How To Set Up Your Online Retail Channel

This article covers how to set up you own retail channel, what to be aware of; retail channels online are often called affiliate programs, because you can set up a number of resellers, or affiliates, quite simply.

The Web is the ultimate distribution channel. You can set up a series of sales agents for little or no investment.

But wait a minute...isn't your time an investment? If you offer your affiliate program to anyone that comes along, you will get bombarded with newcomers selling anything and everything.

I've seen Web Sites that sell pot scrubbers, UFO detectors, pills and what's hot...Viagra to increase your sexual potency and the get rich quick schemes. Travel being sold on the same page as phone cards. What a waste of time, not just for the salesperson, but for the business creating an affiliate program.

Too many choices creates confusion for the customer. Success is based on a simple principle:

The right offer to the right list will succeed.

In other words, if you are selling to the wrong people, you will not succeed And if you are selling to the right people with the wrong offer, it will not succeed.

As the provider of the retail channel, you need to provide the right offer to your affiliates. And you need to be sure it is getting seen by the right people.

Lack of focus ruins business. Ray Kroc knew what he was doing by selling one thing and selling it well (McDonald's hamburgers).

You can waste your time creating a Web free for all or consider your affiliate program a qualifying process.

What You Are Looking For: Qualify your Best Salespeople

You are looking for people who will generate leads that you can easily convert to sales and pay them for it. Commissions are common for one step sales, i.e. Amazon.com's bookstore, which pays a percentage per book sold.

Repeat customers do not involve a commission, which is exactly what Amazon.com is banking on. A great deal for them, but questionable for those reselling books.

It is difficult to create an ongoing compensation per sale unless you set up a subscription basis, such as people selling monthly classified ads (personals and relationship ads are strongest here), Web companies selling Web hosting services, or other subscriber based services where payment is made on a monthly basis.

Be Sure to Track More Than Just Sales

If you are setting up a retail program online, you need to track more than sales. Your affiliate program should be a qualifying process, weeding out the 80% of affiliates who do nothing for you and focusing on the 20% who do.

These 20% are your gold, the ones who will make you a ton of money. But if you spend your time treating everyone equally, not putting in incentives for performance, and waiting for the sales to roll in, you will alienate good and bad salespeople equally.

Here's what you need to do to qualify a good affiliate partner:

Count Visits to Your Affiliates Web Page: How many people visit this unique page?

Most affiliate programs come with a free Web Page, a free storefront for their affiliates at their site. Track activity to this page; reward those who get the most traffic and set a time limit for those who don't.

• Count Leads, Contacts and Inquiries

  How many contact you from this affiliate page? Be sure to immediately reward your customers so they tell you how they came, or if via email, track it digitally. Use a free report, contest, or giveaway to urge people to get in touch with you.

  How many go from unknown visitors to leads? Your affiliates are creating shelf space online. It is up to you to find the ones who generate the most visitors.

• Conversion of Leads to Sales

  How many of these people actually buy from your affiliate? Conversion rate is an overlooked, and crucial part, of any retail channel. Results are all that matters.

  Measure how many sell, find out the best, normal, and worst case scenarios. Remember, it is all about the right offer to the right list. If you have an affiliate sending over tons of disinterested customers, they are not doing a service for you or them.

  Most of all, be realistic in your projections. It is easy to use the Internet as an excuse to create unreal expectations. No matter how hard you try, only a few will succeed. This has been the rule of business for centuries, and it is no different on the Internet.

• Reward Systems for your best salespeople

  The old rule of business applies to your online retail channel; 20% of affiliates will generate 80% of your business, bank on it and treat those who help you with extra bonuses. Give them extra training, more support materials, or maybe a fancier Web Site.

Sales Agents, Commissions, and Subscriptions

These are three of the current approaches to an online retail channel. What is your formula? Territory is a tricky thing online; we are not dealing in a world limited to physical location. Sales agents are a crucial part of your system.

If you set up an exclusive physical territory for agents, set a price point for them to enter or some other form of qualifying process.

If you pay by commission, do they just receive a commission for the first sale? What about subsequent sales? How long a time period will you set?

Finally, if you sell subscription-based services, can you pay them a monthly fee? How often will you pay them?

If you are setting up any sort of sales system, you have to reward performance. Give your best people extra training, extra attention, perhaps better commissions; reward those who do the best.

Natural Market or Free For All

Be sure to promote your affiliate program to those people that have your target market. Use it as a valuable tool in your business; what you are really looking for is what we call shelf space in the world of retail; the way to get your products and services prominently featured to your target market.

Advertise your Network

It is amazing how few businesses promote their own retail channels. I have seen sites where the affiliate program is presented like some obscure deal. If you are going to promote your channel, educate your possible affiliates about your program.

Outline the benefits and support your network.

Take Legal Precautions

Business Opportunities and Franchises have heavy requirements and fees state to state...so keep it simple. Setting up a commission based system is easy; selling franchises or business opportunities is tricky. Consult an attorney with what you are setting up; the Internet is similar to mail order and other businesses conducted at a distance.

This is where a legal mind is essential; have them review your offer.

Manage Your Affiliate Network

Management of an affiliate system can be quite sophisticated. Keep it focused by creating a:

• Tracking System: You can track where people come from via banner ads, or via inquiries entered into your database. Make sure you track the results your affiliates generate, and measure whether your efforts are worth the upkeep.

• Payment System

  How often will you cut checks? Will you do order processing and fulfillment? Think in terms of monthly, quarterly, or per subscription payments.

  Remember that quick payment will make your salespeople happier. I had a client who offered a $500 bonus per sale, but the sale was not finalized for three months. That lag time made his affiliate program unappealing.

• How much do you pay your affiliates?

  Figure out your affiliate's commissions into your own profit margin. Can you afford to pay your salespeople well?

  Many programs offer percentages as low as 5%; will this really get people jazzed and motivated to sell what you are offering?

Control the Content and Advertising Material People Use

Finally, your retail channel does promote your business. Let your affiliates use approved sales letters and Web Pages at your site. Don't just throw out an idea and have everyone present it in whatever way they want.

Their claims could severely hurt you, so make sure you do your best to give them all the materials. This will help them sell what you have to offer, and limit your problems with crazy claims by affiliates.

Pay Them Well

Most of all, pay your people well. They are an important part of your business. If they succeed, give them more training. Nurture your market and do your best.

Like all good things in business, setting up a retail channel involves testing what works. Beware of the Internet folly of offering the world to people, and finding out that you are working hard for little or no sales.

A good retail channel is only as good as your salespeople. You are looking to qualify the best salespeople for you.