Maintain the diversification of Publishers in an Affiliate Program
The structure of publishers within affiliate programs is very diverse. Our research every year shows that within a single affiliate program, there can be up to a dozen different categories of publishers covering all or a large part of the classic sales funnel: From building awareness, interest, and desire to user action or loyalty.
When selecting affiliate networks, eCommerce advertisers very often state sales as the main goal of the partnership. Consequently, a large proportion of them assumes that the primary billing model should be Cost per Sale (CPS) since the aim of the partnership is to generate sales. Furthermore, advertisers expect a high diversification of sources and publisher categories. The initial assumption is correct, as it is largely based on budget certainty with appropriate commission levels and fair compensation for the business partners for the effect achieved. But there are also some challenges, which will be discussed in more detail below.
The Sales Funnel
The first is the Sales Funnel and the user’s typical purchase path. There is a group of users who first search for information about a product group, e.g. hoovers. This provides information about the available models on the market, the features, the design of the different products, etc. At this stage, they don’t know yet which model or brand they want to buy. They usually get this information from content sites like blogs, influencers, or industry article sites. Only afterwards, when they are aware of the situation, they will move to the next step, which is the desire to buy a specific model or product. The information in this phase usually comes from review sites or sites that refer to different types of feedback from other users. At the very end, they use websites that interact at the bottom of the funnel, such as price comparison websites, voucher/promotion websites, or cashback/loyalty websites. Very often, the last interaction with an offer before the final purchase comes from these sites.
The Attribution Model
Another important factor is the attribution model, which in most affiliate programs is configured in such a way that the conversion is attributed to the source from which the last click originated. In this case, when analysing a user’s purchase path, it is easy to see that most conversions are attributed to publishers at the lower level of the sales funnel. That is a natural situation, as few users decide to buy a product after seeing the available offer on the market. The price still plays an important role for a large part of consumers. So, when a potential customer decides to buy a certain product model, there is a high probability that they will check the price in different places in order not to overpay. Of course, price comparison is easier in some product categories (electronics) and more difficult in others (fashion), but even in these harder-to-compare product categories, there are publishers who interact with users at the bottom of the funnel, such as publishers who offer remarketing activities.
The hybrid remuneration model
At Tradedoubler, we are aware of this and use a hybrid billing model. We reward publishers at the top end of the sales funnel, who can rarely expect a measurable commission in the classic attribution model, even though they deliver real added value to the advertiser in the form of interactions with the ad or referrals to the website of the shop. The classic attribution model is based on a combined Cost per Sale (CPS) and Cost per Click (CPC) model. In this way, publishers can expect to receive a commission in the first phase of a user’s path to purchase, regardless of whether the conversion is attributed directly to them or to another source.
This solution helps to keep content publishers in affiliate programs. We have noticed that in programs where advertisers have switched exclusively to a pure CPS model, the number of content publishers who generate content has decreased significantly, and in extreme cases, these publishers have stopped their advertising activities completely. This happenes because, after a recalculation of the return on investment, it becomesapparent that such advertising activities were simply unprofitable from their point of view.
How to do it
In summary, there is a need to ensure that publishers are adequately remunerated for their work to maintain interaction with users at the top end of the sales funnel on the program. The answer to this need is a hybrid CPS and CPC billing model. After adding the commissions from both models, the advertiser can easily calculate the ROAS and evaluate the effectiveness of such a campaign. On the other hand, the publisher can convert the earned commissions into effective Cost per Click (eCPC) to easily compare the revenue from a particular campaign with other campaigns running in the pure CPC model. With this approach, it is possible to effectively reach the sales targets of running affiliate programs while maintaining a high diversification of the different publisher categories, regardless of where they appear on the user’s buying path.
Do you want to start a hybrid CPS and CPC billing model? Then get in touch with our expert Michal Mroczek >>
