Performance Partnerships 101: Transparency

Those who’ve been in the affiliate marketing space for any notable length of time will tend to agree that the early years of affiliate marketing were comparable to America’s “Wild West” days.

The affiliate model, established in the U.S. in the mid-1990s, was a new frontier in marketing. While full of promise and opportunity, this pioneering period was rough around the edges and relatively lawless. This combination attracted colorful characters, some of whom engaged in questionable practices and deceitful behavior.

It was also a period of innovation, development, expansion and exploration.

The visionaries, who saw beyond the get-rich-quick gold rush fever of this era, had the foresight to understand what a game-changer the affiliate model would be in the world of marketing. Their vision, commitment and grit in the face of much condemnation and frustration laid a solid foundation for what present day affiliate marketing is built upon.

Today, the business of affiliate marketing – like that of other companies and industries established during the Wild West period (e.g. Wells Fargo & co) –conducts itself much differently than it did in its formative years.

The affiliate model of today, that most industry-leading companies use in their marketing and business growth initiatives, involves sophisticated technology and employs experienced and scrupulous affiliate program managers.

It also emphasizes another fundamental attribute of the Performance Partnerships framework: Transparency.

PAST

The Wild West years of affiliate marketing were plagued by a lack of transparency – between all parties involved in this model. The concept of having clear “terms and conditions” between affiliates and brands didn’t exist as they do today.

For example, when merchants began to ask questions about their affiliates’ promotional methods, some affiliates simply refused to disclose their marketing activity, claiming it was for proprietary reasons. Others responded aggressively, accusing the merchant of trying to rip off their tactics. In hindsight, it’s clear that this opaqueness was intentional as it allowed these affiliates to engage in questionable or even fraudulent behavior.

This lack of transparency occurred not only between affiliates and the brands they were promoting, but also between companies and the affiliate networks they were paying to handle both the technological aspects of their program (measurement, tracking, payment) and the day-to-day management of their program.

Companies would get pushback when they inquired about who the affiliates in their program were and what they were doing to promote the brand. They also had little insight into what management services they were paying the affiliate network for.

As written in Performance Partnerships, “The lack of price transparency resulted in many companies paying vastly different prices for what is essentially the exact same service. It’s not uncommon for companies to discover that they are paying a performance fee that’s 50–100 percent higher than a similar program on the same network… Instead of paying a premium for access to a broad range of unique advocates, merchants increasingly found that the vast majority of their performance fees were triggered by relationships with a handful of affiliates who were part of all the major networks.”

Large, enterprise brands began to question why they were paying so much in performance fees for existing relationships and even relationships that were not unique to their brand or program. They also began to question why the performance fee structure doesn’t start at a baseline level of the existing program, with a fixed fee to cover mature business and established partnerships already in the program.

The performance fee issue is a complex one. To learn more about it and where this structure is headed, check out this this comprehensive article titled, Why the Performance Fee Model Is On Its Way to Extinction.

In the interim, an important takeaway here is that companies in every industry imaginable have started to put their foot down on the lack of transparency in their business and marketing partnerships. And affiliate is no exception.

Fortunately, better relationships and new technology solutions within affiliate marketing are now providing companies with far greater transparency into their affiliate partnerships.

PRESENT

In a true performance partnership, companies and affiliate program managers know what affiliates are in their program(s) and how they are promoting and representing the brand. Companies also have significantly more transparency into the amounts they are paying their various affiliates, their affiliate technology providers, their program management agency as well as for what purpose.

For example, one especially cost-conscious AP client wanted to:

  • Only pay for incremental sales within their program.
  • Move from a Last Click to a Last to Cart attribution model.
  • Have more insight into what types of affiliates were in their program and what they were doing to promote their brand.
  • Partner with higher-performing affiliates who better represented their brand.

Unfortunately, the particular affiliate technology platform their program was housed on (and who was also managing their program) couldn’t offer this. So, after investigating what other technology solutions were available, the client selected an agency partner (Acceleration Partners) and a Software as a Service (SaaS) provider who could.

This agency + SaaS partnership made it possible for the company to:

  • Change their attribution model from Last Click to Last to Cart and pay their affiliate partners only on incremental sales.
  • Clean up the affiliates within their program and replace some underperforming, Last Click-focused affiliates with high performing content affiliates.
  • Establish different commission rates for different types of partners
  • Simultaneously grow their other marketing channels and gain a holistic perspective of how all their marketing channels were working together and supporting one another.
  • Save $560,000.

From the affiliate partners’ perspective, they too have much better clarity into what they are getting compensated for, how much, when and what they can do to be the best partner possible for the brand.

Transparent partnerships and marketing activity are a cornerstone of the Performance Partnership framework. To learn more about the importance of full transparency in your marketing partnerships and what companies should look for in their agency and performance partners, this article provides a helpful overview.

 

Next Up: Performance Partnerships 101: Real Relationships.

 

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