Thursday, May 07, 2009


The Alternative to Increasing Affiliate Commissions

Affiliates, from CJ to Linkshare and beyond all seemingly have one desire in common, increased payouts. And like coddling spoiled offspring, all too often advertisers are more than willing to give it to them.

How do you break this cycle as an advertiser and how do you keep core affiliates happy without increasing their commission rates?

Why is it important for an advertiser to say no to increased pay-outs? Simply put efficiency, because in the end, customer experience will make or break you as an advertiser. Affiliates are acquisition channels, pure and simple. They serve as a vessel by which a new customer is introduced to your brand or they reinforce what said consumer has already experienced.

Joe Consumer won't notice that you gave an affiliate a 2% commission increase. But he will certainly notice if he sees an attractive, timely offer, in a contextual setting that directs him to an optimized landing page.

Increased pay-outs are good for affiliates. Improving your program efficiency by optimizing offers, creative, and landing pages is good for affiliates, advertisers and the end consumer.

For a good volume affiliate, the type you would give a commission increase to in the first place, a nice bump in CTR and conversion rates is going to have a greater impact to their bottom line than a small commission increase. Let’s look at a hypothetical example and do some math.

The Scenario: Your average order size is $100 and your payout is 20%. Affiliate A generates 10,000 impressions, 1000 clicks (10% CTR), and 100 orders (10% conv. rate) per month for you, earning $2000 per month in commissions.

If you increased the payout for Affiliate A to 22%, they would then be earning $2200 per month. Your CPA for that particular affiliate would rise from $20 to $22.

If you optimized Affiliate A's creative and offers, and provided them a targeted landing page, you increase their CTR to 12% (1200 clicks) and conversion rate to 12% (144 orders). Their monthly commissions at the standard commission rate of 20% would then be $2880. Your CPA remains $20.

Sure, it takes quite a bit more work to go the later route and optimize your program efficiency, but in the end all parties end up winning. Your affiliates are happy because they are better able to monetize their site traffic and marketing efforts. Advertisers are happy because they are able to maintain margins and keep CPA in check. And most critically, your customers are happy with the whole experience and have a stronger perception of your brand.


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