supercharging performance marketing: awarding affiliates for their real contribution

REWARDING AFFILIATES FOR THEIR REAL CONTRIBUTION

SUPERCHARGINGPERFORMANCE MARKETING

Image: www.freepik.com

Rakuten Attribution Supercharging Performance Marketing: Rewarding Affiliates for Their Real ContributionRakuten Attribution Supercharging Performance Marketing: Rewarding Affiliates for Their Real Contribution

EXECUTIVE SUMMARYAffiliate conferences, blogs and meetings are always dominated by discussions on commission structure and commercials. It’s the longest debate in industry history but always seems to end in no action! Affiliates fear merchants trying to cut their commission and merchants dare not risk losing any sales. The unhappy status quo continues and the industry stagnates.

Affiliate supercharger is about taking action and shifting the debate away from changing the commission on existing affiliate sales, focussing on creating a commercial model that will drive more affiliate sales. The key is to align the interests of merchants and affiliates - incentivising affiliates to contribute to the purchase journey earlier or higher up the purchase funnel. Instead of perpetuating the endless competition and strategies to win the last click, create a model that values and rewards content that influences customers earlier in the journey to purchase.

As the debate continues and even proven solutions are doubted, other parts of industry are not waiting around. Companies with a background in other disciplines, such as display, are starting to move into the affiliate space but aren’t restricted by conventions when it comes to their payment. If affiliates aren’t careful, and don’t evolve with the times, then they could find themselves extinct.

Rakuten Attribution Supercharging Performance Marketing: Rewarding Affiliates for Their Real Contribution

THE AFFILIATE MARKET IS STILL CRUCIAL

Despite some conflicting opinions, affiliate marketing is still alive and kicking in the UK. According to research by the IAB, businesses spent £814m on affiliate marketing in 2012, generating sales of more than £9bn, with Travel and Leisure forming 9% of the total spend.1 As the economy is still in the early stages of recovery many advertisers favour a channel where payment is linked directly to performance.

This growth is predicted to continue in the future, with affiliates forecasting that their revenue will increase by 25% and advertisers expecting to spend 5-10% of their budget on performance marketing in 2013 and beyond.

Although this outlook may look rosy, the ‘last click wins’ commercial model that affiliates operate under ensures that all of this growth is concentrated at the bottom of the funnel. Currently, an increase in growth and revenue for affiliates just means more and more competition for the hallowed last click. In an already saturated marketplace this leaves very little room for real growth or innovation.

Helen Southgate, UK Managing Director of affilinet, wrote recently on her view that the affiliate channel may well have outgrown the last click model, suggesting that advertisers need:

“to look beyond the last click, and understand the role that affiliates play higher up the path to purchase funnel.”2

She goes on to confirm that many advertisers are wanting to engage with affiliates who are influencing consumers further up the funnel, which means that they must focus on those touch points where affiliates do genuinely add value. By working together with the affiliates, Ms Southgate believes a suitable solution can be found.

1 The value of UK Online Performance Marketing - January 2013, Internet Advertising Bureau UK http://www.iabuk.net/about/ press/archive/uks-hidden-814m-online-economy2 Has the affiliate channel outgrown the cpa last click model, eConsultancy blog http://econsultancy.com/uk/blog/63629-has- the-affiliate-channel-outgrown-the-cpa-last-click-model


TRADITIONAL ‘LAST-CLICK-WINS’ PAYMENT MODEL FLAWED

Despite the importance of affiliate marketing, the compromised or inappropriate commercial terms underpinning the relationship between brands and their affiliates have long been the ‘elephant in the room’ for the performance marketing industry. Affiliate commission has traditionally been paid on existence of a cookie in the path to conversion, with the theory that these prompted the user to convert.

In the past few years the only real innovation in affiliate payments has been an increase in technologies that automatically de-duplicate affiliates. This enabled brands to avoid ‘double paying’ in situations where multiple affiliates and networks were involved in the journey to purchase, but did little to encourage a broader contribution from affiliates.

