Do you have an affiliate program for your business? Or are you thinking of adding one? Here are three common problems that can impact an affiliate program’s effectiveness and profitability.
The affiliate industry is nuanced. There are many players, layers, and moving parts. While some of these nuances are what make the affiliate model unique and valuable, such as connecting compensation to outcomes, there are others that are less desirable. What’s more is that, if a company is unaware of them, they risk damaging their brand.
For companies to take full advantage of the opportunity and return on investment that an affiliate program is capable of producing, they need to understand and recognize certain aspects and nuances of the industry. Here are three examples of these and what to watch out for:
Affiliates who do not create value.
Affiliates are marketing partners. They include content bloggers, review sites, schools, and organizations, to name a few, and can be incredibly effective at promoting a brand’s products, and services. The vast majority are highly reputable and consistently drive legitimate incremental sales for brands. However, there are also those who do not.
In affiliate marketing, the concept of “incrementality” generally refers to sales that an advertiser would not have obtained without an affiliate’s contribution. In other words, the affiliate is driving a new customer to a company.
Where it gets nuanced is when a company assumes that all the affiliates in their program are driving new customer sales when, in reality, there are ones who are primarily benefitting from the efforts of other affiliates or channels.
As an example, some affiliates (we’ll call them “last-in affiliates”) design their business models to try and capture customers who are already in the buying process or in the shopping cart. By doing this, they may also negatively impact affiliates who are driving top-of-funnel value for the brand and new customers via their blog, social media channel, review site, etc.
By intercepting a customer while their intent to purchase is already high or right before the point of sale, these last-in affiliates often get credit for transactions they had done little to initiate or offered no incremental value to. Consequently, companies end up paying these last-in affiliates substantial commissions.
To prevent this type of low to no value activity in your program, it’s important to not accept results at face-value. Dig into your affiliates’ tactics to truly understand how they are promoting your brand and consider structuring your external attribution model so that it doesn’t reward this behavior.
2. Unethical Affiliates.
While most affiliates are ethical partners who drive significant value to companies, bad apples do exist, unfortunately. These unscrupulous marketers shouldn’t be confused with affiliates who may not add incremental value. No, these types of affiliates are more nefarious. They purposefully engage in deceptive marketing activities to collect commissions.
For example, in a recent Huffington Post article, Dr. Mehmet Oz shared his personal story of how some ethically questionable affiliates and online marketers use his likenesses to sell and promote acai berry and other products – all without his permission. It’s gotten so bad that it’s put his brand and integrity at risk. To call attention to this pervasive issue, Dr. Oz has dedicated multiple episodes of his television show to the topic, even hiring private investigators to find out who these shady marketing individuals are and educate the public how they are being purposefully duped.
Some companies are aware of these bad apples but turn a blind eye because their marketing tactics generate revenue. Other companies have no idea that these types of affiliates are in their program or promoting their brand in illegal or unethical ways. Regardless, neither scenario reflects well upon a company or demonstrates a successful program.
Similar to how you can avoid compensating affiliates who don’t offer any value, preventing unethical affiliates from getting into your program requires that you screen each of your partners carefully, have transparent insight into what they are doing to promote and represent your brand, and monitor their activities once they are accepted into your program.
3. Misaligned incentives.
For most of the affiliate industry’s history, networks have represented both affiliates and merchants in a single transaction and charge “performance fees” to do so. While this structure is not nefarious or illegal, it leaves no room for proper checks and balances, so incentives are perpetually misaligned. These misaligned incentives have also led to serious issues, including fraud, trademark bidding and cookie stuffing.
Today, even though the industry has evolved and matured, some of those misaligned incentives still exist because they benefit many of the players in the value chain; shutting down these behaviors can mean less profitability. Fortunately, there are companies who are becoming more discerning about who they partner with. They are also starting to rebuff partners who don’t have their back, who aren’t representing their brand with integrity, and who accept kickbacks. This is a welcome stance and one that will help the affiliate model reach a place where everyone has an opportunity to excel and work together productively.
Nuances exist in every industry. Some lead to a competitive advantage where others can be a blow to one’s brand. By choosing your partners carefully, demanding transparency from them, and ensuring that there’s a clear connection between the results you’re getting and the amount of money you’re paying, you’ll be able to reap the rewards that a nuanced affiliate program offers.
Robert Glazer is the founder and Managing Director of Acceleration Partners, founder and Chairman of BrandCycle and author of Performance Partnerships: The Checkered Past, Changing Present and Exciting Future of Affiliate Marketing. He is a serial entrepreneur with an exceptional track record and passion for growing revenue and profits for B2C-based companies, partnering with brands such as adidas, ModCloth, Reebok, Target, Tiny Prints, Gymboree, and Warby Parker. For more information, please visit www.accelerationpartners.com and connect with Glazer on Twitter, @robert_glazer.