Jan 17, 2016
Written by Mark G.
Are you constantly tasked with lowering your cost per action (CPA) while also maintaining or exceeding revenue goals? This can be very frustrating, especially if you don't know how to get started.
When you first attempt to lower the CPA, your instinct might be to decrease publisher commissions, but there are better strategies that result in greater sustainable growth and stronger publisher relationships. Read on to learn best practices about where to begin and what strategies you should incorporate in order to maintain an effective CPA for your program.
It is important to understand what your CPA target is; what is the amount you're willing to spend to acquire each customer? Once this is clear, you can develop strategies that align the affiliate channel with your company's CPA objectives.
You will need an efficient and easy way to monitor your CPA at both a publisher and program wide level. The good news is this is very easy to incorporate into your weekly and monthly metrics. Simply divide total sales into total cost and break this out at a publisher and program wide level. This provides insight into how your affiliate program is tracking and where you need to focus your efforts.
Now that you've got the basics to get you started, below are some additional strategies to ensure a successful program.
In order to develop consumer promotions that will ensure a positive ROI and drive incremental sales, consider the following:
If you offer coupon codes, the price point to receive a specific discount should be greater than your average order size (AOS) to guarantee incremental consumer sales.
Be sure to highlight the consumer discount effectively. For example, if you are already offering a discount on a subscription or product, make sure it is clearly visible to the consumer.
If possible, offer promotions on products that have higher margins for your business.
Publishers are very important to the success of your affiliate program and should be treated as an extension of your business. If they don't feel that you regard them as an integral part of their team, then most likely they won't be successful for you. It is important work closely with publishers on the promotion of your brand:
Ensure that the products and promotions that are in your publisher communications are aligned with your CPA objectives.
Work with your publishers on how best to message your products/ promotions on their sites accordingly.
Set up one off calls with your strategic publishers when necessary.
A great way to increase your sales volume is to increase your AOS—this will have a direct effect on improving your CPA. If the majority of your affiliate traffic is being driven to your homepage, you should have a good understanding of what promotions or products are being displayed since this will have an impact on your AOS. For example, if your website has higher price-point items on your homepage, it typically has a positive impact in increasing your AOS. However, it's equally important that you don't inadvertently negatively impact your sales volume by having higher price items that are less appealing to your consumers. Some additional things to consider:
Bundle products to increase AOS.
Offer free products (maybe a low cost product that is being liquidated) with higher price point items.
If you have a large variance of products SKUs, with different degrees of profit margins, consider aligning your commissions more closely. For example, advertisers have the ability to integrate with item based commissions which allows them additional flexibility in developing commission structures that are more aligned with cost of products. If you do decide to lower your publisher commissions on certain products, it is important that you reallocate those commissions into higher margin products. This will go a long way in developing your publisher relationships and maintaining positive growth.
While some advertisers only have the ability to link directly to their homepage, if you offer multiple products, look into offering your publishers the ability to deep link/re-direct to all aspects of your website. This allows your publishers the ability to promote specific categories and products based off of your profit margins. In either case, if you are new to these processes, we suggest setting up a call between CJ's tech team and your internal team.
Whether your affiliate channel currently has an effective CPA that is aligned with your overall objectives, or you're looking to improve the CPA of your affiliate channel, the strategies discussed here will help you foster positive publisher relationships while maintaining an effective CPA for your affiliate program.