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Should Affiliate Advertisers Pay for Existing Customers? 

Should Affiliate Advertisers Pay for Existing Customers? 

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Advertisers are increasingly lowering their commission offering, sometimes to 0% on existing customers. The tactic does seem to be picking up pace within the industry especially in the retail vertical, where repeat purchases occur within a shorter timeframe than other verticals such as Telco or travel.

A few days back in Amsterdam, I attended the annual PMI Europe conference. One of the first sessions of the conference started with – "Should Brands Offer 0% commission for Existing Customers?”.

Chris Johnson from VoucherCloud led the discussion with a room full of traditional networks, agencies and publishers. It was an evenly contributed debate with strong concern (not surprisingly) from publishers - nervous that it could become an industry-wide habit and frustration with the lack of underlying data and reasoning as to why brands are doing this (outside of budget cutting). 

Advertisers are increasingly lowering their commission offering, sometimes to 0% on existing customers. The tactic does seem to be picking up pace within the industry especially in the retail vertical, where repeat purchases occur within a shorter timeframe than other verticals such as Telco or travel.  

So, why would a brand want to do this? Judging by publishers’ views from the PMI talk, the tactic tarnishes relationships with publishers and can make the brand less competitive in the space. One example and plausible challenge I heard from an advertiser was that the customer would have converted anyway (i.e. the perceived value is certain types of publishers are adding little influence to the conversion path - especially partners who demonstrate repetitive bottom of the funnel positioning). 

The major flaw in this type of commissioning is of course Google. I’m sure brands do pay them, repeatedly in fact, for existing customer sales. Indeed the thought trail of “they probably would have converted anyway," could be applied to retargeting or brand PPC for example. So, the real question is, are affiliates just easier to push around?  

For advertisers to make the right decision with their commission strategy, they must understand the real value a partner contributes in the conversion funnel. To truly understand that value, the brand and the partner need access to coherent, accurate data and the ability to conduct appropriate analysis.

If you start looking at value of partners, traditional and non traditional ones, in this light, I would recommend you ask yourself the following questions:

Are you sharing existing versus new customer splits with your partners?

You need to share this information with partners and allow them to understand how the ROI backs out and what impact changing the commission would have. Publishers cannot segment traffic that comes into their site - but you can work together and understand how you can target their customer base more efficiently. Once you’ve done this, you’re better positioned to remunerate fairly for the customers they drive.

Are your customers repeatedly going through the same affiliate or marketing partner before converting?

Often short click-to-conversion times and repeatedly being at the bottom of the funnel can drive a perception of adding little influence to the conversion process. But is it? Let’s consider the following: 

  • Are AOV’s lower or higher when this partner is involved in the conversion process?
  • Is this customer being targeted by the partner's newsletter - are they playing an important role in triggering brand affinity?
  • Do customers from this partner traditionally turn into repeat purchase customers versus other publishers and channels?
  • How many other partners were involved in the path to conversion - was the consumer actively looking around and being influenced by your partner's base? 

Can I change a perceived value problem into an opportunity?

How can you work with publishers to drive a higher basket value from your existing customers – stretch goals – offering a higher threshold than you would normally before a discount is triggered? Can you work with smarter optimisation tiers rather than the traditional blanketed volume-based tiers. 

It seems to me there are some very data-driven decisions being made by brands that see the impact of driving existing customers far wider than just the affiliate channel. As the new customer pond becomes smaller and smaller, there needs to be a more balanced view on the role publishers play in driving existing customers. Working together and sharing information is the best way forward for both parties. 
 

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Sean Sewell

Sean Sewell

Sean is Cofounder and VP Revenue for Performance Horizon, where he is responsible for sales across Europe and the Mideast. Formerly Commercial Director for AOL, Sean spent two years heading up the buy.at and AOL lead generation products, budgets, and growth strategy.

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