Terms And Conditions to Include in Your Affiliate Agreement
Over the past decade, affiliate marketing has taken the advertising world by storm, shaping most digital marketplaces and becoming one of the most popular marketing strategies.
Affiliate marketing is the process by which companies outsource their sales and marketing, relying on affiliates that earn a commission to advertise their products.
These affiliates choose to promote products of their choosing, usually going for items or services they truly enjoy. They then earn a piece of the profit made from each sale they secure.
As a result, affiliate marketers are essentially ‘prosumers’ i.e. consumers turned providers.
The term ‘prosumer’ was coined by technology expert and futurist Alvin Toffer in the 1980s. Despite being four decades old, the idea of prosumers (now known as affiliate marketers) is as relevant as ever.
Nowadays, companies like Slack have emerged as excellent affiliate marketing platforms, where businesses and contributors (also known as affiliates) can work collaboratively to grow profitable communities around certain brands and products.
It’s important to point out that in our current digital marketplace, which is dominated by social media marketing, influencers have become the main affiliate marketers in most industries, representing brands and companies across popular platforms like Instagram, Twitch, and YouTube.
Why you need ‘Terms and Conditions’ Agreements
However, the digitalization of most markets and the rapid evolution of marketing strategies has brought a series of challenges regarding the legal and moral implications of selling products online.
Nowadays, ‘terms and conditions’ agreements’ are everywhere, from online shopping sites to subscription-based services, social media, and entertainment platforms.
These legally binding agreements are necessary to help businesses establish a legal bond between clients and employees (or affiliates). While most affiliates are ethical business partners looking to add value to companies, unethical or illegal practices do happen.
Affiliate marketing wrongdoings can seriously hurt a company’s brand image. This is the reason why things like email verification are so vital (especially since email marketing has taken over in its own way).
Luckily, we have compiled some ‘must-have’ clauses that any serious and robust terms and conditions affiliate agreement should include.
The obvious stuff
Firstly, let’s start with those things that may be taken for granted but sometimes are ignored. This should go without saying, but not everybody is ready to be an affiliate marketer. For this reason, it’s important to train newcomers to affiliate marketing.
When trying to promote something, those representing the brand must know everything about the product or service they are trying to sell. Information like prices, features, or targets should be a priority.
Additionally, affiliates must promote those items that are in stock. It may seem ridiculous, but big companies like Sony have made this mistake before. During the launching of the PS5, Sony’s long-awaited console, the company faced massive stock issues, even though most affiliates kept promoting the product.
To avoid mistakes like this, which can have dire consequences for your brand image, it’s important to invest in Amazon inventory software that allows you to keep affiliates in the loop regarding your product’s availability.
The legal stuff
Having legally sound affiliates is even more important than these elemental details. Any serious affiliate contract must specify rules that follow government regulations, especially those regarding FTC (Federal Trade Commission) compliance.
To be FTC compliant, the agreement must state that your affiliates receive compensation and that such promotion is carried out with transparency.
For example, if an affiliate is trying to promote a CPaaS product by saying “this is the best virtual phone number provider in the market”, they must state that such content is being promoted by the company in question.
If not, that statement would be dishonest and subsequently break FTC regulations. In those cases, the brand is held accountable for such practices, not the affiliate.
Additionally, it’s important to protect your company from intellectual property claims. To do so, the agreement should include a clause regarding copyrights, patents, trademarks, or any kind of private and sensitive information the affiliate is not allowed to use.
In this same vein, it’s important to ensure that your affiliates respect copyrighted content when promoting your products or services. If an affiliate were to break copyright rules, the legal repercussions could end up affecting your company.
This rule applies to any corporation, no matter how big or small. Big brands like Apple, Microsoft, and Samsung have been suing each other due to copyright-related claims for over a decade now.
Regarding other affiliations
Most affiliate marketers choose to join multiple affiliation programs since it opens the door to earn money from several sources. Sometimes, however, this is not recommended, especially if they want to work for direct competitors.
While there is the legal authority for companies to restrict the number of affiliate programs a marketer can join, it’s important to be specific regarding their liberty in terms of joining competing programs. Affiliates are free to promote any companies, but trying to sell products from direct competitors at the same time may hurt both brands.
