The cost of acquiring a customer is one of the most foundational metrics a department leader or channel manager should be using to ensure they are getting the most bang for their buck, the most customers for their marketing and sales dollars.
Affiliate Marketing and affiliate managers can directly impact the overall corporate cost of acquisition (CAC) through several strategies that are unique to the affiliate channel.
But first, what is CAC and how do you calculate it? To figure this out, and calculate your current affiliate program’s CAC.
Now that you have that done, let’s talk about the 6 ways affiliate marketing can reduce customer acquisition costs:
Paying Less for Existing Customers
New customers vs. existing customers is an advanced strategy that is often overlooked. What you are essentially doing here is weighing new customers more greatly, reducing your cost of customers that are already familiar with your brand and incentivizing your affiliate partners to bring more new customers, which are typically more valuable.
Lower Your Base Commission Rate
Many affiliate programs determine their base commission rate by determining the highest commission rate they can afford. This is often done to entice the greatest number of affiliates to join your program. And it is most often done with affiliate programs where there is no active management.
We often advise our clients to reduce the baseline commission rate so that we can use the difference between the highest commission rate that is profitable and that new low baseline to better target our budget towards affiliates that produce the highest ROAS, ROI and the lowest cost of acquisition. Essentially this allows you to save budget for the affiliates that won’t do much actively to promote you to the right customers so you can laser focus those dollars on the ones who will.
Avoid Cart Sniping
Ok, this may take a moment, but if you have any knowledge of the underbelly of affiliate marketing, then you know what cart sniping is.
This is when your customer finds you through other channels, maybe they purchase from you regularly, and they go to your site, find what they want, put something in their cart and BAM, then they go to a coupon affiliate, find a coupon, click that link, and then check out.
What value has the affiliate provided? Very little in this scenario. And it is probably happening in your affiliate program. So you are paying on orders that you also have to pay in other channels, increasing your overall CAC.
Most affiliate networks have amazing technology to combat this. Learn more about this strategy.
Negotiate Network Fees
Psst, don’t tell the networks I’m saying this, but you might be able to get a better deal with a network with better technology somewhere else. Working with an agency can also get you better deals with the networks as we negotiate with more than one client in our pocket. There are benefits to scale here. Evaluating your network to make sure you are spending the right amount can yield great results.
Evaluate Affiliate Performance by CAC
Track and evaluate each individual partner’s performance based on CAC. You may find that you have to redirect the budget to low CAC producers who can generate volume.
Affiliate marketing is about partnerships. When you have strong partnerships you find many different ways to hit your goals, including CAC goals. If you aren’t spending time with your affiliate partners, sharing information, finding mutually successful strategies, then you are probably running at a much higher CAC than you could be.
There are many ways to reduce your CAC, these are just a few.