Advertisers value the contributions that partners and affiliates provide in the consumer journey and many wish to compensate for those contributions even when they aren’t the winning click. This is sometimes referred to as commission splitting. However, commission splitting can add unnecessary complexities that can negatively impact the channel and partners. In this article, I want to explore alternatives to commission splitting that are easier to understand and implement.
Most advertisers determine the winning click as the last paid click in the consumer journey. When affiliates are involved but are not the winning click, they usually do not earn a commission which could impact their participation long term. Advertisers that reward media partners involved in the consumer journey, even if they aren’t the winning click, can strengthen partnerships and incentivise them to drive more value to brands.
In talking to leading brands on how they would like to compensate media partners for their contributions beyond last click, we identified three preferred solutions. Some advertisers use a combination of solutions, so don’t think you have to pick just one for your entire performance programme. Instead, you can choose the appropriate option(s) for the each partnership.
Advertisers determine which partners can earn a participation bonus and at what percentage of sale amount or CPA. For example, an advertiser could decide to pay certain content/review partners 8% when they are the winning click or 4% if they are a participant in the conversion path within a specified look back window (e.g. 14 days).
This allows an advertiser to reward partners that are typically higher up in the conversion funnel and seldom earn a last-click commission. Conversely, advertisers can determine which partners may only earn a commission when they are the winning click and cannot earn participation bonuses.
It’s important that your tracking captures each interaction across the customer journey (beyond just affiliates and other media partners). By capturing all cross-channel interactions, advertisers can consider all media that participated in the conversion journey. So if Facebook was the last click, for example, but a valuable media partner helped to introduce or influence the conversion, that partner can be compensated accordingly for their contribution.
Instead of paying partners on a percentage of sale or CPA, advertisers sometimes choose to pay certain partners on a straight cost per click (CPC).
This payout method is typically used to compensate partners who influence a conversion, but are rarely or never the winning click. In this way, advertisers are paying their partners for their traffic in the same way they would pay other media, such as paid search, social or retargeting. This will help keep partners higher up in the funnel participating in your programme and ensure that the consumer journey isn’t disrupted.
Advertisers can choose to pay partners a fixed commission when they are the winning click, while guaranteeing their traffic is worth at least something when they are not the winning click.
For example, a partner could earn 8% per sale when they are the winning click with a guaranteed effective CPC of $0.25. This means that at the end of the month, if the partner earns $5,000 in commissions on last click, but the effective CPC was less than $0.20, they would be paid a small bonus of $0.05 CPC to true up their earnings. If the effective CPC was equal to or greater than $0.25 per click, they would just earn their 8% commission.
Many traditional affiliate networks need a winning partner or affiliate in order to pay a commission, so some of the options I mentioned above may not be an option available via your existing provider. If a brand wants to credit non-winning or participating partners, they’ll need to talk with their affiliate provider to see what their options are.
It’s important to mention that these compensation models can all be tracked and measured on a pay-for-performance basis (effective percentage of sale or CPA targets) to ensure you are measuring the correct return on ad spend (ROAS) from each partner, regardless of how they are compensated. For example, even you pay a partner on a CPC basis, you can still calculate the eCPA. Simply sum all costs associated with conversions and divide by revenue.
It’s also important that advertisers have access to complete conversion path data, which gives them insights into how their performance-based partnerships interact with each other as well as with other marketing channels. This helps affiliate managers easily identify the value of their partnerships so they can optimise the compensation strategy to maximise value.