Helen Southgate agrees, stressing that because advertisers want sales they are driving all channels to deliver the last click, increasing competition for affiliates,

“I am starting to think that by working to a pay per performance model over the years we may have created a rod for our own backs.”


THE MULTI-CHANNEL - MULTI-DEVICE WORLD COMPLICATES THE ISSUE FURTHER

As the number of marketing channels and devices has increased, so has our understanding of the user journey and the contribution of different touchpoints to the final sale. This insight has continued to highlight the traditional ‘last click wins’ payment model as an unsatisfying compromise.

Recent research conducted by Affiliate Window shows that 22% of traffic and 18% of sales are being generated by mobile and tablet devices alone.1 With the continuing trend for research and price comparison being a vital part of the customer journey, brands must demonstrate their understanding of all of the component parts of this purchase process, no matter which industry sector they operate in.

The travel industry has one of the highest amounts of consumer research before purchase. According to a Google study of more than 7 million people, an average user journey for a travel purchase takes place over 9 sites, visited 22 times over 10 different sessions, with the average number of searches per purchase at 18.1. It seems logical to suggest that consumers are influenced by far more than just the last click. The use of multiple devices complicates the user journey even further, with 47% of people saying that they research holidays using more than one device.

The use of multiple devices presents a critical technological problem for traditional affiliate payments, which is based on old-fashioned tracking technology. Commission is paid on the presence of a cookie, but if this cookie is dropped on a different device then it is impossible to reward the affiliate - a problem for rigorous ‘last click wins’ models. As the use of multiple devices increases this will continue to fuel the chasm between real value and commission.

The high amount of research highlights the opportunity for travel affiliates - instead of trying to develop yet another strategy to secure the highly competitive last-click at the end of the sales funnel, time would be far better spent moving up it. For example, affiliates can harness specialist knowledge to create content sites dedicated to niche destinations and interests at a level of detail that is impractical for large providers.

But if they don’t receive the credit (and most importantly the commission) then why would they bother?

1 http://www.tradedoubler.com/uk-en/insight-resources/mobile-research/


MULTI-CHANNEL ATTRIBUTION MODELS ARE THE LOGICAL STARTING POINT

Affiliates and brands have known for a long time that this method of payment is compromised and doesn’t value affiliates for their true contribution to the sale, however there has been no viable alternative.

Many companies now have multi-channel attribution models in place to enable them to value channels by reflecting actual user behaviour.

The purpose of this has been for internal valuation of activity to inform budgeting decisions, but why not use this approach, or even the model itself, to drive affiliate commission payments?

This method will ensure that early contributors in long and complex paths to conversion are not forgotten and shifts the focus away from the end of the purchase funnel, incentivising affiliates to contribute at all stages of the sales cycle.

Linking the payment of affiliate commissions to their real contribution aligns the interests of brands and affiliates and encourages both parties to grow their businesses together.


CASE STUDY: RESORTHOPPA

Rakuten Attribution (formerly DC Storm) has long delivered ‘path to conversion’ and attribution analysis that exposes the extent of the issue with ‘last click wins’. They have now used this insight to deliver a ground breaking but practical payment model that means affiliates can be paid on the basis of their true contribution.

Airport transfer agents Resorthoppa are the first company to put this model into practice. They have worked with Rakuten Attribution or twelve months and have established an attribution model that they trust in and that gives them a granular valuation of all of their marketing activities.

The starting point for the project was a simple comparison between affiliate commissions paid and the affiliate valuation identified by the attribution model. This inevitably revealed dramatic differences with certain affiliates contributing little but being well paid and others whose contribution was far greater than the commission paid.

Despite the over and under valuations being comparable, the flawed commercial model resulted in the best affiliate partners having little incentive to do more and poor partners having little incentive to work more effectively. The result was a static campaign that was unlikely to grow.

The key challenges for fixing the situation included:

• Building a solution that would easily integrate with the Affiliate Window network systems and processes. This is a challenge in general for the industry.

