If you’ve ever had the perfect hamburger, you know there’s a desired meat-to-bun ratio. Likewise, your affiliate program should have a desired ratio of new and return customers. What percentage of customers coming through your affiliate program should be incremental? Is there value in returning customers through the affiliate channel? In the hamburger example, returning customers are like the bun, necessary, but not the star of the show.
So what is the ideal mix of new and return customers? It depends on what your goals are for the affiliate channel. Many programs are focused on driving new, incremental revenue through the affiliate channel, so let’s focus on that. How many, or what percentage, of new customers acquired by affiliate marketing channels is directly related to the levels of optimization that are happening with your affiliates. We have seen, across many programs, that coupon affiliates send 50% new customers, deal affiliates can be up to 75% new customers, while other segments (sub-affiliate networks, niche content / blogs) can be lower than 50%.
Imagine you are a potential customer of Brand A. You are researching products that Brand A sells. Under the scenario that we see when taking over management of affiliate programs with super low new-to-file (NTF) percentages, there is no optimization happening due to lack of relationships, no budget, etc. The effort given by the affiliate is proportional to the amount they get paid. Shocking, I know. So the affiliate is not placing Brand A in prime real estate locations onsite and the potential customer has to search directly for Brand A in order to find them on their favorite coupon or deal site. This will generate very low NTF percentages, understandably.
In scenario 2, we have a well-run affiliate program, managed by industry veterans that have the relationships, have secured budget, etc. In this case, the potential customer is researching the products on their favorite affiliate site, and they come across Brand A on the home page, category page, in an email, on social media, etc. The chances are MUCH higher that Brand A is going to acquire a new customer, assuming their offer is compelling enough to get the click / conversion.
Assuming you aren’t in the position to pay that upfront (especially in a pay-for-performance channel), here are a few ways that we have been able to secure the same placements:
- Relationship with the affiliate
- Testing discount
- Short-term commission increase
- Exclusive / Semi-exclusive offer
- Vanity code for big sale
- TM+ bidding rights
- Hybrid Flat Fee / Commission increase
Let’s review each of these.
We work with people we like.
Relationships matter! When you work with affiliates on a regular basis and form a solid relationship, your emails, phone calls, and blimp messages are more likely to be answered. We work with the people that we like. Often, when working regularly with affiliates, they are more willing to add you to a placement that hasn’t been sold that month. Or, may be willing to try a few placements out at a reduced rate, in order to test. They want to have long-term relationships with their brand partners, and are willing to prove their worth.
Short-term commission rates can be used in exchange for prime real estate when there is a revenue track record. Basically, if you can back into a similar payout as they are asking in flat fee payments, you can offer increased commission rates for a short period of time, as a way to minimize the risk of paying for something upfront. Now, if you are already doing really well with an affiliate, this could end up being more expensive than the media kit price. Always do your diligence when considering which payment method to choose with your affiliate partners.
Exclusive (or semi-exclusive) offers can also be useful to affiliates. Having a branded code displayed onsite is a great way to increase conversion rates, and show that relationship to potential customers. Often, if the offer is compelling enough, affiliates are willing to give it more exposure without having to pay the full price. Or, many times, commission increases are combined with exclusive coupons to secure extra exposure.
Vanity codes for a big offer can also be used in some cases. Though the offer is the same as what everyone else sees, the code is branded for the affiliate. This can increase conversion rates by 15-20% and affiliates see value in this.
When done properly, there is little to no risk in increasing the brand search costs.
TM+ bidding rights are often given by brands that see value in adding a 3rd party voice to search results pages, or want to remove competitors or non-relevant results. When done properly, there is little to no risk in increasing the brand search costs. In fact, we have seen this type of relationship actually decrease the brand’s paid search costs! The idea here, is that affiliates are allowed to spend their own money on [BRAND] plus “coupon” or similar terms. They only get paid based on conversions, so they are VERY likely to optimize quickly to see a positive return on their investment. As affiliates are very good at this, and often have higher quality scores than the brand itself, and are willing to provide thousands of dollars in free placements each month for the rights to participate. Read more on this here: (http://jebcommerce.com/why-you-need-affiliates-bidding-on-tm/)
Hybrid flat fee / commission increase placements are just that. You can reduce the amount of flat fee spend upfront by adding a few points on the commission rate for a short period of time to make up the difference.
By using a combination of these methods, you can start securing the prime real estate necessary to get in front of the millions of visitors that these popular sites see every day. Without utilizing tactics like these, you are doomed to only seeing repeat, channel cannibalizing customers.
We have reviewed the methods for acquiring new customers, but what about returning customers? Is there value here?
The answer is… it depends. Likely, you aren’t interested in return customers that are being touched by other channels first. Identifying affiliates in this path and working with them to reduce this activity is important. It will be based on internal data collected and require close working relationship with the affiliate management team to identify and optimize.
However, there IS value in re-acquiring customers through the affiliate channel that aren’t being touched by other channels. The methods above are going to assist in re-acquiring customers as well by offering more reasons to convert. Whether it’s by offering a free shipping coupon, cash back, or other reward, consumers are all looking for discounts. By utilizing technology available at most of the affiliate networks, you can incentivize, or completely stop paying, for behaviors that contribute to generating a healthy affiliate program.
Reach out to our team to learn more about driving high NTF and quality return customers!