Imagine you’re a manager of a baseball team tasked with retooling the compensation structure to better incentivise your players to win more throughout the season.
You think and think, and suddenly the lightbulb goes off: you’ll reduce all players’ base salaries in exchange for very generous bonuses paid to each one based on the number of runs they score. The logic seems sound because after all, the team with the most runs at the end of the game is the team that wins. If you incentivise more runs, you’ll win more games.
Intuitively, though, we all know this won’t end well. You don’t build a baseball team based solely on runs scored. Baseball is a team sport, where the roles and specialities of each player come together to ultimately outmanoeuvre the opponent on both offense and defense. Wouldn’t it be better, for example, to incentivise the pitcher based on strikes thrown and a shortstop based on errors avoided?
Performance marketing also takes a team – yet somehow, the conventional wisdom of last-click payouts is still driven by the same flawed logic described above, in which the brand essentially only pays the partners who cross home plate.
True, the success of a performance marketing programme can ultimately be measured based on the incremental revenue it drives for a business. But just as everyone has a different and important role to play on a baseball team, so do different media partners working towards their brand’s success.
Getting it right
Some partners will be fantastic introducers, championing brand awareness and helping to shape a positive image. Others will be terrific influencers, driving prospective customers through the purchase funnel as they become more familiar with the idea of using your product. And yet other partners will be pinch-closers, consistently demonstrating their ability to influence users at the right time to drive a conversion. Incentivising each one of them the right way, rather than the same way, is the key to optimising your performance marketing programme.
We already see this in place for sponsorships and endorsements, a type of influencer marketing. Brands have become much more creative in putting these deals together, with both sides generally avoiding an arrangement where the influencer is paid based on incremental, attributable revenue.
But is a leading blogger who has a loyal following and writes fondly about your brand’s products really that much different? Perhaps they show up consistently in users’ conversion paths, but never in that coveted last spot. Continuing to incentivise them on the last click will likely result in the loss of a valuable partner, or at the very least diminished activity and interest from that partner.
In order to properly align incentives, you have to first identify the role each partner is playing. Get your hands dirty with the data to discover how many distinct groups you have and which partners belong to each one. The easiest place to start is with introducers, influencers, and closers. As you get more sophisticated, you can add more qualifications based on the channel they belong to, their promotional methods or their relationship to other touch points in the conversion path.
The perfect solution
The next step is to apply an attribution model to understand the true incremental value of each partner, regardless of the role they play. You may have partners who are always closers, such as coupon sites, but which, based on your model, aren’t really responsible for driving a whole lot of value.
Finally, once you know what roles each partner plays and how much incremental value they truly bring, it’s time to get creative. How can you incentivise them to magnify their performance? Should you pay them a fixed fee? A percentage of overall sales for a new product? Pay them on first click, last click, last to cart? A flat rate per lead, per click, per purchase? A dynamic rate based on their attributed value in that particular conversion path?
The right answers, of course, will depend on your business, your partners, and your goals.
Building a winning affiliate or performance marketing team requires a nuanced dance in which brands recognise the role of different partners in the buyer’s journey and properly align incentives with strengths of each partner. While it might not earn you a spot in the World Series, it will boost your KPIs in a meaningful way.