honestly, I'm sitting here overwhelmed. I'm like, "I just don't even know where I should start. And now I'm going to have to be dealing with these affiliates."
And I'm just like, "Ugh. Do I want to do it?" So that's... I'm very interested in this answer because it feels extremely overwhelming, to be honest.
Because it seems like a whole new arm of the business that could be extremely profitable. But also I'm bringing in people. (laughs) So that's what makes me nervous.
People are scary. (laughs)
Especially when it comes to money. I'm like, "Oh my gosh. How am I gonna do this? How am I gonna make sure everyone's getting paid? And is it going to be worth it? How are they going to represent the brand? Are they going to represent the brand the way that I want them to?"
Yeah, yeah. And those are all very, very valid concerns. It's just a step-by-step process to try to alleviate each of those risks. So in terms of like a checklist, the first thing I would try to figure out is I like...
Personally, I always like to start with the numbers. I like to know, what is the maximum conversion I can offer, I can give to them... What's the maximum commission I can give to them? And what's the minimum that I think will be enticing for them? And then I try to find somewhere in between.
Or if I'm just starting, I would just start with a minimum and then try to build my way up. And you how you find your margin is like, "Okay, what's the percentage and what's the offer I can give to the affiliate." That's going to be the main incentive.
So some things that you might want to think about during this step is, "Are some of your products higher commission than others? Are some of your products lower commissions and others because of margins?" Like a bracelet might not be quite... It might not get a commission, the same commission as like a sticker, for example.
So once you have your numbers and you have a sense of what that gap is and what you can offer to the affiliate, the next thing I would do is start researching some of the profiles of your customers and figuring out what their influencers are, or who their influencers are. And that can happen in many different ways.
One of the ways I suggested is by just looking at your customer list and seeing if any of them are influencers themselves already, and that was a pretty good guide to say, "Okay, this influencer is probably a good target customer because he's already a customer."
So we're just gonna find more people like him or people want his audience. Just to start and give it a try.
Another way is just to see people who are popular in your community. For example, one case study I can show... I can talk about is a pet company. In order to start building affiliates and influencers, they actually went and reached out to all the animal shelters and made each animal shelter an affiliate inside their program so that they have these affiliations and that the animal shelter can promote their products and get some money back. And so it was a very virtuous cycle of the brands.
So any sort of local establishments, --and they don't have to be people they can be trainers, they can be people have another small business, they can be another business in your vertical-- just figuring out who would be possible affiliates in your vertical, or who influences customers in your vertical is the next step and profiling who you want to target.
And then finally, I would just say write the email. Get that email written. "Hey, my name is X. I'm here to do Y. Maybe you've heard of my brand.
Maybe you've heard my product. I'm very interested in working with you. And I'm willing to offer you (whatever number you figured out on the first step is).
So make it a very friendly direct email, reach out to them on Instagram, DMs, reach out to them on Twitter, any sort of personal way to get that message across.
Because the first affiliates you work with are going to be very personal. They're going to need some support, they're gonna need to learn how to sell your product.
They aim to get some marketing messages from you. And the best way to do that is just engaging with you, as the brand owner.
So the first thing to do is just get those numbers, then figure out who you're targeting, and then just send out the emails and start that relationship.
That's fantastic. So when talking with these new influencers that I'm trying to bring into the fold for my business... I guess I'm going to just answer this question myself.
Because I see a lot of people doing influencer marketing and they're saying, "Hey, I want you to be an influencer. Here's a big code for you to buy something from me. And then you can use that thing to then promote for me." And the statement is all asked, you're not giving anything away.
So I feel like, if you're trying to go to somebody for a favor, you're trying to have someone help you, you need to go and give them something first. And I do this all the time.
When I'm trying to meet new people get people on the podcast, I go to them with value straight off the rip and I don't ask for anything in return. And that's how you should do it for influencers.
You should go to somebody with your hand out and be like, "Hey, I want to give you this product. No, there are no questions about it. I want to give you this product. That's that.
If you like it, I would like to talk to you about doing some influencer stuff with me." Because when you go the other way around, it's like, "Hey, here's a coupon code and buy something from me." You're asking for them to give you money before you...
That's just setting it up on the wrong foot. And it's going to be a terrible engagement. You have to be willing to invest in this person, to have that person invest in their audience that they've curated.
