Performance Partnerships® is a term we’ve been speaking quite a bit about this year – for three reasons.
First, we believe Performance Partnerships are a better definition of the type of quality-focused relationships that companies are seeking from affiliate/performance marketing– two terms that are often used interchangeably but can mean different things to different people.
Second, Performance Partnerships are where we believe the industry is headed.
And third, because I published a book of the same name earlier this year.
To understand how Performance Partnerships work, watch this easy-to-follow video.
While the book goes into great detail about what Performance Partnerships are, as well as the past, present and future of the performance marketing industry, we thought it would be helpful to break down the four distinct elements of Performance Partnerships:
1. A CPA (Cost per Action) payout
Performance Partnerships include a CPA model by default. This could be a percentage of a sale, a lead, etc. From our perspective, it’s cash on delivery (COD). This means that the partner brings a certain behavior to the table and once that behavior is delivered and tracked, payment is then made in real-time.
The opposite of this would be where companies, agencies and marketers call their services “performance marketing”, even though the desired outcome or endpoint wasn’t achieved.
This term has gotten rather crowded as of late. Many in the affiliate industry are trying to rebrand with it. At the same time, firms that provide paid social or pay-per-click services also call themselves “performance marketing firms” due to the fact that they provide services where spend and outcome can be measured.
While there are benefits to measurement, from our perspective, paying for something that can be measured after the fact and paying for a desired outcome on a CPA basis are not the same thing. For example, results from a Google Search campaign can be measured, but if they aren’t incremental and that was your goal, you can’t get your money back.
In theory, most e-commerce marketers would rather pay for a specific action than for an activity; paying for the output, not the input.
The lack of transparency plagued the early years of affiliate marketing, which we refer to as “Gen 1” affiliate marketing. E-commerce companies would put an offer out to their networks and/or affiliates; that offer would then be broken up and distributed out into the world with little to no insight into what was happening with it. It was more of a transactional relationship than a true partnership between the brand, network and affiliates.
Our mindset is that transparency is about developing a quality relationship and having clarity, understanding and ease about what’s being done to promote and represent the brand.
As we move into “Gen 3” performance marketing, the industry is dominated by large companies with strong brand departments that demand transparency. It’s no longer okay to pay a lot of money to a partner and not know what they are doing.
3. An Ongoing Relationship
Performance Partnerships are about knowing and trusting what your partner is doing and requires quality and transparent communication. It also relates to the types of partners you work with and who you consider to be a valuable partner. In affiliate marketing, brands tend to work with “affiliates” or “publishers”.
However, we’ve seen many instances of companies working with people and organizations in an affiliate-type model, but they are doing so through their business development arm. What they often don’t realize is that these relationships and interactions are essentially exactly the same. One just offers a platform that is more efficient, trackable and scalable.
As companies want more payout flexibility (e.g. CPC) and data to evaluate what these relationships are generating, they are starting to develop new types of programs in an affiliate-type model.
In this process, their eyes are opening to the fact that there really is no difference between many of their business development-type relationships and relationships they’d have with affiliates. As such, they are beginning to redefine these relationships– not necessarily as an affiliate or as a publisher, but as a partner.
4. Centralized Tracking and Reporting
Once careful consideration has been given to the management side of the equation and how to best manage all the different types of Performance Partnerships that may exist for your business, the next part is figuring out the technological side – a platform that can bring everything together in one place. For some, this may mean using a traditional affiliate network-type solution. For others, it’ll mean using a Software as a Service (SaaS) platform. SaaS platforms handle all the tracking, real-time reporting, payouts, tax forms, contracts, etc., all in the same place, allowing companies to better manage many relationships at scale.
Today, many companies keep their non-affiliate-type relationships separate from their affiliate program even though they could benefit from the technology. From their perspective, it doesn’t make sense to pay an affiliate network a performance fee of 20 to 30 percent for relationships sourced and managed by the brand.
With the rise of SaaS platforms, many companies are discovering a cost-effective solution that enables them to work with more brand-aligned partners; partners who don’t consider themselves affiliates nor do they recognize or relate to that nomenclature. As a result, these SaaS-supported platforms are now competing with affiliate network platforms or replacing them altogether.
Bringing It All Together
The Performance Partnerships architecture includes all the things one traditionally thinks about when they think of high-end affiliate marketing, plus new channels such as app-to-app marketing platforms, business development partnerships, influencer marketing, etc.
It’s about taking the best attributes of each and managing them all in one place so companies can be smarter and more strategic with their marketing. It’s also about having an efficient, effective system for your marketing as opposed to siloed tactics that are difficult to attribute.
Rather than debating what is affiliate marketing, performance marketing, etc., we think Performance Partnerships describes exactly what companies are looking for from their perform marketing program over the next 5 to 10 years while excluding the less desirable elements they want to move away from.
Get even more detailed insights about Performance Partnerships by listening to our Outperform podcast episode, What the Heck are Performance Partnerships?
You can also contact our team to learn more about how your company can benefit from these types of partnerships and how they can help your company grow in 2017 and beyond.
Here’s visual we put together that lays out the Performance Partnership framework:
Update! Since Performance Partnerships: The Checkered Past, Shifting Present, and Exciting Future of Affiliate Marketing published in May 2017, it’s become a global bestseller in marketing. It’s also a recommended must-read by Entrepreneur, Forbes, and Huffington Post.