The Rise of 0% Commission for Existing Customers
Discussions between advertisers and publishers has long been about driving maximum value via the affiliate channel, especially from new customers. Over time, the affiliate channel has become more reliant on voucher code publishers, as customers become more savvy and change their purchase habits buy searching brand + voucher in a search engine.
As a result, commissions accrued by the publishers start to cannibalise on other marketing efforts from email to postal, leading to the global CPA increasing over the lifetime of the customer. To compensate, a number of advertisers have ceased paying commissions to publishers based on existing customers.
The rise of this trend has been monitored closely by voucher publishers; and has picked up a lot of attention over 2016 as more advertisers follow suit, causing concern for publishers for fears it will severely impact their bottom line, given on average more than 50% of their commissions are driven from existing customers of advertisers.
The solution of course is a minefield. In response, publishers are hiking the costs of tenancy fees to cover losses from declined commissions, and advertisers are seeing less and less incremental value from these publishers as more existing customers adopt the channel for their money-saving objectives.
The knee-jerk reaction from advertisers is naturally to cut back on spend and incentive via the affiliate channel – dropping the voucher codes and paying 0% commission for existing customers. As a result, amplifying reach to new customers for the same advertiser becomes more expensive, and the cost to acquire new customers increases dramatically.
From a strategy point of view; it’s sometimes not so savvy to cull activity in the channel. Versus other digital channels, affiliates is continuing to grow phenomenally, so now is key to working with the publishers rather than against them.
Solution 1: Existing customer spend in affiliate Vs In-House – global CPA
Take a look at efforts from your in-house tactics to get existing customers to re-purchase, either via email, SMS, postal, or other channels and compare the cost of sale against affiliate. Secondly, consider the time to purchase and ask; does the customer buy in shorter frequencies via the affiliate channel? You’ll notice that the affiliate channel is often cheaper than other channels – so consider what would happen if you solely invested in the affiliate channel to drive back existing customers. Consider your overall budget to canvas an existing customer
Solution 2: Reduce CPA, but not to 0%
Reducing, but not removing CPA for existing customers helps to maintain relationships with publishers and shows a commitment to working and growing with the publisher. Use this to negotiate exposure to acquire new customers
Solution 3: Focus on Acquisition
Maintaining CPA for existing customers but investing in acquisition campaigns will help reduce the split of existing vs new customers. Consider the CPA of the channel as your overall acquisition CPA; and work towards maximising investment into exposure and other advertising to attract new customers
Publishers are almost always more flexible to work with advertisers when they’re being rewarded for the traffic they send to the site, reduce their income and at the same time you’ll reduce opportunity to grow on a CPA-only basis.