The Complete Guide to Affiliate & Partnership Commissions and Tracking
Tags: Affiliate Marketing Tips, Affiliate Marketing, Partnerships

When it comes to setting up your affiliate program and recruiting partners, you’ll need to understand commission structures. Knowing these will help you agree with publishers the best possible placements on their site, in return for optimal profit margins. It’s fair to say that not all publishers or partners want to work with you purely for commission. Others are seeking mutual placements or deeper integrations in return, but on the most part commissions are the main agreement between advertiser and publisher.

How do Affiliate Commissions work?

Each customer referred to you by a publisher is tagged in your affiliate system using cookies via the tracking linking to your site from the publishers placement. Your affiliate program will record each referral and therefore the commissions owed per publisher.

The advertiser will take these results from their affiliate program and pay publishers, typically once a

month. Publishers should have visibility on these results and their commissions in the advertisers affiliate program. In some cases there is no program for them to log in to. In these cases the advertiser will send a monthly email report.

There are typically 6 types of commission structure that an advertiser will agree with their affiliates:

Types of Affiliate Commission Structures

RevenueShare – paymentismadeasa percentage of each referred customer’s basket/ value. 2. CPA – costperacquisition;aone-offpaymentfor each customer’s initial sale. 3. CPC – costperclick;payingeverytimea customer clicks through to your site. 4. CPM – costperthousandimpressions;paying every thousand times your ad is shown. 5. FixedFee – afixedpricetothepartner. 6. Hybrid – acombinationofanyoftheabove models. Ways of paying Affiliates and when Advertisers will either work on an automatic pay out or invoicing approach. If a brand has a fully fledged affiliate program that publishers are signed up to, then an automatic system might be in place. For others they may expect publishers to invoice them. . Publishers should expect payment within 30 days after the month’s activity, unless the contract states otherwise. Some advertisers though choose to pay out weekly, others will do so quarterly. Less likely, are advertisers that pay out beforehand, based on forecasted referrals, and adjust each month accordingly. How much should I pay my affiliates? There are several considerations when it comes to how much you should pay your affiliates. These are: Competitors One of the first tips when it comes to deciding how much you should pay your affiliates, is how much do your competitors pay? You might ask, how do I find this out? Well, the easiest way is to go cashback websites, such as Topcashback and Quidco, and search for their brand. Often the cashback they give away is the same as their CPA. Therefore, the same as their commission rate. This gives you a starting amount for your own CPA rate. This shouldn’t the be sole way you decide your own payout structure, but it certainly gives you a starting point. Lifetime Value or ARPU Probably the most important element of deciding your rates, is to understand your customer lifetime value (LTV) or average revenue per user (ARPU). Your customer lifetime value is the amount a customer is worth to you during the years they are active. For a subscription brand this might be the cumulation of the total spend they might have with you over an average

length of 3 years. If your calculations work out that a customer is worth to you £100 over these 3 years, then this will help determine a CPA.

In summary, you wont want to give away the full LTV value, otherwise you’ll make nothing on a customer. So, look to go for half or a third of that value, and cross-reference it to your historical and competitor rates, to finalise your CPA commission value.

Profit Margins

Also consider your profit margins. If you make £100 per customer over 3 years, but your profit margins are so tight that your operating costs of serving this customer also equal £100, then giving that value away as your commission just doesn’t make sense. If though you make a four times mark-up on your product, say £25 per customer, then you’ll have more flexbility on your CPA rate and might be able to give away £50. This equals a £75 overall cost to acquire a £100 customer.

Historical

Lastly, if you are new the business, why not look at historical commission rates. In the past your business may have run affiliate relationships and rewarded accordingly. This information might give you relevant insight into what to offer publishers going forward. Alternatively, your industry might have historical information for you to view. Browse affiliate program comparison sites, and they might give you insight into what has typically been offered as a commission structure in the past.

How to track Partnership Marketing campaigns

The more data that can be collected the better understanding one has on what is going on and what decisions to make going forward. To gather this data every campaign needs state of the art tracking. At this stage your tracking should be configured so it’s all in place for going live with your campaign.

Understand the Customer Journey

Understanding the customer journey is the first step to employing tracking. As a general marketing rule knowing this journey is key to fully understanding where and when customers make decisions and take actions.

