These days, we know more about our customers and their relative value to the business than ever before. That has spawned a fascinating explosion in the number and range of KPIs for brand growth leaders. But the great thing about revenue partnerships is that they can be shaped to align partner goals and results precisely to your KPIs. The most powerful way to create this sort of calibration is to structure partner offers and commissions strategically and with great care. Here is a set of common KPIs, with a set of focusing compensation strategies that will help deliver on those goals.
Every approach outlined here can be delivered today, with the right data collection and flexible toolset.
Maximize customer acquisition
Lots of brands task their growth leaders with growing “new to file.” Here are some ways to do it.
- Identify partners that can individually target users based on whether they have ever bought from you. Then develop a generous commission model that pays them well for each new user they convert.
- Segment your partners by the types of people they attract and craft different commissions for each class based on the likelihood that they will reach and convert new users. Think about influencers and other types of content partners to grow the top of your customer funnel.
- Move beyond a singular focus on bottom funnel “converter partners” to grow the number of buyers who are aware of your products.
- Create a two-tiered program that pays out a base fee for any purchase, and a bonus for every new user they drive.
- Offer a new-customers-only commissioning system in which you only pay for net new purchasers. The key here is to ensure that the bounty is aggressive enough to ensure that partners make enough to justify their investment of time and resources in your program. If your offer is too stingy, partners will pass on it, or quickly drop it once they realize they aren’t making much from the program.
- Expand your program to new regions. The internet enables every connected person in the world to reach your web presence or app. If you have the capability to ship or otherwise deliver your product or service internationally, find partners that can bring your messages and offers beyond your current footprint.
Increase gross margin
Many companies offer goods and services with widely variant profitability. Rather than simply making a one-size-fits-all program that rewards equally regardless of the profit of the goods purchased, consider these more sophisticated approaches.
- Take a category-focused approach to your commissioning. Set different commission rates for different categories of goods based on their relative profitability.
- Related to the one just above, create different commissions or cash payments for different items you sell. For example, offer 4% on that $299 32-inch flat screen, and 12% on the multi-thousand dollar home theater systems. Or, to use a travel example, commission based on length of stay.
- Be conscious of offer “layering” around the holidays. Some companies find that different siloed functions deliver stackable offers at the same time of year, resulting in high sales but little or no profit.
Many companies want to grow revenue by tasking their growth leaders with increasing average order value. Partnerships can be a very powerful way to do this.
- Offer escalating commissions based on order size. With this strategy, you pay more to partners when they bring you big-spending converters.
- Create programs that commission (or commission more) based on whether an order is above a specific threshold. This can be a great way to grow sales if you set the threshold just above your current AOV. An extra incentive can help people justify an incremental item in their orders.
- Commission based on class of service. This is another great travel approach, as you can offer higher rates for first-class or business-class seats, ensuring that the mix of conversions from the channel is far richer.
- For travel, use hyperlocal marketing to sell add-ons to basic purchases. For example, a hotel can offer special discounts to arriving desks for high-margin items like meals, shows or spa services.
- For hotels, commission based on length of stay. You can incent your partners to sell longer hotel stays, with which both profit and margin are significantly higher than for short stays.
Sometimes consumers can be persuaded to change their buying habits, choosing a new source for items they might ordinarily buy from another firm.
- Communicate product availability via product feeds. For partners with robust search functionality, it can be extremely valuable to ensure consumers know what you carry. For example, they may not know you carry a specific brand or item, or that you offer competitive pricing for same. By integrating your product feed with partners you can capture more sales that were headed somewhere else.
- For travel brands, identify partners that users seek out for travel and activity ideas. They may already have made a base purchase like a hotel room, but there are lots of additional opportunity to capture purchases for additional services like meals and entertainment.
- Hyperlocal purchase capture. This can be extremely effective in the travel category. Make hyperlocal offers to arriving guests at a competitors’ properties. In a city like Las Vegas, these sorts of offers can get a guest out of one property and into another, and may well affect future hotel bookings as well.
Moving distressed inventory
Partnerships can be very effective at moving goods that are near to losing significant value. A great example here is in airline bookings. A trip from New York to LA in three months has a lot more shelf life than one for tomorrow. Develop programs that enable you to capture that last-chance purchases and fill that seat before the plane takes off.
- Deeply integrate with leading partners and offer special incentives to move distressed inventory before it loses its value. For example, offer a higher commission for flights in the next three days than for flights that are weeks away. By enabling partners to understand which goods can grow their revenue most, you can move more of those expiring goods before they lose their value.
- Vary commission based on the presence and size of a discount. This is a strategy that can work for many classes of business. You can incent partners to push non-discounted items by offering extra commission – or, by contrast, to push clearance items to move them out at the end of a season.
Drive incremental purchases
Some companies want to increase the number of purchase occasions made by their users, or the items purchased on a particular occasion. For example, in these use cases, let’s assume that the average customer buys four times a year, roughly three months apart.
- Time hot offers to drive incremental purchases. In this use case, you offer your deals at times when the customer may be less likely to naturally buy, like 45 days after their last purchase. This often requires some data sharing with partners.
- Upsell customers as they begin the buying process. Some partners can now dynamically target shoppers as they shop, or offer bundles of items that include popular base items and add-ons.
- Participate in the key shopping holidays. In some parts of the world, selected shopping days like 9/9 and 11/11 have become massive promotional events. Try and capitalise on that increased shopper interest during those peak times.
- Drive add-on purchases after a sale. Related to the strategy above, here you work with partners to dynamically target recent buyers with related or optional items that grow your total sales.
While that may seem a lot of potential strategies, the reality is that there may well be many more for your unique brand circumstances. Many of these strategies are built on a foundation of data sharing with partners. Judicious data sharing with the right partners can be a great way to get even more benefit from this channel. Further, it’s important that, along with careful structuring of program, you share your objectives with partners to ensure they are properly aligned with your goals. Partners want profitable long-term relationships with brands, and true objectives alignment can be a great platform on which to build.