You need to make sure that you're not like being... I don't know, saturating that market is not the right term. What am I trying to say here, Annette?
You want me to read your mind?
Yeah, it's probably a bad idea.
It's a big problem. (laughs)
These people have worked hard to build up their networks. That's why you're approaching them as an influencer.
And if you go to them and ask them to do something for you without giving them anything in return, they're not gonna want to work with you, and they're not going to promote your brand to the audience that they've worked so hard to build.
This is a really good point just because I think the biggest difference between influencers today and affiliates from the 90s, was that affiliates had a blog and they didn't really know their readers so they don't really care as much.
Whereas influencers on social media, they engage very actively in the comments, they read those comments all day long.
So for them, the audience is really important. So respecting them and respecting their audience, really can get your ahead when working with influencers.
Was dilute the word that you were looking for?
No. I think, especially what Chase is saying, they have their own personal brands so they don't want to dilute it by bringing on brands that don't mesh with what their message is. I think one of the things, too.
When I'm just thinking about this influencer or affiliate program for myself, I would probably start very small with micro-influencers. And not even... I hate even using these terms but someone that's very...
If I do this, I want to start with someone that I personally know because they're that close to the brand and I think getting their feedback before trying to conquer someone that has more followers.
And honestly, I think everybody knows right now that like there's a lot of vanity numbers out there that it might be worthwhile to go with someone that has a smaller following.
They're much more engaged and their audience isn't used to them promoting lots of products post after post because I know myself now that I'm looking at social media and someone has something in their posts, I know they're making money off of it. So I don't know how genuine it is anymore. It's getting very diluted, Chase.
Awesome. So, now that we've gone down that rabbit hole, it's essentially just if you're going to ask for something from somebody make sure that you give them something first. That's what we're trying to say.
But moving beyond that, getting back to affiliate marketing and Refersion itself. So what are some of the perks of using an app such as Refersion?
Yeah. So Refersion is really good at helping you organize and segment your affiliate network. So I mentioned having different offers or having different commission rates per your affiliates or having different rates based on who you're working with.
So Refersion helps make that very simple. We have a concept of offers that can... They can keep the house off a registration page and have unlimited offers and affiliates per offer.
So that way, you can really segment your affiliate network into different groups of high commission, low commission, medium commission.
And then also see which offer and which commission rates are performing very well, communicate directly with the top guys to figure out what they're doing, and then try to move some of those strategies across the network. So we try to make everything very simple.
Starting from setting up and integrating our software with your store all the way to getting your affiliate registration page up and launching that first affiliate program and giving the affiliates dashboard that they can use to promote and track their progress.
Do you help with the payment processing for the affiliates? Because that's the other thing that is scary to me is making sure that everybody is paid and paid what's due to them?
Yeah, so we calculate all of that. And we tell you, "Okay, this conversion came in." And you can set that conversion to be approved/denied because sometimes products get returned. Affiliates are used to getting paid maybe 30 days or 45 days after the initial purchase.
So that's okay. That's normal in the industry. Once you have those conversions approved, we then schedule them for payment into the system.
And you can payout via PayPal, which is a pretty valid and safe way to pay out because PayPal is the payee. PayPal, I think you can tax for more than $20,000. PayPal will automatically send the affiliate, a 1099 (form). So that tax portion is covered as well.
So for merchants just getting started, PayPal is great. You can also create gift cards into your store and then send them to affiliates as a store credit system. And finally, we also have Refersion Pay.
So we've just launched a feature where we can help pay affiliates on behalf of the merchant for a service fee. So we'll give you an invoice, you pay the invoice and the fees associated, and then we'll route the money to the affiliates directly.
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You just brought up an interesting point that I've never even thought of. (That) is the payment via your own product back to the influencer. That's a really genius idea.
If you don't feel like you can warrant paying them directly yet, that's a way to weave them in even tighter into your brand. Do you see that being used often?
Yeah, yeah. I've seen a few merchants use it. Actually, there was one merchant who did it in a very smart way. I'm going to share this case study. So basically, what they do is that they only pay out in $25 gift cards.
And that's really strange. Instead of giving you like a $500 gift card, they'll give you 20 $25 gift cards. And it's weird. Why would you do that?
