Back in 2017 when I had first began work for a global, affiliate marketing agency, I was asked my thoughts on the direction of where affiliate marketing commission payouts were headed. In a client services and support role, I had not given the area much thought previously, because like most agencies, we tended to be more reactive towards moves competitors were making as opposed to trailblazing or breaking new ground. That was compounded with the lack of visibility we had into the full core business metrics like LTV, margins, and profit that our clients, despite our MNDAs, would stubbornly keep under wraps.
That line of thinking, at least for me, changed after visiting a client headquartered in Minneapolis. You probably know of them, or more likely have recently shopped with them, given they’re one of the 10 largest retailers in the United States and very much a household brand.
The client had me take an early flight into snowy Minnesota and I sat in a hotel lobby downtown with several hours to kill. I was scheduled to appear before them in a conference room to narrate a 30-page Powerpoint I had painstakingly assembled over the weeks prior so I took a few moments to rehearse and review while huddled over complimentary Hyatt lobby coffee.
One particular section covered our recommendation on commission strategy for their vast partnerships in retails sales. Our analytics, client feedback and benchmark reports at the time had indicated that commissions to affiliates were rapidly moving away from Last Touch attribution, and that was evident across the largest global affiliate programs to smaller, more moderately-scaled ones.
What was driving this shift away from that antiquated, winner-takes-all approach to compensation? Technology – specifically platforms that allow marketing departments to gain more visibility into the multiple touchpoints along the customer journey.
The most forward-thinking merchants, which we positioned this client as, used affiliate networks and Software as a Service (SaaS) companies to bolster these multi touch, multi step journey across not only affiliate and its galaxy of convertors across the sales funnel, but also with other paid and organic channels pulled into the tracking platform.
Continued improvements in data acquisition and attribution modeling means that affiliate programs were better able to align their commission structures based on a variety of factors, including the types of affiliates in their program, how they influence other marketing channels and other performance goals.
For example, if a brand values the top-of-funnel traffic driven by content creators (bloggers, influencers, etc.), we started to see more situational rules applied when they’re active along the clickstream, such as preventing more bottom-of-funnel-focused affiliates (e.g. coupon, deal, loyalty, etc.) from being paid a full commission. One recommendation we had considered at the time was segmenting the total eligible commission amount based on different touch points and customer characteristics.
Similar commissioning options that are becoming more common include:
- Triggering payouts for customer type: Payout is triggered and varied based on “new customer” and “existing customer” actions.
- Splitting commissions: For example, a coupon publisher will receive 20% of total commission while a first click partner receives 80% of total commission.
- Use of a coupon code: A blogger only receives commission on items added to the cart after their code is entered.
- Adding an item to the cart: An action will be considered complete and exclude any clicks once an item is added to the cart
- Separating partners’ traffic sources into different channels: Group affiliates and segregate their traffic so they will be eligible for payout only if no other affiliate types are involved.
Advanced technology platforms that can provide this kind of situational and segmented commissioning are already becoming the preferred technology for large scale and prestigious brands, while legacy platforms that had lagged behind are scrambling to catch up. Other agencies are developing their own proprietary technology to claim their stake on the summit of true attribution and incrementality, which I have my own thoughts on.
While the nuances such as tracking gaps and enigmas along the customer journey will almost certainly never become a thing of the past, I do believe there are tools that no longer make the activities of affiliate partners completely obscure to marketing teams. New technology advances will provide partial transparency into which partners are producing what traffic and their implied value to the program, and the best analysts and affiliate managers will be able to interpret this data and use it to their advantage.
For instance, lower-value partners –those who are commonly credited for driving actions when high buyer intent already exists (e.g. at the point of check-out) or who poach traffic from other channels—can expect to see their payouts adjusted accordingly.
Conversely, the early awareness, top-of-funnel affiliates who have long cried foul when their cookies are overwritten further down the conversion process, will increasingly be recognized and incentivized.
Demand for these insights and the flexibility to use them will soon become the expectation rather than the exception. What’s more is that these critical tools will ultimately help further allocate marketing budgets towards truly incremental partners. Without them, brands will be hamstrung and will struggle to fully leverage the potential of the affiliate marketing model.
In a true affiliate partnership, compensation is awarded for driving a desired outcome. As data, attribution and tracking become further intertwined, merchants will be able to pinpoint those partners who are driving specific outcomes at a very granular level, allowing the highest-value partners to be appropriately rewarded and incentivized.
Determining what commission amount to pay which partners is both an art and a science. Or as my counterpart at the top 10 retailer in Minneapolis put it during my presentation “commissions should be like airline ticket prices. Depending on where, when, and how the journey unfolds, the pricing structure should change.” I thought that was eloquent all those years ago, and still rings true even today.
Nick Montrose 