It’s no secret that affiliate partnerships are becoming a leading acquisition driver for the world’s largest retail brands. In fact, a recent survey of more than 1200 senior retail affiliate marketers found that affiliate marketing is driving upwards of 20% of online sales for retailers. When it comes to retail affiliate partnerships, there is no doubt that this is an enormously relevant and profitable channel. However, many retailers are falling into common affiliate pitfalls that can be costly to their success.
This post is designed to change that. In the paragraphs that follow, you’ll discover six helpful tips to optimize your retail affiliate program, resulting in quick wins for your business.
- Stop Commissioning on Cancelled or Returned Orders
- Don’t Let Shipping Costs Sail Away With Your Margins
- Put an End to Double-Paying on Gift Cards
- Tracking Payment Type Can Be Invaluable
- Strategically Use Voucher Codes for the Greater Good
- Determine If Your Affiliate Matrix Is Aligned to Your Goals
Stop Commissioning on Cancelled or Returned Orders
In today’s increasingly competitive retail environment, retailers need to be accommodating to customer returns to ensure loyal and repeat customers. However, many retailers are falling into the trap of paying out commissions on those returned goods if the sales came from their affiliate marketing programs.
Many online retailers show high return figures. The National Retailer Federation (NRF) in the US reports average online commerce return rates of 28%. The “extra” amount you’re potentially paying could be huge. Think about the tens, potentially hundreds, of thousands of dollars you’re giving away each year for returned sales, and how that money could be better spent incentivizing your affiliate partners with stronger commissions on quality orders.
A quick win for retailers is to put in place a validations process to manage returns and cancellations. Passing back data at an item-level means you can easily reject returned individual item commissions without rejecting the whole basket. It also allows you to streamline the process of validating items that have been returned, so it’s a quick and easy process.
Actions To Take:
If you already have the capability to identify returned goods, and you’re not paying out on them, give yourself a pat on the back! However, if you discover that you are, it’s time to take a different approach, and save yourself a lot of money.
First review what your returns and cancellations process looks like and ask yourself these questions:
- Are you currently paying out commissions to affiliates when a customer returns an item?
- Are you able to identify if a customer driven by the affiliate channel makes a return online?
- Are you able to identify back if a customer driven by the affiliate channel makes a return in-store?
- Are you passing back the right data to allow you to validate purchases?
After you’ve asked the hard questions, it’s a good idea to get in touch with your affiliate network or solution provider’s Customer Success or Account Manager to ensure you have the most automated validations process set up, giving you more time to focus on driving growth.
Don’t Let Shipping Costs Sail Away With Your Margins
When customers are shopping with you, their checkout basket is made up of three components:
- Products purchased
- Delivery/Shipping costs
It is only the products themselves that are driving profit into your business, yet many retail marketers are paying out affiliates on all three customer costs. However, it’s as simple as this: since you don’t make money from tax or shipping, it doesn’t make sense to pay commission on these items. What’s most important to remember here is margin. These other costs come part and parcel with the sale of the product.
Across various retail categories, the margins are often quite slim. This highlights the need for margin protection wherever possible. Paying out commission on straight business costs such as shipping and tax is not beneficial for your business.
Actions To Take:
Run an analysis on your transaction commission payments within the channel to identify whether you are, in fact, paying on the gross sale, including taxes and shipping.
If you find this is the case, review your capabilities at point of sale and assess whether there is scope to separate these items out. You still might want to send the delivery type back as a data parameter – while you shouldn’t commission on this, it’s good to understand what the common delivery types are to pinpoint your customer preferences.
Reach out to your in-house implementation team and verify that the right item values (transaction value minus delivery, shipping and tax) are being sent back through your tracking pixel or server to server call. Your affiliate technology representative can then work with your team to ensure this is executed correctly.
Put an End to Double-Paying on Gift Cards
When it comes to gift card purchases, it is important to ensure you are not “double paying” – paying commission on both the sale of the gift card itself and then the purchases made using that gift card. This is because you’re paying out twice on the same money being spent by the customer once, which isn’t ideal for your bottom-line. Gift card purchases are something that’s often forgotten about when it comes to affiliates, but can result in retailers spending commissions in less-profitable ways. Reviewing your approach to gift card purchases presents the opportunity to be strategic in the way that you pay commission.
Some unscrupulous affiliate partners have also purchased gift cards as part of a scam so it makes sense to have a sensible payments policy.
The best practice is to produce a well-aligned commission strategy so you can incentivize the affiliates who contribute to the end of the buyer’s journey, not a redundant middle step.
Actions To Take:
As a next step, it’s important to review your existing process and determine how you are tracking gift card purchases. Are you able to report back when you’ve both sold a gift card and when it’s been redeemed?