• Effectively communicating the new commercial model to affiliates and making it clear that the objective is to grow the campaign and not to cut affiliate commissions.

Resorthoppa decided that they wanted to use the attribution model for setting affiliate commission payments. As well as resulting in situations where an affiliate would be paid commission on a proportion of a sale, this approach could also result in multiple affiliates being paid in relation to a single sale.


Moving away from the norm inevitably has its problems, in this case both technological and political, but these issues are relatively easy to overcome if confronted in the right way. From a technological point of view, the main stumbling block for paying commission to more than one contributing affiliate is that affiliate networks are set up to only pay commission to one affiliate for each sale.

Resorthoppa explained their aspiration to DC Storm who worked closely with them and Affiliate Window to design a solution that met the key requirements. The basis of the solution is an automated daily feed from DC Storm to Affiliate Window that contains affiliate transaction details for individual transactions. Affiliate Window processes the feed and creates commission transactions in their systems, which are treated in exactly the same way as their standard transactions.

The other challenge was to communicate the reasons for the change in payment model to ensure Resorthoppa’s affiliates bought into the process from the start. The key was to ensure that the affiliates knew and understood that the objectives behind the move were to improve performance and not cut commissions. Resorthoppa hosted an event to explain its motives to all of its affiliates, who were all very positive. To this day none of Resorthoppa’s

RESULTS

The new commercial structure immediately resulted in a significant increase in payments to the most valuable affiliate partners. After only two weeks the volume of visits and conversions relating to the program began to grow as the alignment of objectives between Resorthoppa and their affiliates became clear.

The operational change for Affiliate Window and their affiliates was minimal and clear communication of the objective and new rules meant that trust and cooperation was completely maintained throughout the project.

Since the new commercials were implemented Resorthoppa affiliate sales have grown by 200%, but their commission payments are slightly less than they would have been with the ‘last click wins’ payment model. Revenue for all parties has grown significantly – Resorthoppa, Affiliate Window and the affiliate partners. The new approach has now been rolled out to the Zanox network to replicate this success for the European affiliate program.

UPSETTING THE APPLE CART


Seth Richardson, CEO of Rakuten Attribution said:

“The results of this project show paying affiliates for their real contribution can benefit everyone involved and we’re thrilled that Resorthoppa have been the first company to take the plunge. The ‘last click wins’ payment model is redundant in the complex, multi-channel world that marketers operate in. We have already started to work with more affiliate networks, including Zanox and Linkshare, and have some top retail companies who are moving to the new model.”

SUMMARYBy rewarding early affiliate contributions the new payment model opens up competition for affiliates and incentivises them to look beyond the last click. The innovative new model brings affiliates into the modern, multi-channel world and has proven to increase revenue for all parties.

Despite this success there have been a large number of voices in the affiliate industry that urge caution and do not want to move away from the comfortable model they have known for years. There is no one way of rewarding commission and providing the rules are transparent, and all parties agree, then there are a multitude of models that could be used. For example, aggressive brands looking to widen their market share could keep commission for ‘last click wins’ and simply pay commission for early contributors on top. However, if affiliates continue to insist on last-click wins they will be overtaken by more innovative companies unbound by tradition.


ABOUT RAKUTEN ATTRIBUTION

Rakuten Attribution (formerly DC Storm) delivers cutting edge marketing performance measurement solutions for leading online retailers. ‘Measured Success’ encapsulates the solutions we deliver for our customers. It enables businesses that participate and compete in a multi-channel world to measure their business performance and to progressively move towards data driven marketing and trading.

Measured Success is delivered through implementing data solutions that drive excellent business decisions to improve marketing efficiency and effectiveness. We currently work with over 1,000 websites worldwide, across a wide variety of verticals, including Rakuten’s Play.com, House of Fraser and lowcostholidays.com.

Discover what Rakuten Attribution can do for you:

Phone: +44 (0)1273 807272 | Web: www.dc-storm.com

Email: [email protected]

supercharging performance marketing: awarding affiliates for their real contribution

Documents