Affiliates Have Negotiation Power

value affiliate negotiation power

Affiliates hold more power than they know. The problem is that most are unaware of how to leverage their power to attain better deals or negotiate higher commissions.

In the affiliate/merchant relationship most affiliates assume that merchants (or whomever is running the program) have all the say in setting commissions, defining terms of service and everything else related to the affiliate’s participation.

It’s a typical complaint from affiliates that X merchant has cut commissions. And now the affiliate must either accept this or stop promoting Merchant X and find another merchant that will enable them to make more money. The affiliate feels powerless.

 

Timing is Everything

As laid out, the affiliate has no leverage in the above example. But that’s only because of the timing. Once a merchant decides to reduce commissions or removing a certain type of affiliate (maybe coupon or deal affiliates) the affiliate’s power to minimize the impact of the merchant’s decision is long gone.

Had the affiliate actively negotiated with the program manager prior to those decisions, they might be in a different position. Merchants use historical performance data and analytics to make most program strategy decisions. Unfortunately, affiliates are often lumped in together when merchant business decisions about their affiliate channel.

But affiliates can have more influence by taking some simple steps:

Determine Value

Most affiliates underestimate their value to a program. They don’t have to be biggest affiliate or driving the most revenue to have an increased value to a merchant. The affiliate’s value can be bringing in first time customers, or driving sales via promotions in their newsletter, or bringing in a desirable audience that the merchant wants to reach. It can also be having higher conversion rates than other affiliates.

The key for affiliates is to determine what they may be worth to a specific merchant based on the merchant’s goals and objective for the program.That requires the affiliate to know and understand those objectives. This knowledge requires ongoing discussions with the program manager. Most program managers (whether in-house or at an agency) are willing to test affiliate performance and set up win-win.

Be Realistic

Each program has a set of key metrics to indicate performance of the program and the individual affiliates. Often this will include: Revenue or a sale metrics–including Average Order Value, number of items or transactions completed, leads generated, customer profile data (such as new customers), and participation in the consumer’s journey. There may be more granular data related to what the consumers are purchasing (full-retail vs. sale prices). Sometimes an affiliate is making a positive contribution — but an affiliate program metric (like EPC) doesn’t reflect the value or benefits being provided.

The flip side is overestimating value. As some merchants found out this holiday season when attempted to negotiate paid placements, affiliates are charging high rates for placements with minimal improved contribution to sales. High placement fees for increased visibility is a sure-fire way for an affiliate to price themselves out of a deal.

Communicate Worth

Be proactive about letting a merchant know what you can do for them. Be willing to test. Most programs have hundreds, if not thousands of affiliates. And a merchant can’t know what each of them is up to. So, if an affiliate is planning to revamp their site, step up their content creation efforts, or invest in new technology to potentially help boost conversions, they need to communicate those plans to a merchant. Those types of efforts can positively increase the affiliate’s ability to drive more sales to the merchant. And the promise of more sales may just tip the scales in the affiliate’s favor.

Provide Proof

Affiliates should be willing to share some of their internal data. This might include some historical (year-over-year) growth data about their business or even how they performed in other similar programs. It’s not enough for an affiliate to say they add value to a program, they should have specific data to back up those claims.