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In her recent post on Econsultancy, Helen Southgate, the chair of the IAB Affiliate Marketing Council discussed the myths associated with attribution within the affiliate channel.
She rightly pointed out that the affiliate market is not looking for an alternative to the last click model.
A more suitable exercise for advertisers would be to analyse which affiliates are driving value for the brand, based on their key performance indicators.
This post investigates how advertisers can assess the value driven by individual affiliates and reward them based on their traffic.
Affiliate categorisation is outdated
Traditionally affiliates have been categorised by their primary methods of promotion. With boundaries becoming blurred it is important to assess them on their individual merits.
It is now difficult to categorise all voucher code affiliates in the same way, as they have different ways of driving traffic to advertiser sites and attracting different audiences.
Advertisers will have a set of key metrics used to measure the success of their campaign. Typical metrics include but are not limited to new vs. existing customer %, average basket values and lifetime value of customers.
These metrics will vary from advertiser to advertiser and across sectors to be in line with their core strategic objectives.
New vs. existing customers
A common attribute that advertisers are recognising as a key performance indicator is the split of new vs. existing customers through the affiliate channel. Quite often internal targets will be based on delivering new customers to the business.
While new customer delivery is one indicator of value, other factors also need to be considered. Simply saying the higher the split of new customers the greater the value ignores other important metrics that constitute value through the channel.
One myth associated with incentivised traffic (cashback and voucher code sites) is that these affiliate types are more likely to convert existing customers that are looking for a discount.
On the contrary, we have seen affiliates within this category delivering high volumes of new customers. This is indicative that consumers are visiting incentive sites as the first port of call rather than an afterthought to gain a discount.
An increasing number of advertisers are neglecting the value that is derived from existing customer sales. With the increase in incentivised sites and consumer behaviour changing – it could be argued that keeping hold of a customer and encouraging greater rates of spend should have as much importance as trying to attract new ones.
This is especially important in switchers’ markets where customer churn can be an issue.
When assessing the value affiliates are offering to a campaign, existing customer spend could be a key contributing factor, in addition to new customer acquisition.
AOV of new vs existing customers
A further indicator of value is how much on average new and existing customers are spending. If existing customers are spending more through affiliates should this be considered when assessing the value of the affiliate channel?
It could be expected that existing customers who are already familiar with brands would be spending more than new customers.
Customers are spending more when they are incentivised to do so. It is interesting to note, across a number of programmes even if discount codes aren’t available for existing customers, they are still spending more on average through voucher code sites.
Lifetime value of customers through individual affiliates could be a suitable metric for determining the value of each affiliate partner.
Advertisers should consider a number of metrics when assessing the value of their affiliate partners. In addition to driving new customer acquisition, other metrics such as life time value could also play an important role in having a successful affiliate campaign.
It is essential for the affiliate channel to be benchmarked against other online channels to see how affective affiliates are at driving valuable customers for the business – and at what cost.
By understanding the difference in affiliates’ traffic and treating them as individuals, advertisers can successfully continue to drive valuable customers.
In essence, commission structures can be tailored to individual affiliates to reward them for the value delivered to the business.