Strategies to Lower Customer Acquisition Costs with Your Affiliate Channel
As industries age and mature, the e-commerce environment is definitely feeling the pinch.
Especially as large aggregators like Amazon, Walmart, Ebay and others increase their efficiencies.
It is vital for a vibrant and growing digital retailer to pay attention to lowering CAC.
Affiliate marketing is the best channel to accomplish this goal.
Because you can manage the cost of each partnership individually. Allowing you to closely manage the cost of acquisition by partner.
Unlike other channels, you have a direct 1-1 relationship from activity to results. It’s a direct response marketing channel. Meaning you only pay for results.
Affiliate marketing management makes it very simple to ensure you are hitting customer acquisition cost goals.
How do successful digital retailers acquire new customers while reducing CAC?
Here are 4 proven affiliate channel strategies to lower customer acquisition costs:
Unique Commission Structure that Aligns with Company Goals
Most affiliate programs simply provide commission on all sales.
This can be a great strategy if your goal is revenue production and you have very few other channels competing for revenue.
If your affiliate program operates within a robust marketing climate, then you have many different ways to commission.
One way we recommend is new vs. existing customers.
A new customer is most often valued at a higher rate. An existing customer is valued lower, usually the assumption is that the existing customer had other resources directed to them in order to have them come back.
Offering a solid commission for new customers and a lower commission rate for existing customers is a great way to incentivize your partners to advertise in a way that attracts more users.
Lowering your costs on existing customers that you most likely spend money in other channels to acquire.
Further explore the costs of new customers vs returning customers in this article by JEBCommerce affiliate management experts.
Limit Spending During Slow Times
Many affiliate programs dedicate more budget than commissions to grow the revenue through the channel.
Focusing these budget resources to the times when customers are most likely to buy, say Q4 for most retail, Q1 for Travel and fitness sites.
By distributing your marketing budget wisely you will ensure that the annual budget gets a higher ROI, your ads get a high ROAS and your cost of acquisition is as low as it can be.
It has been a pretty amazing decade in terms of technology within affiliate programs.
Many of the affiliate networks (the technology providers that make affiliate marketing possible) have released new features allowing retailers to:
- Pay only for new customers.
- Reduce commissions based on the affiliates’ actions to close the sale.
- Not pay commissions on sales where the affiliate was the last one in the customer’s path to purchase and they only went to the affiliate to get a coupon.
- Not pay on orders that used other channel’s coupon and promotions – ensuring higher quality results for the other channels and reducing costs on orders that were truly generated by the other channels’ efforts.
- Single use coupons and new customer only coupons.
There are so many options now that you should be working with a provider that can lead your CAC affiliate strategy.
It’s All About Relationships
The affiliate channel is driven by the relationships you have with affiliates and relationships start with trust.
When your affiliate partners know and trust you, and they know that you are working, and have worked, to build a strong relationship with them, they go above and beyond to help you be successful.
Sharing your goals, metrics and functional limitations with each other, goes a long way in establishing strategies with individual affiliates that are unique, not on their rate card and hit your goals.
I can’t tell you how many times affiliates brought truly unique ideas to our clients because we work very hard and diligently to build strong relationships.
It’s not hard to quantify either. JEBCommerce regularly beats our clients’ first 30 goals by 10-20X. And it is because we are intentional with our affiliate relationship building.
Your affiliate program can be a great source of spend efficiency and reduction of your cost of acquisition if you are intentional, creative and focus on some of the strategies outlined above.
Too many programs are run on a “set it and forget it” type model which breeds inefficiency and balloons the cost of acquisition.
Affiliate Channel CAC Audit
JEBCommerce has managed 300+ affiliate programs over 15 years. We would love to use that expertise to help you acquire new customers and lower customer acquisition costs.
Fill out our 30 second questionnaire and we will help you build a winning strategy.