I had coffee with the affiliate manager of a local retailer recently and we talked about some of the challenges facing internet retailers, whether they’re managing an established or mature affiliate program.
Early stage affiliate programs are often a new revenue stream contributing to ecommerce growth, a lead generation mechanism for your sales force, or a medium to increase new user signups and subscriptions — very exciting stuff that everybody in your company loves to hear about.
But what happens when your affiliate program has lost its “new car smell” and the proverbial honeymoon phase is over? What initiatives and strategies encourage continuous growth in an established affiliate program that will enable you to build upon the foundation you’ve created?
Like A Fine Wine, An Affiliate Program Gets Better With Age
As your affiliate program grows and matures, finding incremental revenue opportunities becomes more challenging.
Sometimes a pivot in your affiliate strategy is needed to take your affiliate program to the next level. Early on it’s easy to focus on recruitment and filling the funnel of affiliates joining into the program.
Paid placements and other “spend-money-to-make-money” strategies offer great short-term revenue spikes that will improve overall program performance, but also present risk in the event they dry up or become less effective.
When affiliate sales growth begins to slow, being able to identify ways to increase profitability and decrease your program expenditures is an important factor in creating a sustainable affiliate program that continues to add value to the business.
Three Ways To Improve The ROI Of An Established Affiliate Program
Here’s a scenario; maybe it sounds familiar:
Your affiliate program experienced dramatic growth in the first 18 months, contributing approximately 15% of your company’s ecommerce business.
Sales growth is starting to slow down or even plateau.
You’re working closely with affiliates and taking advantage of placements and other opportunities to gain exposure on their website, blog, social network, and newsletter.
You have the right publishers in the program and maintain a balanced portfolio of affiliates.
Your boss has tasked you with finding incremental growth opportunities and figuring out ways to improve the ROI of your affiliate program.
Here are a few ways to improve affiliate channel performance for your business, without alienating your current publishers in an established affiliate program.
A Commission Structure Refresh
When was the commission rate for your affiliate program initially set? A better question yet: is your commission structure aligned with the current growth objectives of your organization?
Commission rates tend to be a component an affiliate program that is “set and forget”. Before launching the affiliate program, you review your profit margin by category and/or product line, do a quick competitive analysis on commission payout levels of your competition, and then choose your affiliate program commission rate.
Unless you’ve gone out of business, there have likely been new goals and objectives set to grow particular areas of the business. This could be acquiring customers that fit into a particular category and profile or growing particular product categories that are most profitable. It is important to architect and refresh your commission payout structure so it supports current initiatives.
Most affiliate tracking platforms and networks have the capability of multiple commission payout levels based on products, product categories, or variable actions. Having different commission rates based on product categories is not a new concept, but as web analytics and business intelligence platforms improve, you can segment customers, begin creating customer profiles based on consumer behavior and base commission payouts accordingly.
This enables you to pay a higher commission rate for new vs. returning customers or for certain customer profiles if you know the lifetime value of the customer profile (i.e. how much they will spend on average with your company after that initial purchase).
If there is data that you can share publicly about customer profiles, your publishers will be better able to adjust and target their campaigns towards those consumers. The more insight you provide around monthly, quarterly, and annual goals increases the likelihood of your publishers being able to help you reach these objectives.
Cost-Effective Affiliate Platforms
There are many benefits of using a trusted affiliate network as the platform to launch and build your affiliate program. The most reputable affiliate networks serve as check/balance ensuring publishers are paid accurate commissions in a timely fashion for advertisers they work with.
Networks can also make it easier to work with affiliates you would not otherwise be able to reach. An example of this could be top loyalty and affinity publishers that have technical integration requirements so they can attribute sales and reward members for making a purchase through their site.
Depending on the network and the size of your affiliate program they can also be very expensive, but what are the alternatives? When it comes to affiliate tracking software, there are two options: build your own or license a third party solution.
Building your own affiliate tracking platform is risky and expensive. If your organization is not prepared to handle monthly affiliate payments, custom reporting questions/requests, and order inquiries you could jeopardize existing affiliate relationships. There are also ongoing development and maintenance costs, and creating a comprehensive solution that meets the needs of your publishers is a daunting task and could limit the types of affiliates you are able to work with.
Recently there have been new solution providers creating innovative affiliate tracking platforms that are winning awards and taking the performance industry by storm. Companies like HasOffers and PHG are creating cost-effective affiliate tracking solutions that offer advertisers and publishers robust reporting, advanced tracking capabilities and an open architecture platform that make it easy to integrate in to existing systems.
While a standalone affiliate tracking solution may not be the best option for new affiliate programs, they can add value and provide cost-savings for large established affiliate program.
Introducing New Affiliate Tools
One challenge facing both early stage and established affiliate programs is how to activate more of your publisher base —whether you have 100 affiliates in your program or 10,000.
If you look at a tenured affiliate program, like the Amazon Associates program, they have an affiliate portal where publishers can find affiliate tools that help Amazon bridge the gap between recruitment and activation for their affiliates.
In addition to activation, creating tools for your publishers can improve the performance of your long-tail affiliates that may be only generating one or two sales each month. The most successful affiliate programs recognize the value and are able to quantify the value as a means of growing their established affiliate program.
Identifying and developing relevant affiliate tools takes time and will likely require you to build use-cases and a business case, but the return on investment can be worthwhile.
We recently wrapped up a client success story and discovered that over 10% of their monthly affiliate revenue was generated through and attributed to their affiliate tools. In an established program, increasing affiliate activation and generating 2% – 3% incremental revenue is a good benchmark.
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