If you have a Software-as-a-Service company, you most likely have a free trial option. At some point in time, you might have considered compensating affiliates for driving free trial signups.
Much of this thinking comes from a basic hypothesis I hear a lot:
You believe there is a correlating relationship between compensating an action to an affiliate, and a affiliate providing more traffic (thus increasing the probability of more trial signups, and potential upgrades to paid accounts – in the long run).
While certain affiliates very well could operate this way – a vast majority don’t. On the whole, there is not a direct causation relationship between compensation and the ability for an affiliate to drive more qualified leads to sign up for a free trial account. It’s much more nuanced than that.
So, should you compensate affiliates for free trial account signups? In an overwhelming majority of cases, The answer is: NO.
Why? In my experience, when managing an affiliate program that compensates affiliates on free trial signups – the outcomes and takeaways usually are:
- You will get an increase in traffic and sometimes an increase in affiliate applications. However, given our experience: 95% of the increase in traffic (as well as new affiliates) won’t and don’t lead to higher paid conversions.
- You, as merchant/advertiser, have to be more rigid on verification of those commissions – which ends up taking more time than the ROI it produces (AKA total amount of revenue derived from all trial accounts upgrading to paid accounts). Additional verification also increases support volume since many of those affiliates just try to turn a buck, want to know why verification is taking so long.
- Qualitatively (and to point #1): The top affiliates I have worked with often don’t have interest in a lower commission rate free trial. They are interested in driving paid accounts (which is good: as it aligns, or should align, with your company goals for the affiliate channel) as it results in higher commissions and more impact for both parties.
Stuck with Free Trial Option
But what if you ONLY have a free trial option? Meaning: A new prospect/customer must signup for a free trial account and then upgrade to a paid account. Should you compensate affiliates on those free trial signups or just when they upgrade?
This is a case, separate from this question (and a topic I will cover in detail in future posts), where your company hasn’t aligned for a Cost Per Action (CPA) consideration for affiliates.
In other words, you are doing a disservice to affiliates if the only way for an affiliate to drive a paid account is to force them to drive a free trial signup first. Almost all affiliates want to ensure they get the commission for referring a paid account, so any impediment to that is going to lower confidence.
Long story short: you should offer the ability for a new prospect to either a) signup for a free trial (and upgrade in the future) OR directly buy an account from your website. Then the affiliate can choose how he wants to drive leads or paid prospects to your SaaS business without being locked in.
Curious to know your experience and opinion. Thanks!