Affiliate Marketing: Segmenting Your Affiliates

As a retailer, you likely segment your consumers. The segmentation can be a formal exercise, where preferred customers get preferential treatment; or it can even be informal, such as when you greet your regulars with a friendly wave or a cup of coffee. Segmentation is the practice of knowing who your customers are so that you can best assign your resources.

Segmentation can also be applied to your affiliate marketing channel. Just as different types of customers require different levels of service, different types of affiliates require different resources.

One of the best ways to segment your affiliate base is by marketing method: coupon and deal affiliates, content sites, search engine marketers and even mobile. For this article, I’ll explore the first two segments — coupon and deal affiliates and content sites — as they are the most common.

Coupon and Deal Affiliates

When you first launch an affiliate program, you’ll likely see most of your transactions come in through coupon and deal sites, such as Shopping-Bargains.com and CouponMountain.com. This is typical of new programs. The reason is because coupon and deal sites are often built on template platforms. In essence, all these affiliates need to do is upload your banner and tracking link. There usually is not a lot of customization involved in launching a new merchant on a coupon and deal site.

It is relatively easy for a templated deal site to add a new banner and tracking link.

Many retailers are initially alarmed because they think their affiliate channel will only drive customers seeking discounts. However, there are customers who frequent coupon and deal sites simply to see what deals are to be had. These customers are more likely to make a spontaneous purchase decision based on a discount.

A subset of coupon and deal affiliates is incentive sites. These are entities that award cash, mileage, points or other rewards to consumers for completing a purchase — examples include eBates and FatWallet.

Incentive sites offer targeted rewards to attract shoppers.

Incentive sites are challenging to work with because there is a loyalty element in place. Even if you get a new customer via an incentive site, any future purchases the customer makes will likely go through the incentive site. The customer is always going to want their points. Since you are likely to pay affiliate commission on all future purchases these customers make, their lifetime value is lower. However, before you write off customers driven by incentive sites, remember that many retailers have shown that these customers tend to purchase more often, and have higher average ticket orders than customers who do not receive incentives.

As such, when managing coupon and deal sites, affiliate managers should focus on managing their marketing spend. To illustrate, let’s say, as an affiliate manager, that your retail company offers a $10 retail item. Assume a 2 percent commission to the affiliate, which leaves you with an $8 in net revenue. If you add a consumer coupon onto that, now you have a $10 item, and you’re giving away a $2 coupon, and on top of that, you’re paying $2 in commission. Your net revenue ends up being $6.

In short, it may cost more to acquire a customer via these sites. The affiliate manager should compare that cost versus the long-term value of the customer.

Content Sites

Content sites span the spectrum, from mommy blogs to online communities. The purpose of these sites typically is to draw readers, not consumers. The sites are valuable because they influence purchase decisions. Examples of content sites that contain affiliate links are MyDFWMommy.com and CharlotteOntheCheap.com.

Content sites draw readers who are interested in a particular topic.

Since many content sites are focused on specific topics, they tend to have high rankings in search engines. So when customers are researching a product online, it is possible that they will click one of your affiliates — i.e. a content site — even if you occupy a higher search result. This is because the customer wants information that isn’t provided by you, or the manufacturer. They want information provided by their peers.

As such, content sites are a key segment of your affiliate base. Their needs are different from coupon and deal sites, however. Affiliates must compose the post and manually insert tracking links. This takes more time than simply uploading a logo. Because of this, it may take longer for you to see sales coming in through your content sites.

So how can you help these affiliates? First, be sure to provide advance notice of sales so that they have time to prepare their posts and plan their placements. Many retailers worry that sales will get leaked to the public before they occur. This could reduce revenue as shoppers postpone their purchases to wait for the discounted price. However, if you put an embargo in place, your affiliates will respect it. They know if they disclose a sale, they run the risk of getting removed from your affiliate program and forfeiting their earned commission.

Second, provide product samples to the owners of the sites, so that they can consider and review your offering. Take the time and research which sites rank high for keywords related to your offering. Then reach out to those sites and offer them a product to review. It is important to know that product review sites are fiercely protective of their editorial independence. Be ready for honest criticism.

Finally, keep content affiliates up-to-date. Send out regular newsletters that discuss new product offerings, promotions, or even industry insights. Affiliates are great at affiliate marketing, but they may not know as much about your industry as you do. Any knowledge that you have about your ideal consumer helps them craft content targeted toward that person.

For next month’s article, I’ll discuss the resources you can provide to help search marketing and mobile affiliates drive significant revenue.