A Different Approach to Affiliate Program Management

A Different Approach to Affiliate Program Management

Affiliate-ManagementCropOn August 14th, Acceleration Partners proudly announced that we are taking over the management of the adidas America affiliate program. While we are certainly very excited to work with one of the largest and most visible sporting goods companies in the world, we also see it as another step in our evolution toward becoming the most innovative and productive affiliate marketing agency in the industry. This is the latest in a series of high-profile companies that have asked us to handle their affiliate programs, including One Kings Lane, Stella & Dot, and Mabel’s Labels, all of whom have seen the benefits of our approach. Slowly but surely, through our work with companies like these, we are shining a light on many of the issues that have plagued the industry for years, and are hopefully changing the affiliate landscape in a way that adds significant value to our clients’ businesses.

Since the origin of the affiliate marketing industry over a decade ago, the channel has helped companies grow by tapping the power of the long tail to find new customers and generate incremental revenue. Or has it? We have noticed that many affiliate marketers drive great results for their own programs, but rarely are these results reflected in their clients’ bottom lines. The traditional affiliate marketing approach just doesn’t work when it is viewed within the larger performance marketing portfolio, which also includes SEO, SEM, display, etc. For a while, companies have been willing to overlook the fact that the revenue generated by affiliates often has a much higher cost than it should, but now the smart ones are taking notice.  We have spent a lot of time and energy preaching the gospel that a new approach to affiliate is needed, and building on our experience building the award-winning Tiny Prints program from the ground up we have developed a unique approach to affiliate program management that goes against most of the conventional wisdom. But the funny thing is, it works.  Here are some of the key pieces of our philosophy:

1. Quality vs. Quantity of Affiliates: Since affiliates have figured out how they can make commissions without doing a lot of heavy lifting, the channel has been flooded with low-quality affiliates that don’t actually provide much value. We focus on recruiting affiliates that deliver mostly new customers to our clients instead of targeting existing ones, and we aren’t afraid to either pay less to or outright deny an affiliate that does not meet the criteria. Fewer high-quality affiliates create far more value than a lot of low-value affiliates.

2. Focus on the Top and Bottom Lines: Most outsourced program managers (OPMs) focus on one number: program revenue. As a result, they are typically willing to set commissions as high as they can in order to drive revenue, and are also willing to pay low-value affiliates much more than they are worth. This means that the revenue coming is often both unnecessarily expensive and non-incremental, as affiliates simply poach customers who would otherwise come through other, less costly channels. In a large program these unnecessary costs can be hundreds of thousands or even millions of dollars. We obviously want to drive revenue, but it is not the only metric. We also always look outside of program revenues and pay close attention to both affiliate channel profitability and its effect on the entire marketing portfolio.

3. New Customer Acquisition: As previously mentioned, the affiliate channel is designed for new customer acquisition. The problem with many affiliates, however, is that they target existing customers who are already customers of a company, often targeting them when they are already in the shopping cart. This can prove extremely costly. Affiliates can take customers from other channels, such as organic search and pay-per-click, and claim them as their own. When multiple channels are taking credit for the same customer, the cost of that customer goes up unless there is a sophisticated method of attribution. Additionally, if a returning customer is using affiliate offers geared toward new customers, the company ends up both giving a discount and paying an unnecessary affiliate commission, driving up costs. Our basic philosophy is that the affiliate mix of a program and the incentives given need to promote the desired behavior—driving new customers. This may mean that program revenue will be lower than it should be, but in the end it is a much healthier program and more beneficial to our client.

The affiliate marketing industry is at a critical juncture right now. If it continues to gain the reputation of a low-quality channel that is difficult to manage, it runs the risk of ultimately collapsing on itself. Every day at Acceleration Partners, we swim against the tide and drive value for our clients by holding to the basic set of principles outlined above and developing innovative strategies and technologies to leverage these principles.