“Those sales are great, but the margin was low.” “Great revenue month, but we sold new product and still have so much left in the warehouse.” “Really glad that promotion hit it out of the park, but did we see any increase in our profitability?” “Love to see that sales growth, but we aren’t seeing the new customer acquisition that we hoped.”
As an agency, we hear responses like these from time to time, and I’m willing to bet, if you are an in-house manager or e-commerce director, you’ve either heard these, variations of these, or said them yourself. No doubt these types of comments have been topics of discussion internally. If not, I’ll be honest, they should be. It’s rare that an affiliate program is operated with more than “increase sales” as it’s goal, but it’s more rare where this is actually the only goal of the program.
Many advertisers have more than one goal when they start out with their affiliate program:
- Overall revenue increase
- Move product, old and new
- New customer acquisition
- Competitive advantage
- Market growth
- Increased margin contribution
Why then are affiliate programs most often managed and run as if revenue were the only goal? The simple answer is because multiple goals, and goals outside of revenue, are hard. They aren’t simple and easy and take tech bandwidth, strategy bandwidth, tactical implementation bandwidth, and at times, emotional bandwidth.
The problem then lies in evaluating your program. Whether you are an agency or in-house manager, your job is to (insert goal here), but you are only reporting on revenue, rewarding on revenue and set up to support “any sale is a good sale” type relationships. And boy you are missing the boat. You may need to be aligned.
What do I mean by aligned? While I’m up for a twist and shake from my chiropractor, that isn’t what I’m referring to. In the game of affiliate marketing, you have several players:
- The advertiser
- The Network
- The Affiliates
- and some times, the agency
And they all have to have the same goal for maximum effectiveness.
Maybe it’s best demonstrated by an example of how it can go wrong…
It’s Monday morning and you just walked into your team’s meeting on how all channels performed last month. You present your results and they are amazing. 40% growth over last week and 50% growth over last year, in terms of revenue driven. The VP of Marketing then says while that is great, your percentage of new customers was down to only 10%, so while your revenue is great, we aren’t sure that is real revenue and “honestly, we are judging your channel on new customer acquisition”. Head hung low, you go bak to your desk to blindly try and raise your percentage of new customers.
But Jamie, how does alignment effect this? Great question, so glad you asked.
Right now, if you are like 95% of other programs out there, you reward the affiliates, the networks and your agency on a percentage of the sale. You offer as much as you can, and in general the affiliates are happy because the revenue they are driving for you is producing revenue for them. But revenue isn’t the only thing you are looking for. In the above example, you need new customers too. But if you aren’t incentivizing affiliates for new customers, you are not providing tools to attract new customers.
The affiliate’s goal is to drive revenue. The network’s goal is to provide a platform for you to drive revenue. Your goal is to drive revenue, but your company’s goal is to drive revenue AND new customer acquisition. The tools you have provided affiliates (offers, merchandise, banners, text links, datafeeds etc) are all targeted to produce revenue, any kind of revenue. The data you provide back to them, when you think of it, is only about revenue.
So, these relationships are out of alignment. In order for you to reach your goals, those goals have to be the goals of everyone in the chain. Especially you and your affiliates. And, the tools you provide have to be designed to produce the multiple goals most programs actually have.
Your financial arrangement with the affiliates has to be aligned with the goal. If you are looking for new customers, you should be paying more for them. They are obviously worth more to you. The first step to alignment is to ensure you are incentivizing your partners for the type of activity you are after.
Then you need to get your tools in alignment. This means consumers offers that attract the behavior you are looking for.
Start there. Take a look at your program, your commission structure, your consumer offers, your affiliate tools. Are they all aligned with your company’s goals?