What are the most effective ways to manage your affiliate program budget?

Budgets for affiliate marketing are usually open ended as long as all the revenue is good quality revenue. So it’s somewhat of a false question. Now some companies don’t budget for resources to help grow their Affiliate program, which is a mistake. I’ve seen that over the years many times. But it’s hard to really know where to spend that budget to get something out of it.

I would also argue that if your inventory is freely available, and the payment model is % of basket, then it is MADNESS to allocate a budget. Macy’s won’t close a store on day 26 because they hit the months budget - why on earth would you do it with the affiliate program? For these scenarios it makes more sense for affiliate to be managed by sales and NOT marketing - if you insist in separating those depts.

I agree with my colleague Chris Tradgett who said, "It's madness to allocate a budget" when it's performance-based. However, this channel is increasingly in need of robust budgets for content creation and paid placements. Our programs are growing rapidly due to sponsored campaigns with relevant influencers with highly engaged audiences. We pay them to create the content, and then reward them with commissions on the sales. Budgets vary from $500 per month to $30,000 per month and all include free products to review. We are also seeing incredible PR placements in major media publications. Each site will send out a media kit and the requirements. Clients that fulfill these placements are rewarded with substantial new customers.

It is essential to clearly understand your business and campaign objectives before starting any affiliate program. You should already have an idea of your key metrics, such as LTV, cancellation rate, return rate, AOV, etc. The list varies depending on the industry you are in. Once you have that in place, your next step should be doing competitor analysis. Determining which types of affiliates you want to target and what your competition might be paying them is crucial. When deciding your payout and budget, you should consider things like brand awareness and market share. A brand with great visibility will always attract affiliates more easily. Lastly, listen to your affiliates' feedback. They can offer you valuable guidance.

I still bristle at the idea of there being a budget for commissions. Instead focus on building a program that rewards the right affiliates for the right actions on the path to your desired business outcome.

Managing budgets starts with commission structures - how much you pay depends on LTV, and performance separates affiliates. A few will generate a huge amount of sales, how do you approach them? Where can you increase commissions, tied to LTV? Without LTV, you're missing the foundational core of commission based marketing. We can afford to pay more for a good customer. And there are many different flavors of affiliates, the objective is to gain customers in the fairly expensive affiliate channel for acquisition, if they convert long term. Did this in a program, 5 affiliates generating tons of customers. 3 did great LTV, 2 did not. Lessened the commission for 2, and upped it with the 3 who died. LTV determines it all.

The commision is not an exspense, its only paid out if a result is achieved. No sales or leads etc, no commission payouts. If an affiliate makes a sale then you have made some profit assuming you know your margins before setting commission levels.

Make sure that you leave wiggle room here too - lots of publishers (TopCashback is a good example of this) will ask for an additional CPA (plus perhaps a flat fee) for extra short-term exposure which can get you in front of hundreds of thousands or extra eyeballs - so if you can't increase further you may not be able to participate.

Some affiliates will ask for the highest commission which might eat at your margins. Not all affiliates will give you more traffic if you give them a better commission plan so make sure these deals are negotiated and reviewed over time. Be sure to invest in optimizing your landing pages for affiliates. You'll have an easier time increasing your conversion rate by 25% than you will increasing your traffic by 25%. These wins are compounded by the realized benefit that your affiliates will earn more and realize your 20% commission might be worth more than 40% offered by your competitor.

Be careful of affiliates that capitalize on the websites inherent traffic and traffic from other sources or channels. A lot of affiliate networks’ top producers are this type of affiliate. Usually they use browser extensions to capitalize on the brands website traffic. Better to have direct publishers and affiliates. Check out publisherfinders.com which is the internets largest database of affiliates and publishers.

Affiliate quality can largely depend on your goals and attribution models you leverage. Are you a retail brand looking to sell more goods through increased conversion rates? A coupon-oriented affiliate and commissioning on a last-touch model may be a great way to grow your business. Or are you a service-oriented platform looking to drive net new, incremental traffic? In that case, the coupon affiliate would hurt your business and dry up your budget with low quality traffic. Instead, find pubs who can drive qualified leads and reward incremental traffic drivers with a first-touch attribution model. Affiliate quality is largely based on your brand’s goals, and it’s up to you to create the environment that rewards the right behavior.

