One Australian brand cut its affiliate commission from 14% to 6%. In the same period, its revenue almost tripled. The partners doing the real work came out of it earning more.
Affiliate is one of the few channels that can get more profitable as it grows. Most ad channels give you less back the more you spend. But you can’t grow a programme that leaks. If commission is going to partners who didn’t create the sale, every extra dollar makes the leak bigger.
What Is a Profitable Affiliate Programme?
A profitable affiliate programme pays commission for sales that partners actually create, not sales that would have happened anyway. It rewards the partner who introduced the customer, pays more for new customers and full-price orders, and is checked against total business revenue rather than the partner dashboard. That’s what makes it worth growing.
Where Affiliate Programmes Leak
Annabel Gray is Vice President of APAC at Silverbean. She opened its first office outside the UK, in Sydney, in 2019, and has spent 15 years in affiliate and partnerships. She worked on Modibodi’s programme, which is where those 14% and 6% numbers come from.
In her episode, Annabel explained how cashback and coupon partners can soak up demand that already existed. Watch for sudden performance spikes with no explanation, brand bidding on your name plus “discount code”, and browser extensions that appear at checkout.
Other brands, it’s set and forget. They’ll just turn on a cashback program and that’s when it just sort of mops up existing demand.
In this article, we cover three things ecommerce teams can take into their business:
- Pay the partner who introduced the customer, not whoever touched the sale last
- Set commission rates for the value each partner brings in
- Check the growth is real, using numbers from outside the affiliate channel
Pay the Partner Who Actually Earned the Sale
Coupon sites, cashback sites and browser extensions are very good at being the last click. If your programme pays whoever touched the sale last, that’s where the commission goes. Not to the review site that convinced someone, or the creator who showed them your product first.
Rainer Schmid was Global Marketing Manager at Bikesonline. When he looked at the path behind each sale, he found coupon partners taking commission from content creators at the last second.
If there was more than one interaction with an affiliate partner, the coupon code site does not get the cash. The person who introduced us to that customer gets the cash.
He didn’t cut the coupon partners. He moved them into their own programme with their own commission structure. Pull your top partners this week and sort them into two piles: who introduces, and who closes.
Set the Rate for the Value It Brings In
A flat commission rate says a brand new customer is worth the same as a fifth-time buyer. It says a full-price order is worth the same as a discounted one. Neither is true.
Pay introducers more than closers. Pay more for new customers than returning ones, and more for full price than sale orders. That’s how Modibodi’s average rate came down while its best partners moved up a tier and earned more per sale.
Steffen Daleng, former Chief Marketing Officer at Booktopia, calls this table stakes.
A commercially astute contract would of course be rewarding new customers over existing customers to your partners, so that they’re earning more money from introducing your brand to brand new customers.
Annabel’s warning is to start broad. Introducer versus closer, new versus existing, full price versus sale. Go straight to commission by SKU and nobody will be able to manage it.
Make Sure the Growth Is Real
Run two checks. First, divide total marketing spend by total revenue. If affiliate revenue climbs and that number doesn’t move, the channel is moving sales around and taking a cut. Second, work out your floor: one divided by your contribution margin. At a 40% margin that’s 2.5. Any partner returning less is costing you money.
Roger Lee, former Head of Digital Marketing at Brand Collective, the group behind Reebok and Hush Puppies in Australia, says growth comes from making it a win-win.
You need to make partners want to work with you. They want to see some profit from promoting you as well. So as long as you’re both benefiting, then that’s a true partnership that will carry you through the test of time.
Let partners put their own spin on your content, because they know their audience. And look past cashback and coupons to brand-to-brand partners and niche communities.
The Takeaway
A profitable affiliate programme isn’t a smaller one. It’s the one you can afford to grow. Every dollar you stop paying a partner who didn’t create the sale is a dollar you can put behind one who will.
Frequently Asked Questions
How do you make an affiliate program profitable in Australia? Pay commission for sales partners actually create. Reward the partner who introduced the customer over the one who closed it, pay more for new customers and full-price orders, and check affiliate growth against total business revenue. Modibodi cut its average commission from 14% to 6% this way while revenue almost tripled.
Are cashback and coupon affiliates worth it? They can be, if they change what shoppers do. Silverbean’s Annabel Gray says cashback works when you’re in the shopper’s consideration set and competitors are there too. Left on set and forget, it mostly pays commission on sales you’d have made anyway.
Should affiliates earn more for new customers? Yes. Former Booktopia CMO Steffen Daleng calls it table stakes. A partner who brings in someone who has never bought from you is worth more than one who catches an existing customer at checkout.
How do you know if affiliate marketing is incremental? Look outside the channel. Divide total marketing spend by total revenue. If affiliate revenue grows but that ratio doesn’t improve, the channel is mostly taking credit for existing sales. Also check each partner returns more than one divided by your contribution margin.
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