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A Few Pointers About Affiliate Marketing in SaaS

Generally speaking, affiliate marketing in B2B SaaS depends on

  1. how you want to incentivize the partner
  2. your average ticket size from one referred sale
  3. how fast your product is selling
  4. the cost of acquiring one customer
  5. how much post-sale training and support is required by the customer
  6. who provides this training and support
  7. the cost of this training and support

Here are some general rules of thumb

  1. If your product is flying off the shelves and is primarily DIY, then you can have a 10 to 15% monthly commission for the lifetime of the customer and you’ll have affiliates queuing up to sell.
  2. If the product is not selling, is not well known, or has a bad reputation, then you’ll have to significantly increase the commission (and therefore, your CAC) to get affiliates interested. If your average deal size is less than $150 you’ll find it extremely difficult to find long-term, committed partners.
  3. If you have annual contract values in the $xx or $xxx thousands, then you’ll rarely have affiliates. Instead, you’ll go for strategic partners who will work with you pre and post sale (like Salesforce or Radian6) and the deal will be more complex than a 15% commission. In such cases, it might go up to 60% where the partner provides lifetime support and training to the customer, while you make a sale and get out of the way.
  4. If you’re on MRR and churn is more than 2% monthly (meaning it’s easy for customers to switch or stop using your product), pay the partner their commission for the lifetime of the customer. If you pay for only a year, then the partner has every incentive to ask the customer to switch to a competitor after one year, or simply stop caring. If you’re paying commission for the lifetime, then the partner has some incentive to keep the customer with you.
  5. Don’t be cheap. In SaaS, a good LTV:CAC is 3:1 so try and pay handsomely for performance. Eg. if a customer stays for more than 6 months then the partner gets 20% monthly (from month 7 onwards), if the customer stays for more than a year then go ahead and pay 25% monthly.

End of the day – partners are not invested in your growth, they’re invested in theirs. So you will have to show them potential returns. Which is why referral and affiliate partnerships work best AFTER you’re a name in the market and are already selling a lot on your own.

Hope this helps!

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