And the reason is that, on checkout, only one gift card can be applied. So basically, they're saying you can have $25 off of anything, any total order in the store, but you can't use more than one gift card at a time.
So this way, they actually spread the gift cards around to more people. People share in and actually help grow their affiliate network a lot.
That's some interesting tactics in my eyes. It's smart. It's smart because then people can give those away as gifts and it's still payment. So...
Well. Just to say with getting store credit type situation with selling your products. When you go to an influencer, they (will be) more than likely are going to be a fan of your product.
Especially when you're younger, a younger (brand) getting started with this program, anyone that's going to talk about you obviously likes what you guys are doing.
So offering them, maybe a higher commission with store credit versus a lower commission and a cashback reward, and let them choose their own ending. That's a way to navigate those offers by trying to build out your first couple of affiliates.
Yeah, yeah, that's a very good point. I think different audience types, different personalities, different personas of your affiliate network are going to require different commission payment types.
Sometimes if you get a big deal with an influencer that's very well established, there's no way they would accept store credit because it's just how they pay their bills. They can't pay their bills with store credit.
So I think it really has to do with the level of an affiliate or the level of professionalism the influencer has. But yes, I've seen a lot of micro-influencers, brand ambassadors getting paid by either with a product or store credit.
Absolutely. I mean, there's a million ways to build this program and to build the commission structures and that's what we're trying to make you think about before you go down and build this for yourself. You got to have all the answers before you start the system.
Refersion isn't going to build that for you. You need to have all that in place beforehand.
And then you can use apps like Refersion, and there are others in the marketplaces that do similar stuff. There are strengths with every app that's out there. But just know that before you can use an app, you gotta have a plan.
And I think also you can start really, really small. You don't even need the app in the beginning. You can just start with the people that you know (who) already support the brand and do smaller level stuff for them.
But having some sort of affiliate program in place is very smart. Don't get overwhelmed. Like I was getting overwhelmed myself, but just listening to it to our conversation, I think everyone should have a program in place whatever that is, including myself, even if it starts at a really small level, and then build upon that. So...
Yeah, some of the most successful small affiliate programs I've seen are starting to run on Google Sheets. Just tracking a few coupon codes, looking up which coupon codes lead to which orders and then just manually paying out the affiliate by PayPal.
Awesome. I think that's a great place for us to wrap up. Letting everybody know, just to get started on it.
But are there any resources that you have, that our listeners --either maybe your site with some blog posts-- that they could take a look at if they're interested in getting started with an affiliate program? Some resources?
Yeah, for sure. On our blog post... Our blog, we have a lot of blog articles about how to find influencers, how to work with influencers on Facebook, and how to work with influencers on Instagram.
So you can check that out at blog.refersion.com and then on refersion.com we also have a Learn page. So on that page, we feature articles as well as videos about our software so you can learn a little more about what our software does and how to get into affiliate marketing.
Cool. And then I know this, because you guys have been a sponsor for so long. If you go to refersion.com and sign up for an account, there's a coupon code.
We're not an affiliate, but we actually pass the discount on to you. I think it's either ELECTRICEYE or HONESTECOMMERCE. I think they both work. But I'll make sure to put that in the show notes.
I have one last comment. And we just like jumped over it really quickly here. I know that you met your partner at a meetup. Correct?
And Chase and I, we host a meetup. And I just want to encourage all of our listeners, find some sort of meetup in your town, the face-to-face still works. You can find rad people to work with, whether it's starting a business, starting a store, letting them help you with your store.
So really look at the Meetup app and take a look at it. You can build some really strong bonds, if not careers and businesses. Like you, correct?
You never went back to that meetup, right? It was one and done. You found your partner.
Yeah, exactly. Me and him actually, we talked about it. Neither of us ever went back to that meetup. But we kept talking.
Yeah, it's awesome. So please listeners, find a meetup in our town and hit it up. You can find some cool connections there, for sure.
Awesome. We'll Shibo, I promise not to delete this one. And I can't wait to see you when I'm back in New York.
You guys as well.
Thanks for having me guys.
Have a good one. Bye.
We can't thank our guests enough for coming on the show and sharing the truth. Links and more will be available in the show notes. If you found any actionable advice in this podcast that you'd like to apply to your business, please reach out at electriceye.io/connect.