Affiliate marketing: promoting your product through synergistic partnerships.
Seems lucrative for established companies of all sizes, as it unlocks additional potential in the form of loyal customers they were unable to reach in the first place. But is this a good approach for the early days of a startup?
Generally speaking, startups need to figure out three things:
- a product-market fit (aka. unique value proposition),
- a minimal viable product and
- a sales engine.
As much as you can get outside support for the product management & analysis, you still need to be out there and talk to potential customers, analyze pain points and adapt (or even pivot) your idea. That’s when the magic happens.
Alas, there’ll be no magic if you choose to go an early affiliate program. Effectively, you’d be getting a chunk of someone else’s customers overnight – you wouldn’t know if they enjoy product; worse yet – you wouldn’t know your primary market, as most of your early adopters would be artificial.
In more ways than one, it is like paying for Facebook fans – you have followers, but you know they are fake.
Another thing to consider is the lean product management cycle you’d be willing to implement and follow. Ideally, your early adopters would pay for your product to solve an issue they have. They are rather important, because through insight in their issue you should be able to expand your idea and solve a pain point for a larger number of customers – your market.
Should you choose to go for an affiliate partnership early on, you’ll probably get a lot of early adopters from a different product. Therein lies the risk: you may find yourself solving another company’s shortages instead of creating your own marketing niche.
While that’s not necessarily a bad thing, it needs to be a conscious decision; it may even influence your exit strategy. There’s a considerable business risk too – imagine your partner product sending too many affiliates to you; their team may decide to implement a key subset of your features and obsolete the partnership. And if in the meantime you’ve build exclusively for a cohort of that affiliate – poof! – your own unique value proposition is gone.
To round it up, here are a few rules we suggest to startups:
- Don’t go for an affiliate before the first 6 months or with less than 1000 paying customers;
- Track and limit affiliate customers to 50% of your organic user base;
- Aim for discount vouchers rather than integrations;
- Don’t do any affiliate integrations (through coding) within the first 12 months (or 20 product sprints).