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What Affiliate Payment Model To Choose?

Being able to offer your affiliates different payment models can help your brand to appeal to a broader range of publishers. One of the unique features of the affiliate channel is its ability to attract a variety of specialist publishers that can excel in their niche.

 

Networks have come a long way in how they track and reward the affiliates on their platforms and with their support brands need to become less averse to testing unique and individual campaigns. There has never been a better time for your affiliate channel to grow.

 

Cost per acquisition/ Cost per sale (CPA/CPS)

 

This is the most prevalent payment model in the affiliate channel and is the most popular among brands. In simple terms, a commission on final order value is paid to the publisher that the customer interacted with last. The terms of the commission and how it is paid is determined by the advertiser. For example, they may offer higher commissions for new customers.

 

A negative against this model is it is geared towards the last click, which is often driven by a cashback or discount site. Affiliate management teams should be working with their networks to offer different adaptations of this model. That can for example, reward content sites that may have assisted higher up the customer sales funnels. Thankfully networks have been very proactive in releasing new technology that gives sites like blogs or influencers the chance to be fairly paid.

 

Overall there is much less risk for the brand within this payment model as the onus is on the publisher to promote, and deliver a paying customer. The brand has no cost unless an order is placed on their site.

 

Offering different commission groups by standard or for negotiated coverage is key for engaging mid or long-tail publisher with CPA. As they can find it hard to compete with the big players on a last click basis, it can be disheartening to create great content for which they receive little remuneration.

 

Cost per lead (CPL)

 

This is paying an affiliate for delivering a valuable lead as oppose to sale, and can be very useful for brands that don’t operate a typical ecommerce site. Insurance brokers, and car hire companies are key players in this model.

 

Some brands might have a more detailed application process to receive their service or to purchase an item. So they are rewarding publishers that can send qualified customers that have shown an interest but might need a follow-up call or test drive a car to secure their final order.

 

Ecommerce brands are not always completely adverse to working in this model, but may need some coaxing to try a test. By analysing the lifetime value (LTV) of a customer it can help brands focus on the long term revenue received from customers who might have come through a particular publisher category. In this model an individual publisher then might then be rewarded with more commission. On the back of this they are then encouraged to increase the brands presence on site, and then subsequently drive even more orders.

 

Cost per click (CPC)

 

Large traffic drivers like comparison sites or travel sites can prefer this model as they are within the customers consideration period rather than at purchase intent. Their sites are built to maximise traffic to a brands site but unforeseen circumstances like flight availabilities, prices changes or stock issues can hinder them receiving the final sale.

 

CPC can be anything from £0.01 – £0.25 dependent on the publisher and means the affiliate gets paid for traffic no matter whether the customer completes on site or not. Established travel brands offer hybrid payment methods with CPA on a final order but CPC on an uncompleted visit.

 

This payment method can offer a headache to some brands as they are paying without the guarantee of a sale. Without proper management like daily budgets assigned, costs can spiral. But as nearly all brands should be used to this model from other channels like PPC or Paid Social, there should be no reason a test shouldn’t be carried out with a select choice of publishers.

 

Cost per impression (CPM)

 

CPM is broken down as cost per mile (thousand) and is used in display advertising to reward websites a price per thousand impressions. This can be risky for brands as there is no guarantee of a sale, like with CPC. But with CPM, there isn’t even the result of a click through to your brands site.

 

When looking at typical affiliate KPI’s it can be hard to get sign-off on CPM coverage. But, like with analysing the effectiveness of tv advertising this needs to be looked at similar to brand awareness. So, how do you track effectiveness:

 

  • Assign an offer or a promotion to the banner and monitor code usage
  • Report on any uplift on sales of products featured on banners
  • Analyse any increase in sales from the reader demographics assigned with that website
  • Most publishers can offer third-party reports on post view impressions of creatives

 

Tenancy

 

Working in tandem with CPA, tenancies or fixed price models can enable your brand to receive great exposure packages. Affiliates will be able to provide rate card prices for coverage but by offering a hybrid of increased CPA and tenancy you can help to reduce initial costs.

 

Much like CPM or CPC there is no guarantee of a sale from the coverage, so we would always request that brands take great consideration before paying for tenancies. It could for example, be a natural move forward in a relationship with a publisher that has been successfully providing good sales on a CPA model. It will cement the relationship and show a commitment from the brand to have a healthy long-term partnership.

 

Whichever payment model you choose for your program it must meet with your brands channel objectives. Are you looking to generate more signups from the affiliate channel or increase brand awareness in a new market? Adapting your payment models to suit your brands KPI’s is key to a healthy and active affiliate program that rewards publishers on the type of customers they send to your site and where they fit in the overall customer journey.

 

Feel free to get in touch if you have any questions about your current affiliate channel or would like more information on a particular payment model and how to implement within your program.

 

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