As the next chapter of affiliate marketing is written, flexibility will be a dominant theme. Answer the questions below based on your current state and your anticipated needs over the next 24 months. An honest assessment of these four primary drivers will put you in a position to make the right decision for your business.
1. Is your company equipped for in-house affiliate marketing?
Affiliate marketing programs are complex. Successful implementations will leverage a technology platform to create efficiencies in workflow, but the technology alone does not eliminate the need to maintain vigilant oversight. Marketers must engage in ongoing communication and collaboration with publisher partners, pursue the enforcement of program rules and brand safety, and interpret and act on the analytics and insights generated by the underlying technology solution.
If your organization does not have a committed strategy for performance marketing, the necessary expertise to execute, or access and a commitment to hire subject matter experts to own your program’s performance, fixed-fee models that rely on your in-house administration are not right for you.
2. How is your program budget funded?
Does channel performance determine additional investment or budget? How much can you afford to spend on commission payouts or paid placements? Do you separate technology costs in your budgeting process, is it funded by total program performance, or are you built to fund on a campaign or program basis? If you need the flexibility to fund your program based on generating business outcomes, a fixed-fee model will be less attractive, and it will be more difficult to gain the necessary internal approvals.
3. What are the total cost of ownership and ROI projections?
Is the technology fee in the fixed-fee model sufficiently transparent and predictable? Will tiers result in unexpected fees? Are you equipped to project and measure ROI effectively? Do you understand ancillary fee structures, and do you have sufficient advance visibility to account for all expenses required to operate a high-performing program?
4. Is your affiliate program mature or still growing?
As the underlying platforms enhance their ability to automate publisher discovery and recruitment, most programs should be in a position to grow. If you believe your current program is mature and you are inclined to move to a predictable fee structure because you view your needs as maintenance, consider that growth will come from the ability to identify and recruit incremental affiliates to your program while adjusting the mix of volume from your base publishers. This lends itself well to a hybrid model in which a fixed fee supports the mature segment and a variable fee supports the growth engine.
Commercial models are at the will of the market, and mutually sustainable partnerships between marketers and solution providers require flexible commercial models that retain the integrity of the sector’s pay-for-results nature and respect the unit economics of both underlying business models.
About the Author
Matt Gilbert is the CEO of Pepperjam, an affiliate marketing company redefining its industry through innovative technology and service. Matt has 20 years of executive leadership experience and is passionate about teaching clients how to leverage data and technology to improve marketing effectiveness and maximize customer lifetime value. Pepperjam is committed to empowering marketers by enabling the profitable acquisition of high-value customers while protecting brand safety.