What levers can affiliate managers pull in order to increase sales? In this two-part article, Owen Hewitson, Client Strategist, Affiliate Window & buy.at, whether more commission to affiliate partners actually generates more sales within performance marketing.
Historically, an affiliate programme’s commission settings have been the principal method by which affiliate managers have attempted to recognise and reward different types of affiliate activity.
Most programmes advertise a standard commission rate and most affiliates work on that rate. But nevertheless almost all programmes provide private rates for certain affiliates – or certain types of affiliates – based on either the levels of volume they drive or the amount of exposure they can offer.
Some such increased commissions are more or less permanent and are necessary solely to make the programme competitive for key affiliates. This is perhaps the first and most widespread example of where an increase in commission does not in and of itself produce any additional sales. The necessity to arrange a bespoke commission structure for certain affiliates is therefore almost mandatory for many advertisers. It buys them placement on a large affiliate’s site but the link to incremental sales is less easy to assess.
As publishers become larger and more influential amongst consumers shopping behaviour patterns start to shift. Many affiliate sites are brands themselves that are larger in some cases than the advertisers they promote. It is habitual for many UK shoppers to go direct to some large publisher sites before going to the advertisers they promote. Recognition of this fact means that flexibility with commission offerings is crucial in establishing and maintaining competitive commercial relations with these players. The virtual necessity to offer bespoke rates (either ongoing or at certain times) therefore means that advertisers will need to build in margin for these when they are deciding what their standard or baseline commissions should be prior to the launch of their programme.
Conversely, where an advertiser provides a temporary increase in commission for a certain affiliate they will undoubtedly expect something in return, usually in the form of a certain amount of additional exposure above-and-beyond that normally on offer, agreed beforehand, to a certain audience the affiliate can target.
Advertisers sometimes approach such arrangements in the belief that a commission increase should function either as an incentive or a reward; that is, whether a commission increase be provided before the affiliate’s promotion (to function as an incentive to drive additional sales) or after the promotion (to function as a reward for driving additional sales). Whilst this distinction might be a false one (when you pay-per-sale is the reward not its own incentive?) opting for an upfront or post-hoc increase could be said to be more effective or less effective depending on the advertiser’s campaign objectives.
Assuming they are confident in their ability to drive additional volume, the affiliate has of course a vested interest in ensuring that the commission increase is in place before they run additional activity so that each sales that is produced earns a higher commission. The advertiser on the other hand may wish to mitigate the risks of paying more per sale than they would otherwise have to. Setting a higher commission rate for an affiliate in anticipation of future sales from a forthcoming promotion carries the inherent danger that an advertiser might simply raise the cost of sales they would have got anyway without achieving enough of an uplift in those sales to justify the increased commission.
Affiliate promotions targeted to mobilise the long tail of a programme’s affiliates might find more success using a post-hoc incentive, for example, ‘Every affiliate that produces x sales this month receives a higher commission next month’. The rationale here is that affiliates will be tempted to run a campaign for a programme they have previously given little attention to and, if it is successful, they will be encouraged to continue promoting the programme thanks to the increased commission offered in the following month, perhaps recouping an initial investment made in the first.
Larger affiliates however tend to work with almost all advertisers and so a commission increase might be aimed at increasing sales rather than starting them. For larger affiliates promotions tend to be agreed with an individual affiliate beforehand (perhaps a feature in a newsletter or homepage coverage) and the advertiser might be more confident of a substantial sales uplift, thus making it easier to put the commission increase in place ahead of any additional promotion going ahead.
What is important in either case however is that the advertiser be able to make educated decisions to give themselves confidence that an affiliate’s campaign to boost their sales will be successful. In the second part we will look at ways in which advertisers can achieve this, and question further whether more commission is likely to equal more sales.
Read part two of this article here
By Owen Hewitson
Client Strategis
Affiliate Window & buy.at
www.affiliatewindow.com/
