We will review how affiliate networks can be used to improve the results from affiliate marketing and the main controls on affiliate marketing: commission, cookie periods and creative. It is important that these parameters are clearly defined in the affiliate agreement to reduce the likelihood of abuse.
To manage the process of finding affiliates, updating product information, tracking clicks and making payments many companies use affiliate network or affiliate manager such as the US / European networks Commission Junction (cj.com), Link Share (linkshare.com) or Trade Doubler (tradedoubler.com, mainly European). Since the affiliate network takes a cut on each sale, many merchants also try to setup separate relationships with preferred affiliates, often know as ‘super affiliates’.
Since many of the important affiliates are members of more than one affiliate network programme, it is usually found that it is not worthwhile for a merchant to join more than two affiliate networks. They also need to be careful that several affiliates are not credited for multiple sales since this quickly becomes unprofitable for the merchant.
Affiliate marketing is often thought to apply solely to e-retailers, where the affiliate is paid if there is a purchase on the merchant site. In fact, payment can occur for any action which is recorded on the destination site, for example though a ‘thank you’ post-transaction page after filling a form. This could be a quote for instance, trial of a piece of software or registration for download a paper. However, the majority of affiliate activity is within consumer sectors such as travel, finance and retailer rather than B2B.
The value of affiliate networks in managing the relationship between merchants and publishers is such that is rare for merchants to bypass them and so avoid the network override, although Amazon is one example of merchant with their own programme.
In affiliate marketing, it is vital that commission is set at such level that it incentivises affiliates to preferentially promote a merchant’s products, while at the same time being profitable.
The affiliates or publishers are naturally obsessive about their earnings per click (EPC). This is average earnings per click and is usually across 100 clicks.
EPC is a crucial measure in affiliate marketing since an affiliate will compare merchants on this basis and then usually decide to promote those with the highest EPC, which will be based on the commission level and the conversion rates to sale for different merchants.
A merchant will set commission levels according to a product’s awareness level within a merchant portfolio of products or how much they feel they need to promote them. It will also be worth increasing commission when there is a favourable promotion on a product since affiliates will then promote it, knowing that their EPC is more likely to increase. Less well-known products or newly launched products will often have more favourable commissions. For example Tesco.com once used affiliates for different products with different commissions as follows:
- E-diets commission from 12 GBP on 1-9 sales to 20 GBP on 61+ sales
- Wine at 2% on lowest tier to 3% on the Gold tier of sales of >250 GBP
- Grocery and utilities – flat rate of 5 GBP for first time purchase only
Affiliates’ EPC will also depend on the cookie expiry period agreed on the time between a visitor clicks the affiliate link and the sale is accredited to the affiliate. Common times are 7, 30 or 90 days. A longer cookie period will result in higher EPC. Prussakov (2011a) recommends that 60 to 90 days is often best to incentivise affiliates in competitive markets with a longer decision-making period. Merchants don’t typically want to pay multiple affiliates for a single sale. Instead, it is usually the last referring affiliate that is credited or a mix between the first and last. So a good tracking system is required to resolve this. Prussakov (2011b) argues that the majority of purchases happen within a shorter-period, so a longer period gives a better incentive without adversely affecting profitability.
Managing the creative which affiliates use to promote a merchant is a challenge since creative needs to be up-to-date in line with different promotions or it may be misleading, or even illegal. So this needs to be monitored by the affiliate manager. Many merchants now provide live product feeds to affiliate networks in order to keep their promotions and product pricing up to date.
There are risks of brand damage through affiliates displaying creative on content which a merchant might feel was not complementary to their brand (for example, a gambling site). This needs to be specified in the affiliate agreement – sites need to be reviewed carefully before affiliates are permitted to join a specific programme and additional sites used by each affiliate should be monitored.
Another form of brand or trademark abuse is when an affiliate bids on merchant’s brand name such that they may receive credit for a sale when a prospect was already aware of the merchant. The limits of this should also be specified within the affiliate agreements and monitored carefully.
Chaffey, D. and Ellis-Chadwick, F., 2012. Digital marketing: strategy, implementation and practice (Vol. 5). Harlow: Pearson.