What’s better? Joining your competitors directly can be a smart move for your businesses. You can surf the wave of your competitors’ success and keep a close eye on their marketing and products by applying a competitive collaboration marketing strategy.
This will allow you to be in control of your relationship with your competitors, without leaving it in the hands of an affiliate marketer. Remember, sometimes a rising tide lifts all boats or, in other words, if your competitors do well you do too.
Partnering with competitors can promote your brand and boost your positioning in the market, especially in highly competitive industries where one business controls the majority of the offer and demand. Luckily, cross-selling (getting other businesses to promote your company) can help you turn more leads and upsell services to current clients.
Keeping the agreement up to date
All terms and conditions agreements should include an update clause that offers both parties the opportunity to renegotiate previous contractual clauses. Additionally, it’s important to communicate all changes to the agreement with your affiliate partners.
Usually, it’s recommended to review agreements yearly. You can automate this updating process thanks to the implementation of HR software, that allows companies like yours to administrate and organize employee payments, payrolls, records, etc.
If you want to learn more about how these tools can help you, have a look at this HR software guide.
Using coupons & discounts
Coupons and discounts tend to work better in highly competitive digital markets where companies sell items such as beauty products or clothing. Additionally, e-commerce businesses offering services like cloud phone for business can take advantage, since that industry is very crowded at the moment.
To make the most out of your coupon affiliate marketing strategies, it’s important to choose a selected group of high-quality affiliates to work with. Accepting coupon affiliates or not is an important choice, but either way, it’s essential to make it clear in your affiliate program agreement.
Approving promotions
There’s plenty of ways affiliates can promote your products and services. But you’ll want to ensure their promotions fit within your overall marketing strategy and don’t have a negative impact on other channels. In other words, you don’t want to be in competition with your own affiliates.
This occurs most commonly in paid advertising, wherein affiliates run paid ad campaigns on Google Ads, Facebook, or elsewhere using their own referral link.
While this could bring in leads, it comes at a cost. Affiliates will be in direct competition with you for reaching potential customers, and this drives up the CPC (cost per click) costs. Next to that, you won’t be reaching new audiences like you would through a blog or word-of-mouth, instead the affiliate would be advertising to the same audience that your business already is reaching.
Include guidelines for how and where affiliates can promote and share referral links. This could be outright prohibiting any promotions through paid ad channels, or limiting paid ads such as no bidding against branded keywords.
Regarding the affiliate’s business structure
When a prospective affiliate is looking to join a program or promote a brand they usually choose between two different types of business structures: sole proprietorship or limited liability company.
Sole proprietorship
In essence, sole proprietorship means that the legal name of the affiliate is the name of their business in legal terms. However, they can also choose to operate their promotion business under another name.
This is usually referred to as a ‘fictitious business name’. This practice appears in most legally binding documents as ‘doing business as’ (DBA). To operate as a DBA, most countries require affiliates to file a formal application.
Limited liability company
Commonly known as LLC, this business structure offers affiliates the chance to operate as a separate entity from their legal name. In turn, limited liability companies allow affiliates to not be held personally responsible for business-related mishaps.
Offering bonus commissions
Bonus commissions are used as an incentive to encourage affiliates to work extra hard. This technique rewards those affiliates that have sold more products than they were contractually obligated to.
As a result, affiliates tend to put a little additional effort in to go the extra mile, which directly translates to more sales.
These types of commissions are very common. However, it’s important to specify the three main factors that make bonuses so popular.
Amounts: This is either a fixed bonus commission or a percentage-based bonus commission.
Time: The amount of time affiliates have to reach the target goal. Companies can choose to set their own specific time period, but it’s recommended to go for a fixed time period like a calendar month or week.
Bonus tiers: The different bonus offers awarded when affiliates reach different goals. Setting up levels or tiers will help differentiate bonuses. If an affiliate sells five more items than expected, they shouldn’t be rewarded as much as another affiliate that sold 25 extra products.
Put our advice to work today to make sure you’re dotting your Is and crossing your Ts the next time you draw up an affiliate agreement.
