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Affiliate marketing is an effective way to achieve both upper- and lower-funnel goals, such as increasing brand awareness, generating clicks, and boosting sales. To ensure that you and your partners establish a successful and mutually beneficial partnership, you'll want an affiliate contract that outlines payouts and sets clear expectations based on the most important KPIs.

The agreement should specify how much will be paid, how it will be paid, and what it is being paid for. Additionally, the agreement should provide legal protection for both parties, ensure compliance, and safeguard intellectual property rights.

By laying out the rights, responsibilities, and duties of both the brand and the affiliate, these affiliate contracts form a rock-solid legal bedrock for your partnership. This guarantees that everyone is on the same page, slashing the chances of any mix-ups or disagreements down the road.

Here are the 5 essential elements of a solid affiliate partnership agreement that you need to know.

Clear commission structure

One of the most essential elements of a solid partnership agreement is a clear commission structure. Determine what metrics matter most to your brand, and create payout details around them.

The agreement terms should clearly outline:

  • The commission structure that will be used to compensate a partner for successful conversions or referrals.
  • The default percentage or fixed amount that you'll pay your affiliate for successful conversions
  • Additional incentives you want to offer partners aligned with your objectives.

This will depend on what revenue model the business is working with. If a brand is working on a Pay Per Action basis, they can choose to pay a fixed amount to the partner per sale. If the goal is to get more new customers to buy a specific product category, then the company can create a payout adjustment that is specific to that group. With affiliate contracts, you can get really specific in your commission structure and payouts.

When setting the commission structure in an affiliate partnership agreement, it’s important to remember that the payment structure should align with the objectives of both the brand and the affiliate to create a successful partnership. Brands can incentivize or disincentivize specific actions, while affiliates can work with businesses that are best suited to their promotional strategies and target audiences.

Payment terms and schedule

Payment terms and schedules are an essential part of successful affiliate contracts. They specify the finance timeline and payment cadences of when and how the affiliate will be paid. For instance, what happens in the case of reversals? How does the brand pay out the affiliate based on their action locking periods?

One of the quickest ways to spoil a new relationship with a publisher is to forget to pay them on time. Imagine if time is spent writing a beautiful article about a partner’s products, and they forgot to pay you! This is why it’s crucial to confirm and communicate the finance timeline or cadence to all involved parties, and how the finance settings work. Having this cleared out will make the partnership a breeze.

Remember, the flow of money will be different depending on what affiliate network or partnerships platform the company is on. For example, the action locking policy could state that actions are locked 10 days after the end of the month they are tracked, while approved transactions are paid 5 days after the end of the day they lock.

Your partners will also need to understand what methods you use to track and process the payments and how and when you make payments.

Tracking and attribution rules

The next thing to consider in a solid partnership agreement is tracking and attribution. How is the action that the brand wants to compensate a partner for tracked? Are partners allowed to place a tracking pixel on the brands' confirmation pages?

The affiliate contract should state the duration of the tracking period, and how the action is tracked in the affiliate journey. It should define how sales (or whatever action the brand wants) will be attributed to the correct affiliate, and how long the affiliate will receive credit for a customer’s actions after the initial click.

An important element when it comes to tracking is the credit policy — whether that is first click, last click, or last to cart. For most brands, this is set to last click, meaning the partner who drove the last click to a completed action receives the credit and payout.

The agreement also needs to determine whether that partner is in a standard credit group, or a preferred group. In a standard credit group, partners will all be judged against the same crediting policy at any time during the conversion path. If they are in a preferred group, such as a special influencer a brand wants to work with, they'll get credit over any partner in the standard group.

The attribution rules should be specified to avoid any confusion or disputes over commission eligibility. This includes the referral window, which determines how long a click is valid before it becomes irrelevant for this sale in the customer journey.

Promotional guidelines and restrictions

Any affiliate partnership agreement needs to define which promotional methods can be used to promote your products and services. This part of the affiliate contract could include guidelines on email marketing, social media promotion, PPC advertising, and content creation.

It’s also important to develop marketing policies for your program when contracting with new publishers. The promotional guidelines and restrictions should impose limitations on specific actions to safeguard your brand, including preventing affiliates from employing deceptive advertising, bidding on trademarks, or participating in unethical promotional activities. These help brands to ensure consistent brand identities and messaging, and define how the marketing activities need to be conducted.

Guidelines define content and image rights, promotional terms for influencers, branded search terms, and any other promotional restrictions on various social media platforms or channels. These ensure the protection of the brand’s reputation and who holds the rights to the content and for how long.

Custom legal terms

Lastly, a solid affiliate partnership agreement should include any specific custom legal terms that need to be followed to protect both parties on their affiliate journey.

When publishers sign up for an affiliate network or a partnerships software platform, they are agreeing to the platform T&Cs or Master Legal Agreement. This means there are already legal protections in place for the company and for the partnerships platform. However, every organization will have varied legal requirements, so it’s important to have the marketing and legal teams review some key items and make sure they are listed in the agreement.

This may include gift card commissioning determining whether the company will commission on the purchase of a card or the redemption of a gift card. It could also define coupon usage terms - whether the company would like to make coupon usage public or give their publishers unique coupon codes.

This is also where the agreement can clearly state the conditions under which either party can terminate the partnership agreement. Whether this is due to violations of the agreement, a breach of terms, or any other reasons. It should state how disputes will be resolved, such as mediation, arbitration, or a specified process that is determined by the company’s legal team to resolve any issues amicably.

The bottom line

In a nutshell, affiliate contracts are the backbone of a thriving affiliate marketing program, providing both legal safeguards and practical advantages. They go beyond just establishing expectations; these affiliate contracts detail the agreed payouts, safeguard intellectual property, and nurture trust between brands and affiliates.

Crafting a top-notch affiliate partnership agreement involves mapping out the payment structure, defining promotional guidelines, and putting in place dispute resolution mechanisms. It paves the way for a partnership that's not only mutually beneficial but also built on a solid foundation.

Always keep in mind that a robust affiliate agreement demands clarity, specificity, and alignment with the shared goals and values of both parties. Armed with the insights from this article, you now have the tools to create a comprehensive and effective affiliate agreement tailored to your unique needs. Happy partnering!