You’ll then want to look at how this data folds back into your commission structures and at which points you’re paying out affiliate partners. If you’re paying out on both gift card sales and redemptions, it’s a good idea to put together a gift card commission strategy that doesn’t result in double payment, and communicate that to your affiliates.
Remember that you can always get in touch with your Customer Success or Account Manager to discuss the reporting and tracking requirements for the implementation of a commission strategy around gift card purchases.
Tracking Payment Type Can Be Invaluable
Beyond wanting 360-degree view of your customers’ purchase behavior, it can be invaluable to know and track which type of payment they are using.
Payment type could include:
- Credit card
- Debit card
- Buy-Now, Pay-Later
It’s helpful to track payment type because certain payment types may represent different levels of valued customers within your business. Accessing this data will also present an opportunity for strategic utilization of it. For example, if you understand a significant percentage of your customers are paying with a credit card, you could use this data for an affiliate partnership opportunity with a credit card, financial institution, or payment provider. This could also be a similar opportunity with buy-now, pay-later payment providers.
If you want to track payment type, the best approach is to pass back ‘Payment Type’ as a metadata parameter so that you can then report back one each method.
Actions To Take:
As a first step, you’ll need to understand if you’re passing back payment type currently. If you are, great news! If not, it’s worth taking some time to look at the following:
- Do you have the ability to pass back ‘Payment Type’ as a metadata parameter at point-of-sale?
- Are you analyzing ‘Payment Type’ in your current reporting?
- Are there opportunities within your business to partner with different payment providers e.g. VISA?
Remember, the more data you’re passing back, the more opportunities you have for strategic commissioning and reporting.
Strategically Use Voucher Codes for the Greater Good
While coupon/voucher codes can be extremely effective when it comes to conversions and driving traffic, you want to utilize them in a strategic way, keeping your margins at the forefront of your affiliate program. That means taking a more bespoke, margins-based approach to coupons/vouchers based on what the user purchases.
Approaching coupon/voucher codes more strategically allows you to drive higher-margin growth. For example, strategic use of vouchers can result in higher-basket sizes or sales of higher-margin products. This is a best practice to help you avoid a situation in which you are essentially wiping your margins from the sale of the product.
Strategic commissioning on voucher codes does provide the opportunity for you to be more flexible with affiliates and arrange for bespoke, exclusive rates where applicable.
Actions To Take:
Before you do anything, take a good look at your current approach to voucher codes. How many are you handling? Are any voucher codes affiliate-specific? How are you managing their use?
Once you have a clearer understanding, remember that above all, be strategic. Review your current setup and see where you can set different commission rates on purchases by customers who use a voucher code vs. those who don’t. As part of this, ensure you aren’t paying out for sales where an “exclusive” affiliate code is being used through a different partner.
It’s also wise to look into dynamic coupon opportunities (these are voucher codes that adapt based on the basket items or customer type) with top coupon/voucher code affiliate partners in the space, as this approach is definitely a quick win for your voucher strategy.
When it comes to coupon voucher codes, it’s a key time to work with your network or solutions provider’s Customer Success or Account Manager to understand best practice, and what options are available to you when it comes to managing voucher codes.
Determine If Your Affiliate Matrix Is Aligned to Your Goals
It is important to analyze all of the affiliate partners you are working with. This will help you identify whether your existing affiliates are both relevant and helping you achieve your program goals. Additionally, it’s a good way to identify any gaps in your affiliate matrix. By evaluating your affiliate matrix, you will expose any partnerships you are not tracking or measuring to their full potential.
Often when looking at the affiliate matrix for top retailers, the 70/30 model is common – the top 30% of their affiliates are driving 70% of the revenue for the campaign. As much as this is a good rule of thumb, it is important to have a wide portfolio mix so that you are driving value through various potential customer types.
Actions To Take:
Firstly, map out your current affiliate matrix. This could be everything from influencers to technology providers.
Ask yourself these questions: are they best in market, and are they best in helping you achieving your business goals? If the answer to either question is no, it may be time to reassess those affiliate partnerships. This is a great opportunity to add new affiliates to your mix.
Additionally, If your audit reveals areas of affiliate marketing that are not being tracked to their full capacity, get in touch with your affiliate automation technology representative and arrange for the tracking parameters to be put in place to capitalize on wider opportunities.
Don’t let your retail affiliate program run on auto-pilot. By putting in place some or all of these quick wins, you will be able to ensure you are truly maximizing the potential of your affiliate partnership program.
While some of these tips may be easier than others to execute, it’s important to note that these aren’t one and done tasks.
You should continually monitor your programs and always be on the lookout for red flags. Leveraging an affiliate automation platform is one way to efficiently track all of your program data in one place, and to gain insight into other areas that can be improved or optimized. For more information on how the Partnerize Affiliate Partner Automation Platform can help, please contact us.
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