June 24, 2020
Affiliate Marketing Platforms: How to Choose the Best One for Your Company
As advertisers, we often contemplate whether we are getting the best out of our chosen affiliate marketing platform and will continually ponder if the grass is greener on the other side.
There are a myriad of options in the market, each with unique capabilities. While it’s easy to choose the cheapest one and move forward with your affiliate program, that method might not produce the best results for your company in the long-term.
If you’ve been through an RFP (or less formal evaluation) before, you know that each company will pitch different, yet often similar technology at different prices. Therefore, it can be extremely difficult to tell exactly what value you’re getting from each provider.
So, how exactly do you choose what is the best affiliate marketing platform for your company? Simple; don’t base your decision purely on price, opt for value instead.
Value-based commercial models are harder to develop, but they will enable you to establish a decision making process that propels you away from short-term thinking. In this article, we will share some guidelines that will be useful for any company that is evaluating their advertising platform, and who is willing to look beyond price to define and measure value.
What You Should Look For in an Affiliate Marketing Platform
I imagine most of us have been put through the ‘RFP-ringer’ at some point in our careers and have found that price ultimately drives decisions, especially if this process is being led by procurement or senior leadership. There are two reason for this:
The platform providers don’t effectively demonstrate the value advertisers will receive in exchange for the price they must pay;
It is far easier to communicate to the business that you saved $X by choosing platform Y. It is considerably harder to communicate paying more because a platform has a unique technology, superior service, or they are just easier to do business with.
Whilst cost-based decisions have immediate commercial value, they typically offer a short-term benefit that endorses a zero-sum game. If this is the case, the real losers are your partners A zero-sum game, in its simplest form, means that one party gains and the other loses.
However, if the affiliate marketing provider can demonstrate the long-term value of its product or service, then you can increase the advertiser’s willingness to pay (see Fig 1). This allows the relationship to move toward a non-zero-sum game and a more mutually beneficial partnership.
To avoid this type of decision making in the future, we recommend using a simple value-based formula to assess the legitimacy of your chosen partner platform. In addition, this will force the companies you evaluate to demonstrate the tangible value they can deliver beyond just price.
How to Determine an Affiliate Marketing Platform’s Long-Term Value
As the advertiser, it is your responsibility to have clarity on what value represents to your business. It is also important to communicate your needs clearly to your suppliers, because this will empower them to make proposals that will directly impact your business rather than communicating the typical, unmeasurable sales hyperbole.
By implementing this approach, you will come away from vendor meetings with proposals that include value metrics that substantiate the need to invest in their services. This will help you to communicate the value of each platform to the decision-makers within your organization.
As you examine what value metrics are important, let’s consider how we can define value.
Value can be defined as: the worth in monetary terms of the technical, economic, service, and social benefits a company receives in exchange for the price it pays for a market offering.
Therefore, the value metric(s) can be anything if it is imperative to your business. For technology, this could be the amount of time saved through automation; economic value could be that a provider will commit to a target CPA or Return on Ad Spend (ROAS); service could be a dedicated Business Analyst to support your data requirements; and social could be that the provider is based in the same city as you, making collaboration more cost-effective, or has experienced staff, with language skills, located in your key market(s).
How to Calculate the Value of Your Affiliate Advertising Platform
All value-based models attempt to assess the monetary value that a vendor can provide your business. However, the simple equation below (from James C. Anderson and James A. Narus) helps you to determine the net value of your investment (s) by offsetting this against the next best alternative (a).
(Value(s) – Price(s)) > (Value(a) – Price(a))
If you were to take this one step further, you could also incorporate the total resource cost of integrating with this company so that you can get a more accurate depiction of what your net value would be (in doing so, you would change the variable in the formula from ‘Price’ to ‘Cost’). Perhaps one vendor or provider is fantastic at delivering partner reach and saving you time, but there are considerable challenges with its integration which will lead to additional development costs. These elements should be taken into consideration and factored into your calculations.
Conversely, you should always measure the company’s value over the total term of the contract or Statement of Work (SOW) to avoid only focusing on short-term value. If a SOW is estimated to last for two years, then you need to apply the value metrics for the duration of that contract. Likewise, if the value created extends beyond the SOW, try to incorporate that into your calculations too. For example, a provider might be responsible for assisting with upgrading your tracking technology, from pixel to client-side, and this benefit will continue to add value beyond the SOW.
Putting this Value-Based Calculation into Practice
Let’s say that ‘partner reach’ is valuable to your business, but you only have limited resources to manage the channel effectively. Then, imagine you have sat through two proposals for prospective tracking providers, who focus on this value within their respective platforms.
The first provider leaned heavily on the breadth of advertisers they worked with across all industries, saying that “our network will allow you to access over 100,000 partners – the largest in the industry’. Whereas the second provider, focused more on the time sensitive nature of managing a large-scale partner program and said, “our technology allows you to automate your recruitment and activation strategy, saving you on average, four hours a week”. Which proposal would you find more valuable?
The monetary value in the first proposal is ambiguous. Whereas the second proposal clearly states a metric (4 hours of time saving) that can be used to calculate the value of their technology (for example: (n x hourly rate) = value).
Let’s take this one step further
How to Get The Provider to Deliver Value
You will inevitably have to base aspects of your calculations on data-led assumptions. This is one reason why focusing on price is easier. That said, as long as you define the metrics that are important to the decision-makers within your business, and you can track, monitor, and measure them throughout the term, then you should be confident in basing your decision on more than just price.
In addition, you can also factor these metrics into your commercial agreements, so there is accountability on the provider’s side to deliver this agreed-upon value.
Value-based models help align all parties in achieving a common goal(s), and if a provider is not equipped to support or influence these goals, then it should not be considered as a viable option – even if it is the best price.
In any situation, price should never be considered as a unique selling point; it should be a warning sign that a business is not confident in – or worse, doesn’t understand – the value of its product or services.
More importantly, the value-based model doesn’t enact a zero-sum game, which is something the industry has suffered from over the past few years. It should incentivize companies to invest more in value creation, which, if demonstrated effectively, should increase the advertiser’s ‘willingness to pay’ for its product or services.
The Bottom Line
If you focus on value when choosing your providers, then you’re more likely to be confident in your purchasing decision. Additionally, adopting a value-based approach to assessing providers will arm you with all the necessary data points to convince your CMO or procurement team that the investment equates to monetary worth for your business. In this scenario, all parties – advertisers, providers, and, most importantly, your partners – will win.