A Different Approach to Affiliate Program Management
Since the origin of the affiliate marketing industry over a decade ago, the channel has helped companies grow by tapping the power of the long tail to find new customers and generate incremental revenue. Or has it? Many affiliate marketers seemingly drive great results for their programs, but rarely are these results reflected in the bottom line.
A traditional, high-volume approach to affiliate marketing doesn’t work when it is viewed within the larger performance marketing portfolio (SEO, SEM, display, etc). Customer acquisition costs are often much higher then companies realize, and revenue is often double counted across different marketing channels.
With this in mind, it’s clear we need a new approach to affiliate marketing – one that goes against conventional wisdom and traditional tactics. Here are three that have proven successful:
- Quality vs. Quantity of Affiliates: Since affiliates have figured out how they can make commissions without doing a lot of heavy lifting, the channel has been flooded with low-quality affiliates that don’t actually provide much value. Focus on recruiting affiliates that deliver mostly new customers instead of targeting existing ones, and don’t be afraid to either pay less to (or outright deny) an affiliate that does not meet the criteria. Fewer high-quality affiliates create far more value than a lot of low-value affiliates.
- Focus on the Top and Bottom Lines: Most outsourced program managers (OPMs) focus on one number: program revenue. As a result, they are typically willing to set commissions as high as they can in order to drive revenue, and are also willing to pay low-value affiliates much more than they are worth. This means that the revenue coming is often both unnecessarily expensive and non-incremental, as affiliates simply poach customers who would otherwise come through other, less costly channels. In a large program these unnecessary costs can be hundreds of thousands or even millions of dollars. Driving revenue is important, but it is not the only metric. Pay close attention to both affiliate channel profitability and its effect on the entire marketing portfolio to understand the true value of your affiliate program.
- New Customer Acquisition: The purpose of the affiliate channel is new customer acquisition. The problem with many affiliates, however, is that they target existing customers who are already customers of a company, often targeting them when they are already in the shopping cart. This can prove extremely costly. Affiliates can take customers from other channels, such as organic search and pay-per-click, and claim them as their own. When multiple channels are taking credit for the same customer, the cost of that customer goes up unless there is a sophisticated method of attribution.
Additionally, if a returning customer is using affiliate offers geared toward new customers, the company ends up both giving a discount and paying an unnecessary affiliate commission, driving up costs. The affiliate mix of a program, and the incentives given, need to promote the desired behavior—driving new customers. This may mean that program revenue appears lower than it was, but in the end it is a much healthier program and additive to your overall marketing mix.
The affiliate marketing industry is at a critical juncture right now. If it continues to build on its reputation as a low-quality channel that is difficult to manage, it runs the risk of ultimately collapsing on itself. The basic set of principles outlined above combined with innovative strategies and technologies will help you drive real value with your affiliate marketing program.