This content has been written by Georgina Samson, Director of Client Services at Webgains. Webgains is one of The APMA’s founding members. Webgains is a world-class affiliate network, supporting affiliates and publishers. They combine cutting-edge technology to kickstart campaigns.
Whether it’s fair to pay zero commissions on an affiliate programme depends on the specific circumstances and the expectations set between the merchant and the affiliate(s) in question.
From our network’s perspective, we do not allow advertisers to pay zero commissions unless it is for a very small number of products. It’s not fair to put a publisher type, high number of products, category, or customer type on zero commissions. Cutting costs in the short term can have detrimental effects on a programme’s long-term health and relationships.
Below, we explore what needs to be considered, ways to avoid zero commissions, and the effect that zero commissions can have on programmes and publisher:
Things to consider
1) Expectations
The terms and conditions of the affiliate programme should clearly outline how affiliates will be compensated for their efforts. If affiliates are aware of this upfront and agree to participate with restrictions for other reasons, such as brand association, then it can be considered fair. Any changes to fee structure should be communicated with adequate notice to affiliates.
2) Transparency
Transparency is crucial in affiliate marketing. In some cases, affiliates rely on accurate information being shared by advertisers to understand the value that they are driving.
Example below:
Program A is offering 0% commission on sales to existing customers; publishers have no visibility on which sales are existing or new customers. Existing customer sales are cancelled at the validation stage, leading to a high cancellation rate.
Results: Affiliates also retain customers. Customers are savvy and, in this market, want to purchase for the lowest possible price. It might be assumed that shoppers are loyal to brands but that is certainly not always the case. Plenty are loyal to affiliate sites, especially when it comes to bloggers, content and influencer sites in niche verticals.
The example above will drive affiliates to no longer promote the brand, causing damaged relationships, competitors prioritised, a decrease in loyal customers, a decrease in YOY results and a loss of market share vs competitors & resellers.
Solution: Whilst commission does not need to be as high as acquiring new customers, it does need to be fair and rewarding. If the affiliate is an established platform attracting healthy traffic, they have loyal users who return for their services. Their increased effort in converting returning customers should be rewarded.
3) Long-Term Relationships
If the brand can demonstrate that participating in their affiliate programme with restrictions (such as monthly caps or zero commissions) can lead to long-term benefits, such as future revenue opportunities, then affiliates may view it as fair in the context of building a mutually beneficial relationship.
However, as relationships are key within the affiliate industry, to maintain them, the programme needs to be rewarding and fair. Brands failing to make them could lose key contacts, risk not being prioritised for exposure, and have offers and promotions ignored.
4) Healthy Publisher Mix
Maintaining a healthy publisher mix is key to any affiliate programme’s success. Affiliates choose to work with brands based on how they are incentivised. Some affiliates, such as CSS, invest in the programme ahead of receiving compensation. Some publishers may decide that they will not work with the brand as it is not profitable for them or worth the risk.
5) Managed Services
Most brands require managed services from affiliate networks/agencies, most are compensated on a percentage of commission offered to affiliates. If zero commission is being offered, this will dictate the service that brands receive and could result in missing key opportunities or events and competitors being prioritised.
How to avoid zero commissions
Affiliate programmes need to be beneficial for all parties, including the advertiser, who may have to work within strict budgets and margins. Below are ways to work within margins but avoid zero commissions:
1) Dynamic Commissioning
Dynamic commissioning allows brands to pay out different commission levels based on specific products. This lever gives brands control on a granular level, using individual product SKUs, etc.
This exact control means advertisers can now bring in high-volume publishers for specific opportunities, and increase commissions for distressed/seasonal inventory without increasing the CPA for the overall programme. The result? Better control over budgets, pushing products with higher margins and reducing the need to offer zero per cent commissions.
2) Commission Structures
Commission structures should be reviewed to ensure that the programme is running efficiently. Here are some examples of how brands can ensure that they are paying fairly but also within their best interest and KPIs.
- Lower commission for existing customers versus new ones
- Commission by category (reducing where margins are tighter)
- Zero commissions on a small minority of specific products
- Different commission schemes by publisher type
Final word
Ultimately, we need to consider that affiliates will only be paid when there marketing efforts result in a sale (CPA), therefore should be rewarded adequately. These rewards typically take the form of commission that is high enough to attract and engage the publisher. However, in some cases, the reward can vary. For example, brands offering longer-term benefits. The over-arching fundamental rule though is that brands should always strive to provide fair compensation or value in exchange for the efforts of their affiliates to ensure the success of the affiliate program. If they do this, they won’t go far wrong.
About the Author:
Georgina Samson is a Client Services Director for Webgains affiliate network. Georgina has been in the industry for over 10 years, with 6 of those years being at Webgains where she started as a senior account manager. Georgina has a wide range of experience in the sector having previously worked for both agency (eBay Partner Network) and publisher side (Hot UK Deals). Georgina has worked with 100s of clients and has a passion for showing brands how successful the channel can be for them.
To find out more about Webgains and to get in touch with them please visit their website.