Understanding your Publishers is key here. Publishers not only operate at different parts of the "funnel" however they also offer the opportunity to engage with wide ranges of different types of audiences. Content publishers offer the chance to provide more contextual information behind your brand and your products with engaging Articles, Listicles and reviews, whilst Cashback and Discount/Coupon sites offer the opportunity to convert customers who are more price sensitive. Whilst considering your publisher selection, always be thinking about the rates you can afford to pay each individual publisher type, bearing in mind that some publisher types are perhaps more inclined to drive customers who will have a lower margin purchase behaviour

This sounds so obvious, but you don't know who the best affiliates are by size of audience or relevance. Those are subjective guidelines which while useful, don't always lead to the best affiliates, wish it were that simple. Focus on quality, what makes quality affiliates, then look to the channel to set up a list to test. I've found affiliates in the same channel, meeting all the good traffic and relevance criteria. But when tested 3 affiliates generated excellent LTV customers, and 2 gave us poor LTV customers. So we scaled the 3 and disconnected from the 2 poor ones after trying improvements. Quality is not a subjective statement, it's data driven and flexible. Plus great affiliates may not fit into your neat definitions so be open.

It all comes down to building strong, mutually beneficial partnerships. The 80/20 rule does apply, whereby you need to take a strategic approach to a small group of top-performing affiliates, partnerships that you nurture and optimise. However, you never know who the next 'Top 5' partners are. I remember when 'AsSeenOnTheScreen' was a mediocre non-brand, and Trivago started to climb up the list of sale-generating affiliates. Don't take the long-tail for granted!

Managing your affiliate marketing budget effectively involves supporting and incentivizing your affiliates. Provide them with marketing tools, training, and resources to enhance their performance. Offer motivational incentives like bonuses or rewards for achieving targets. Continuously monitor the impact of these strategies and adjust as needed to ensure they're effective and aligned with your budget. This approach not only optimizes budget use but also boosts affiliate engagement and productivity, benefiting your overall program.

This is where your Program Management skills come to the fore. Staying on top of updating your creative banners within your Affiliate platform might sound laborious, but your Publishers are supposed to be an extension of your brand - so don't have them promoting last years offers within your creative, or pushing A/W collections in the Summer! If you work with your Publishers to find as much as possible about what they need to promote you best, you will reap the rewards!

Worth knowing that a lot of big publishers who can drive large volumes will struggle to work with a direct platform - I would always advise working with a well-known affiliate network because, as a publisher, it would be impossible to integrate and manage every advertiser directly due to the costs involved.

Speaking from an app-based perspective, there are multiple MMPs and most brands already use one. Each one has it's own advantages like some of the MMPs like (AppsFlyer) let you grant access levels in different hierarchies which will allow some of them to act as ad networks and some as agencies which can onboard ad networks. MMPs like (Singular) let you define your own rules when it comes to invalid traffic and highly useful when you would like to prevent invalid traffic, which the affiliate partner would not be open to in few cases It is crucial to know which partners you would like to work with and checking if they are already integrated with your MMP or not, which shall ensure seamless tracking experience for both brands and affiliates.

Whether you're a start-up or a blue chip, Affiliate tracking is available and should not be looked over. Networks such as Webgains offer a tracking solution at all levels of membership. This is one of the fundamentals that your program is built upon - without reliable tracking, your publishers are not paid fairly and subsequently will stop working for you as they are paid on a CPA basis.

All depends on the budget as to what affiliate tracking you use. You could splash out on one of the big networks or keep it low key with a Wordpress plugin or Shopify app etc depending on your ecomm or websites platform.

Do research and learn what options you have available. Network with other programs to see what they like and don't like about affiliate program software. I highly recommend any program to avoid building this in-house at the start. Some affiliate programs automatically enrol you into an affiliate network which can give you instant access to 1000s of affiliates.

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