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Affiliate Marketing Marketing

Use these 5 forces to help you build an effective affiliate program

By Lee-Ann Johnstone, CEO



The Drum Network article

This content is produced by The Drum Network, a paid-for membership club for CEOs and their agencies who want to share their expertise and grow their business.

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April 23, 2020 | 7 min read

Porter’s Five Forces may be familiar to you if you’ve studied economics. In short, it is an analysis framework that covers the exact market forces that shape every industry. Economists use it to work out how the market might react to certain occurrences.

data competitor

Recently I have been presented with more questions than ever relating to how to plan and launch a successful affiliate program. You might have read in my previous article why affiliate marketing is going to get a lot more popular.

Affiliate marketing can seem complex and there is no one plan that fits all to help you get started. Every program and business is unique, but like architecture – if you know the basics – you can build any structure, from a one-storey bungalow to a high-rise apartment.

The same principle exists behind affiliate marketing. If you know how to think and plan your affiliate program strategy, you can effectively apply it to any business, product or industry.

Here I’ll explain how using Porter's 5 Forces can help you strategize your program and set it up to succeed from the start.

Force #1: Know your competitors

Knowing your competition is critical when it comes to any business plan, but particularly in affiliate marketing when things move so quickly. You need to find out where you sit in the marketplace and benchmark yourself against your closest competitors to discover where you can differentiate and add value to affiliates where others aren’t.

Investigate whether or not their product has something that yours doesn’t – or if their affiliate program offers a tool, a concierge service, or onboarding information pack, which you don’t. This will give you the information you need to both tailor and market your program launch and offer added value to the affiliates they are working with to win you more real estate on their sites. You want to seek out your competitive edge and be crystal clear on the value you are going to give to affiliates who join the program

Force #2: Research new entrants to the market

Affiliate marketing is fast paced. There are roughly 50-100 new programmes being launched every day (according to across multiple sectors – so how are you going to stand out from the noise and get affiliates to give you their attention?

As more people are moving online, the likelihood is things will get more competitive than before. Research what others are doing and consider their approach against your own. For example, has someone just won a Rising Star Award? Have they been featured as part of a launch offer in a known publication?

Are they advertising their affiliate program somewhere you aren’t? Knowing what you are up against is imperative in this industry; making sure you are seen and heard by affiliates in multiple places is key for brand awareness and program promotion. Marketing your program is just as important as marketing you're offering.

You have to be seen and heard to get new affiliates in the door.

Force #3: Gauge the number of direct competitors you are up against

Direct competitors need a closer look than new market entrants. Do you know if they operate on the same platform or network as you? Knowing this kind of information can help you differentiate.

For example – if there are three direct competitors to your brand and two of them are on another affiliate network that offers the same incentives, reports and payment methods – what can your platform do differently to theirs to make managing your affiliate easier, faster, with better automation. Could you offer a direct report API, can you pay weekly instead of monthly?

Small things like this can help you get a competitive edge. Do they have top affiliates driving their brand and are they working with affiliates you could be working with too? Do they have anything in place that would attract new affiliates that you don’t? Are you regularly benchmarking your performance and rankings against theirs?

Your competition is working with the same affiliates you are – don’t be fooled into thinking they are not. If you can’t differentiate on product and service, you need to start leveraging relationships to really matter. This is why affiliate management is such a highly sought after skill and why you need to be knowledgeable as a digital marketer plus a natural people person too.

Force #4: Know the bargaining power of your competitors

The number of suppliers or competitors operating in your market will directly affect the ways that you can negotiate your affiliate deals. If the market is small and supplier numbers are large, the cost for an affiliate’s traffic will increase.

This impacts your commercial negotiation tactics and your program margins. Often you just can’t compete on pricing and I would not recommend you do. It’s why points 2 and 3 above are also very important, because these items can often be leveraged over price or in conjunction with it to add value.

Depending on how prolific your competitors are in the industry, you may need to evaluate your sign-up offers, your ongoing affiliate promotions or the types of deals that you have in place to get affiliates on board and promote your products or services. It might be that you look at seasonal incentives vs a straight up price hike or you look at incentivising on volume of delivery instead to get a step over your nearest competition.

Force #5: Analyse your threats

Your competitors are not the only thing that you need to think about – you also need to uncover any threats with your product or the affiliate platform functions itself. If you are operating on a white label affiliate platform – there will obviously be certain limitations on your product functions and limited customisation features you can offer to affiliates to help them self manage in a faster and more automated way.

Legal and regulatory changes could impact where and how you promote your offering.

This can be a challenge in terms of how you scale your program growth – so you need to find out ways you can get around it. Is there something else that you can offer affiliates which will be over and above the existing product function and limitations? Does the platform you are using scale to meet the needs of your program as it grows? Is it still cost-effective?

Are you able to compensate for the lack of customisation in other ways, which will keep affiliates driving traffic? It’s important to make sure that your strategy is agile so you can adapt.

If you are new to affiliate marketing – or are exploring new avenues, then hopefully this article will give you some food for thought as to how critical planning and strategizing really is for this channel to work.

Lee-Ann Johnstone, affiliate marketing expert and digital business coach

Affiliate Marketing Marketing

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