Customers are not created equal but is there a trend of inequality starting to emerge?
In the world of affiliate marketing campaigns, customers are not created equal. Return customer conversions can often generate a lower commission for affiliates (and in some cases, no commission at all!). So what’s the reasoning behind this, and is it fair for advertisers to weigh these return customers differently to new customers?
What constitutes a new customer will vary for each advertiser and vertical. For example some will classify a new customers as someone who has never purchased before while others will stipulate that anyone who hasn’t purchased for a period of 12 months or more should be classified as a new customer.
In addition to the classification of new customers, the length of time an advertiser has traded online will impact their share of new customers. As time passes there will invariably be a tipping point at which it is no longer possible to maintain such a high share of sales from new customers.
Many affiliates argue that they don’t have control over the type of traffic they’re sending to sites and if they’re having a run of just repeat customers, it could be down to sheer bad luck. Different products and services carry a different level of brand loyalty, however, advertisers have the power to recruit content sites that are relevant to their product or niche, so that the affiliate and advertiser are an ideal match.
The more natural sites (content/blogging/comparison sites) carry more value to an advertiser than a coupon site and then what is almost always the case, return customers get lumped into a category of only being after a discount without regard to where the referral originally came from.
What is a “repeat customer” anyway?
The definition of a “repeat” customer is ridiculously broad: it could be a loyal customer who regularly visits the site, or it could be someone who made a one-off purchase a decade ago. So why are these two customers given equal weighting when it comes to affiliate compensation? Well, expanding the customer base is one of the most powerful features of the affiliate network, so once a customer is converted, it’s cheaper for advertisers if they complete any future purchases directly with the customer, and not the affiliate.
At the end of the day, a return customer just isn’t as valuable to the advertiser. However, advertisers do need to tread carefully here: if they don’t see the value in retaining existing customers and building loyalty, they could lose not only affiliates, but buyers too.
Repeat customers are loyal and will keep buying, so affiliates should be rewarded accordingly for driving them to the site, right? But think about this: if the customer was so loyal, wouldn’t they purchase directly from the site? Existing customers consider the affiliate to have a strong influence in their buying process, and this trusting relationship can be a powerful thing.
One reason customers shop around is to see if they can find a better deal elsewhere. More often than not, the intent to purchase may already be there and the affiliate channel and it’s influence is a last stop for some savings more so than the reason the customer took action.
That translates to the indisputable fact that that purchaser is not the merchant’s customer, that they will buy from whoever has the best deal. In the online world there is very little loyalty, when it’s so easy to shop around based on pricing and the fact that someone perceived as “your” customer can be found on 100 other online retail databases around the world — ready to be marketed and sold to.
The customer journey
A single customer is no longer present on just one database — in fact, their purchase journey, whether the end result is via affiliate or directly on the company site, is a lengthy one and can include multiple other channels. For example, a customer may do a general search, browse a few Google ads, then do another search later before finally clicking through and making the purchase. In cases like these, it’s hard to say whether an affiliate is totally responsible for that purchase. A good solution here would be for the affiliate and advertiser to work together to try and identify the paths these customers take. That way, the affiliate program can work efficiently and potentially lead to that customer going directly to the affiliate site.
So what’s the solution — should return customers be assigned the same commission value as new customers? Well, there’s really no black-and-white solution. If the affiliate and the advertiser can work together to come up with a new pricing structure that takes into account customer pathways, loyalty, and spending habits, then perhaps everyone will be happy.
It is important to keep in mind that affiliates cannot differentiate between new customers and existing customers.
Customers that visit affiliate sites are exposed to your brand, click through, and make a purchase — it’s a great method for strengthening your brand, gaining additional exposure, and getting life-time customers. The best and most successful Advertisers reward their affiliates by offering above industry or vertical average rates for new customer acquisition.
Penalizing your affiliates for returning customers, whether those customers bought once since your site came online, registered on your site but never purchased, or somewhere inbetween is becoming a dangerous trend that tells affiliates you don’t value their efforts for bringing customers back to you. Especially if your commission policy for return customers is below what is considered fair compensation for your vertical as far as commission rates go.
For example, when your commission terms were 10% across the board and you announce that you’re raising your commission rate to 12% for new customers and lowering your commission to 5% for “existing” customers, this is considered a penalty against your affiliates. The fair and reasonable remuneration would be to raise your new customer rate to 12% and leave your existing customer rate at 10%. In this method affiliates are being rewarded for generating new customers but not facing a penalty for traffic referral types that are outside of their control.