Advertisers: Are you Rewarding For the Sales that Matter Most To You?
LinkConnector is an Industry Champion Member of the Performance Marketing Association.
Let’s create a scenario. You are an advertiser who pays your publishers a percentage of revenue for each sale a publisher drives through your Performance Marketing program. Let’s assume not all sales are equal since they rarely are. Chances are you are valuing each sale the same by paying your publishers the same percentage for every sale.
This isn’t necessarily a problem unless you, or more likely your boss, have a different objective other than maximizing the number of sales. Don’t get me wrong; maximizing the number of sales is extremely important, however, it is seldom an advertiser’s primary (or even secondary) objective.
All Sales Are Not Created Equal
Often, advertisers value new customers over existing ones. They favor customers that tend to generate repeat purchases, and they prefer those with higher average order values. Rarely does a single sale equal the same value as any other single sale.
Yet, publishers generally have no means to understand these differing objectives. More importantly, it is difficult for a publisher to optimize to an advertiser’s value without any financial differentiation.
The easiest example (and probably most common) is the acquisition of a new customer versus a publisher referring a sale from an existing customer. Advertisers generally value the publisher’s assistance in helping to drive a sale from an existing customer.
But, new customers paid under the Performance Marketing model represent a greater value for most advertisers. Generally, this concept is recognized up through an advertiser’s entire executive chain of command.
Let’s create another scenario, but this time through a different perspective. You are a publisher working to drive traffic to an advertiser’s site. You know that the advertiser will compensate you more for a sale completed by a new customer compared to a sale completed by an existing customer. With this opportunity, you are better empowered and financially incentivized to optimize to the actions that tend to drive new customer acquisitions. The greater the commission gap, the greater the financial incentive for you.
Now, let’s again assume you are an advertiser, but one who pays 10% of revenue for a sale from an existing customer and 30% of revenue for a sale from a new customer. And, let’s assume one of your publishers is driving you sales from five different promotional channels—one of which drives new customer sales and four of which drive existing customer sales.
Over time, the publisher is going to maximize their efforts to drive you traffic (and sales) from the new customer channel because it generates higher commissions. If all five of the channels were originally driving you an equal number of sales, your new customer acquisition percentage starts out as 20%.
Now, as the publisher optimizes their efforts to drive more promotional traffic from the new customer channel (to maximize commissions earned), your new acquisition percentage increases—making this publisher relationship much more valuable to your organization.
Align Commission Structure With Your Goals
The key to designing a good commission structure for your Performance Marketing program is to align the structure with those things you value most as an advertiser. Once you have your commission structure aligned with such metrics, you will be able to more easily work with your publishers to optimize to those goals. The publishers that succeed will become your strongest performers, and the value they bring to your program will be vividly apparent and valued throughout your organization.
Finally, commission structure is simply one thing you can do to align your Performance Marketing program to your organizational goals. There are many other things you can do to empower your publishers to help you reach such goals.
As one example, you could arm publishers with coupon offers that encourage conversions from your most valued customers.
But, that is a topic for another day.
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- Advertisers: Are you Rewarding For the Sales that Matter Most To You? - January 26, 2014