For new customers online the journey begins with the user directly visiting a brands site. Next the customer may then select a product and make a purchase. For existing customers it may involve returning to the site from a newsletter or retargeting.

Offline journeys are more effected by recognition and convenience. A new customer may try a product for its branding having seen it recently advertised, while existing customers may return to a store due to its location. Understanding all of this helps decide where and when tracking should be deployed.

Decide on your tracking

First things first, its pivotal that we track effectively as we have two brands marketing under one campaign. Online we can use cookies and tracking links implemented at different touch points along the user journey. Offline we can use promotional codes or loyalty cards. When it comes to tracking you want to select a process that works for both partners. Here are a several tracking options available:

PromoID – Linked to your internal data or CRM.

PromoCodes – Using codes such as ‘TicketSale’ or ‘CheapTrains’.

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3rd Party Tracking – Affiliate tracking, Adservers, Doubleclick.

UTM – Tracked via Google Analytics. Which tools and data

Your decisions here will be influenced by the type of partnership you are running as well as the journey the customer takes.

Online Partnerships

What makes online marketing unique is that unlike offline the performance can be proven. Some of the tools mentioned above, such as Google Analytics, affiliate programs, or Doubleclick, are all recommended to track campaigns. Doubleclick for example is highly advantageous for programmatic direct-buy campaigns, whereas CAKE is a great all- round tracking technology. UTM codes, tracked via Google Analytics, is really useful too, particularly if you are just starting out, they are easily to create and implement.

A good example of employing online tracking in a partnership is a joint content campaign we ran with Xero, an emerging accounting technology. We promoted their content via our communication channels and vice versa. Both embedded UTM tracking links and analysed the number of customers clicking through. A very easy way to track the performance the success of our campaign.

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. Offline Partnerships

Away from the devises it’s a different kettle of fish. Any brand that advertises offline experiences the ongoing problem of tracking their outcome. Some popular solutions include using promotional codes, loyalty cards or mobile data. Mobile data is the latest tracking trend. The concept being that electronic billboards will sync with our mobile activity using geolocation, tracking those who search for a brand after they have walked passed an ad’s location.

The best tracking we really have though at the moment is the PromoCode. Where a certain code can be taken into a store by a customer, allowing the firm to recognise if an offer has been taken up. It is also a great way of taking offline activity online, by entering the code on onsite checkout pages. We can’t sugarcoat it though, we still don’t have a clean answer for offline tracking, which is perhaps why so many marketing campaigns are moving online these days.

How to negotiate Partnership commissions

This article outlines our top tips for negotiating commissions with a partner brand. This takes the perspective of a brand promoting another brand, so effectively taking the role of the publisher.

The first time you agree to expose a partner on your site is often your best chance to agree favourable commission terms, so make the most of this opportunity. Find out the possible commercial options and understand the techniques of how to negotiate them.

Understanding the details of commission negotiations

Standard Terms

Most advertisers will offer you as a publisher their standard terms from the offset, because they have no proven results from you yet. They don’t know how many customers you will refer. So, most advertisers will start with a basic revenue share or CPA.

CPA vs Revenue Share

There is a big question which is more favourable. A CPA, which is a secure form of commission, as you get a one off payment for each customer. Or Revenue Share, which will lead to much higher growth but there is inconsistency where basket size can fluctuate. Our tip is to therefore negotiate a hybrid structure of CPA and Revenue Share model. Though this might only be possible when you have proven conversion track record of working together, 6 months to a year.

Complexities

Some industries offer varying levels of commission, with varying degrees of complexity. The retail industry can be relatively simple where often CPA is the norm. But in gaming, revenue share is the traditional method.

There are further complexities that many publishers aren’t even aware of unless they reach super-affiliate status. In gaming you can negotiate a ‘Lifetime Revenue Share’. This means you earn from the customers usage for the life they are active with the partner. Or even something called a ‘no negative carryover’. This means any losses incurred due to the revenue-share slipping into the negative (as rev-share

is based on user earnings), aren’t carried over to the next month.

In some industries they use something called a ‘Click Floor’. These are minimum number of clicks you need for a CPA to kick in.

Our top tip for your industry is to be fully aware of all possible commission terms available to you while you’re negotiating.