Affiliate Retention: Rewarding good affiliates while weeding out bad ones

My previous article – Affiliate Marketing Retention Vs Acquisition Strategies (which you can find on http://www.igbaffiliate.com) - focused on the importance of strategically choosing your affiliates using the Affiliate Value Model. This model enables affiliate managers to classify affiliates according to their potential and helps them to focus their energies on acquiring, growing and retaining valuable affiliates. This article will deal with the practical ways of categorizing affiliates and suggest ways of incentivizing good affiliates and weeding out the bad ones. 

Set your objectives

Before starting to take an active role in proper affiliate management it is important to set clear SMART objectives. To be successful Objectives should be:

Specific –should specify what you want to achieve.
Measurable – You should be able to measure how you’re progressing in meeting the objectives
Achievable – The objectives that are set, must be achievable and attainable
Realistic –Consider the resources at hand and think whether you can realistically achieve goals
Time-Specific – Set a deadline for meeting objectives and review dates to monitor progress

An example of such a goal could be: To increase affiliate programme profitability by 10% within six months from implementation with bi monthly review.

Analyse Reward Plans and Composition of Net Revenue

At this stage it is important to benchmark your offer with that of your competitors. How do standard revenue share deals and CPA rewards compare with other competitors within the industry? Are the player promotions being offered to affiliates attracting the right players or are you mostly attracting bonus hunters?

This information is essential as one often realizes that due to high bonus payouts, Positive Revenues are turned into Negative Net Revenue as players do not carry on playing when their bonus runs out. This problem is especially more relevant today as “No Negative Carry Over” has become an industry standard and hence there is no recovery mechanism from affiliates.

You also need to review CPA deals and see whether these are based on stringent criteria that result from the company earning revenue from players. Ideally CPA deals should be based on Positive Revenues from players and should be proportionate to the Net Revenue Criteria. As an example: €125 CPA for players generating €75 Net Revenue in one month.

Analyse Existing Affiliates

Before devising any strategy aimed at improving the resource allocation and guaranteeing the best return on investment, one must be able to analyse the existing affiliates that the company already has. It is suggested that affiliates are split according to their current profitability; high, medium, low (and even negative). Pareto rule is usually adopted to select the top affiliates, however in this industry the 80:20 rule hasn’t proved to be so reliable yet. It over-optimistic to say that 80% of profits are being generated by 20% of affiliates - it is rather more realistic to say that 95% of the profits are generated by 5% of affiliates. This creates a supplier dominated scenario, and the operator should pay extra attention with these top affiliates, as losing one of them would have a large effect on the profitability of the affiliate programme.

Create and implement different strategies that cater for Affiliates in Different Tiers.

After splitting affiliates into different tiers, it is important to start planning strategies that aim to grow and retain good affiliates while at the same time improve or weed out bad ones. It is ideal to think of each tier as independent but at the same time try to devise strategies that help affiliates to move from one tier to the next.

Starting with the top tier affiliates, it is advisable that specific reward plans, which are agreed by both parties, are set up for the VIP affiliates. As with any business deal, it is essential that revenue targets are agreed in advance, in the same way that business targets are agreed internally, and special bonuses awarded upon achieving and surpassing goals.

When it comes to middle tier affiliates, it is recommended that progressive deals are created, basing these on the average player profitability. The higher the average profitability the higher the revenue percentage should be. Once the overall profitability reaches a certain pre-agreed amount, affiliates should be moved to top tier affiliates. It is important to note that certain middle tier affiliates will produce a constant return with no growth potential. These affiliates should be retained as cash cows.

In the case of low tier affiliates, these should be analysed in the same way as middle tier affiliates, hence creating revenue share percentages based on the average player profitability. However in the case of negative revenue generating affiliates, negative carry over plans should be considered. As an operator you should retain the right to use such plans where affiliates deliver negative net revenues for a period of, for example, three consecutive months. Moreover, in cases where negative net revenues are prolonged for longer periods, affiliate managers should consider closing off the affiliate account.

Affiliates producing negative revenue do not only reduce the overall profitability of the programme but also consume internal resources that add more to their overall costs, so weeding out these affiliates would enable the affiliate manager to concentrate on the more valuable affiliates.  

The above concept sees affiliates as partners, and as such aims at sharing both the fruits and the costs that affiliated players bring to the business.

Conclusion

Knowing your affiliates well is essential as it enables operators to develop different strategies aimed at creating more value for the operator and at the same time rewarding good affiliates. Although painful, weeding bad affiliates is essential for the long run success of the program.

One might say that the main aim of an affiliate programme is to grow the affiliate base; weeding out affiliates will not help achieve this goal as these affiliates will sign up with other operators. This is exactly what you want. You don’t want affiliates who bring players who deliver constant negative net revenues so you should be more than happy to weed these out and even more happy to see them going to a competitor.