Affiliate marketing: what are the costs and what are the returns?

[jrineakter]

Almost all large e-commerce companies in the Netherlands have an affiliate or partner program. Within an affiliate program, advertisers give website owners the opportunity to promote their product or service in exchange for a commission per closed lead or sale. In this article, I will delve deeper into affiliate marketing.


What are the costs of an affiliate program for the advertiser? What costs should you pay attention to when managing an affiliate program? I will try to give you as complete an overview as possible. Finally, I will discuss the question of what you should pay attention to when choosing a network.

1. Affiliate marketing network costs
Below I will explain the costs of an affiliate network per component.

Affiliate network
You start an affiliate program (with exceptions) at an affiliate network. The largest networks in the Netherlands are Zanox, Daisycon and Tradetracker. These networks take azerbaijan telegram number list care of the measurement of orders, promotion of the program and the recruitment and payment of the affiliates. The advertiser receives an invoice from the network once a month. But what does such an invoice contain?

Affiliate network costs
An affiliate network works largely 'performance based'. This means that a margin is calculated on the affiliate fee. It works as follows: an affiliate receives a commission on a brought in sale or lead (for example 10 percent on the order amount). On an order amount of 100 euros this is 10 euros. 10 euros is the amount that the affiliate receives for the brought in sale. The network calculates its markup on this affiliate fee of 10 euros. With a markup of 1.25 your final costs are 12.5 for this order. The amount of the network markup differs per network, per advertiser and per sector.

In addition to the network storage per order, networks charge start-up costs, license costs and traffic fees. These are one-time or monthly costs for the use and maintenance of the interface and the hours that are used for starting and promoting the program. These costs differ per network.

Stack of money coins, opposite curve

Why are there differences in network storage?
Because an affiliate network is paid per registered order, the network benefits from a successful affiliate program. If 100 orders are registered per day via your affiliate program and the affiliate network receives a network fee of 1.25 per transaction, the network earns 25 euros per day. With 10 orders this is 2.50 per day. A lower network fee is justifiable for an affiliate program with a lot of potential.

The potential of an affiliate campaign depends on the industry, competition, site conversion, number of quality affiliates, program terms, affiliate compensation, and other factors.

2. Deduplication of orders
If you work with multiple networks, there is a chance that one order is registered with two networks. Prevent paying twice for the same order by deduplicating. During the monthly or biweekly approval of orders, compare the lists of the networks and check which orders are registered with both networks. Approve the sale with the most recent click ('last cookie counts').

If you use conversion attribution within the affiliate channel, you can choose to split the compensation, since the affiliate of the first click played a role in the purchasing process.

Percentage value of contact moments
Conversion attribution maps a customer's online journey from the first contact to buying a product or service. Each contact moment is then given a percentage value. This way, the online marketing budget can be divided.

An example of such a route could be Google AdWords > affiliate site > Facebook > organic > AdWords > affiliate > sales. It is also possible to use conversion attribution within the affiliate channel. In that case, all clicks that are registered within the affiliate channel are considered.

3. Affiliate compensation
For a successful program it is important to have a competitive affiliate fee. Affiliates are commercial and want their website, email list or Facebook page to generate as much money as possible. But what is at least as important are the offers and the conversion of the advertiser's website compared to the competitor.

Exampleiphone_6_lightcurb
A telecom comparator has 2 offers for an iPhone 6 subscription on its website:

Advertiser 1 offers a free iPhone 6 with a 40 euro per month subscription.
Advertiser 2 offers a free iPhone 6 with a 45 euro per month subscription.

Advertiser 1 gives an affiliate fee of 30 euros.
Advertiser 2 gives an affiliate fee of 50 euros.

The affiliate fee favors Advertiser 2, but the consumer offer favors Advertiser 1. In this example, the conversion determines which advertiser will be promoted the most. If the advertiser with the best offer, based on the clicks forwarded, converts twice as much as the advertiser with the higher affiliate fee, then Advertiser 1 wins.

If the offers are always sharper than the competition, then the affiliate fee can be adjusted downwards without this being at the expense of the numbers. Affiliates look at what a click yields in combination with the volume of clicks that they can forward. Based on this, the degree of promotion is determined.

By knowing your position in your market, you can determine the most ideal affiliate fee. A fee where the affiliate is happy with the revenue and the advertiser is happy with the cost per order is the goal.

4. Choice of affiliate network
What should you pay attention to if you, as an advertiser, want to start with affiliate marketing when choosing an affiliate network?

There are many different networks in the Netherlands, all with specific sectors in which they specialise. For example, almost all providers of telephone subscriptions are affiliated with Zanox. Because these telecom parties are all affiliated with the same network, you can assume that the most important affiliates (comparison sites, but also Apple and Samsung blogs) for telecom can be found at Zanox. In addition, the account managers automatically have a lot of industry knowledge. This can be a reason for telecom advertisers to choose Zanox.

Competitive considerations
However, the large supply of telecom advertisers can also be a reason not to choose Zanox. The assumption that you will become 'one of many telecom advertisers' within the network can cause your affiliate program to not stand out enough. In addition, it is possible that too little attention is paid to your affiliate program because the network has 'more important' telecom advertisers.

A network that is willing to run hard for you and manages fewer affiliate programs from your direct competitors may be more successful. It is important to take these considerations into account when deciding on an affiliate network. In addition, the costs, especially the network storage, are essential when choosing a network.