Affiliate programs can be a great way to drive sales, but many of these programs suffer from a major problem: they cost way more than they should and don’t drive as much revenue as they appear to.
The source of the problem has to do with the quality of the sites that are part of the program. Approving too many low-quality sites can inflate costs without driving much additional revenue. The fundamental goal of every affiliate program should be new customer acquisition. The problem with low-quality sites – such as coupon sites, incentive sites, and loyalty and toolbar sites – is that they fail to target new customers.
These types of sites tend to target existing customers who would have purchased from the company anyway. Take, for example, the perennial deal-hunter who has already decided on making a purchase. But before they do, they scour a coupon site that’s part of the affiliate program to see if they can find a deal.
If they end up converting via the affiliate channel, the commission payout to that affiliate is essentially a waste of money for the company since they are essentially paying the affiliate for a customer that was going to make a purchase anyway. In other words, these low-quality affiliates don’t actually add value and can often hurt a company’s bottom line.
The first downside of these low-quality affiliates is pretty obvious: they constitute an unnecessary cost. The money spent on their commissions could be better spent acquiring high-quality affiliates or on a different marketing channel entirely. In many affiliate programs, low-quality sites even command the same commision rate as a high-quality site that drives new customers.
The second problem with low-quality sites is that they don’t drive new traffic or sales. They are just poaching from other marketing channels, such as SEO or PPC, thus damaging the effectiveness of that channel.
On top of all this, low-quality sites can also be major perpetrators of affiliate fraud, which can include anything from spyware and adware to cookies stuffing and typo squatting. Limiting low-quality sites will also decrease the amount of fraud in an affiliate programs. Otherwise commissions get paid to sites engaged in illegal activities. One of the most important things to get right when managing an affiliate program is carefully reviewing the quality of every affiliate. Low-quality sites should either be paid much less or outright denied from the program.
Ideally an affiliate program should focus on high-quality affiliates such as blogs, product feed sites, and daily deal sites that focus on quality content. These are the types of sites most successful at delivering new customers.
At the very least these high-quality affiliates should get a higher commission rate than low-value sites because the high-quality sites are the ones actually driving the highest percentage of new customers. If low-quality sites are going to be included, they need to be carefully segregated and paid a much lower commission rate.
A well-managed affiliate program will make every effort to control these low-quality site, thus bringing down the cost while guaranteeing that only valuable new customers are being driven to the site.
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