What are the different affiliate marketing payment methods?

According to Statista, the affiliate marketing spend in the UK in 2020 was calculated at £627 million, and is expected to rise by over 10% globally over the next few years. It is clear that the affiliate channel has gone some way in further establishing itself as one of the key drivers of growth for e-commerce retailers.

As the channel continues to mature with various network networks developing tools and technologies such as Awin’s cross-device tracking and influence reporting, advertisers find themselves in a position where they have access to more data driven insights.

Optimising how this information is used can help advertisers produce focused, long-term strategies based on their priorities for specific types of affiliates.

For example, a telecommunications advertiser may want to adjust their strategy to prioritise affiliates who drive more customers with higher lifetime values or a fashion retailer may want to prioritise affiliates who drive a high percentage of first time buyers.

With this in mind, let’s consider the different ways of paying your affiliates with the various payment methods.

Traditional Affiliate Payment Methods

Traditional methods of affiliate compensation are based upon the completion of a desired action, these include:

Cost-per-acquisition (CPA): Fulfilment of a sale

Cost-per-lead (CPL): Completion of a registration form, subscription to newsletter, etc. 

Cost-per-click (CPC): Fixed rate based on banner/creative clicks

CPA is considered to be the most successful and well-established affiliate payment method. It typically operates on a last-click wins approach, which credits the last referring affiliate with the commission.

This model has been a mainstay in the affiliate channel for the best part of two decades and has given site owners the opportunity to flourish in the digital landscape by monetising their websites.

As the evolution of technology has been rapidly improving, it now provides advertisers more insights into the affiliate world, making the customer journey less linear, and therefore conversations are now mainly focused on the best methods for affiliate compensation.

Diverse Affiliate Payment Methods

Based on the advertising insights, priorities and what they want to get out of their affiliate marketing programme there are a number of options Awin can explore:

Influencer Recognition

Some of the most influential affiliates can be found at the top of the purchase funnel, with early funnel contributors tending to be blogger or rich content sites. Consumers use these sites to fuel their interest, and they therefore play a vital role in influencing the consumer to eventually go on to complete a purchase.

Advertisers can compensate these affiliates by running an ‘Influencer Campaign’, a functionality readily available in the Awin system which tops up the commission earned by these influencers for conversions they were involved in, but they were not the last site that a customer clicked on before purchasing a product.

Multi-attribution

ROI (Return on Investment) is a key metric for any advertiser operating within a performance marketing channel. Understanding each of the individual touch points involved in a customer’s journey from first click through to conversion as they interact with the brand, can help ensure budgets are invested effectively to maximise ROI.

A multi-attribution affiliate payment model can be used to split the commission offered for a conversion based on where the customer interacted with the brand across the different touch points. For example, if there are four affiliate touchpoints within a conversion, the commission split can be weighted to reward the affiliates at touch point 1 and 4 with 30% of the commission and the middle two affiliates with 20% each.

To optimise this strategy, attribution should be considered across all digital channels rather than exclusively within affiliates. Some considerations to take into account are the different payment models used across multiple channels as affiliates are compensated post conversion and PPC, for example, is compensated regardless of a conversion. Some affiliate types, such as cashback or loyalty sites, need to know the commission they will earn prior to the conversion taking place so that this information can be passed onto their members.

First Time vs Repeat Purchasers

For advertisers who have targets measured towards whether or not a customer is a repeat buyer or a first time shopper, monitoring this split will enable them to identify which affiliates they should be investing more in.

A key consideration here is the lifetime value of the customer. Lowering the commission for loyal existing customers should generally be deterred, as it’s likely to drive away the customers you’ve worked so hard to gain the trust of.

Instead, consider maintaining your standard commission for repeat customers but increasing the commission for consumers who are new to the brand and converting these into loyal patrons through the quality of your product and service.

Cross-device tracking

With the rise in access to multiple devices, consumers can find themselves always ‘online’. Customer journeys have become more complex, spanning across both multiple channels and multiple devices. Awin’s cross-device solution tracks the full transaction as the customer switches from device to device.

Advertisers have valuable advertising insights into the behaviour and intent of their customers depending on where they are in purchase path, the device the brand is being engaged on, and which affiliate is influencing the customer’s journey. This gives the advertiser the opportunity to adjust their strategy to improve user experience.

In summary, they have access to far more advertising data today than ever before, but it’s how they use this data which will ultimately define what their affiliate programme will look like. Each of these affiliate marketing payment methods have unique attributes which will appeal depending on the priorities and focus on an advertisers digital marketing objectives.

The affiliate channel is designed to maximise reach across a broad range of sites who are there to promote the advertisers brand. As it continues to evolve, now is as good a time as ever for advertisers to think beyond the conversion when it comes to how they reward their affiliates.