When marketers think about affiliate programs and partnerships, one of the first things that come to mind is the traditional, low-funnel partners that have historically made up a majority of the publisher landscape. In the early days of affiliate marketing, coupon, loyalty, and cashback partners ruled the industry. Many of the sites that started in the mid to early 2000s like Rakuten and RetailMeNot are still major players in the space today. As partnership programs began to develop and diversify, however, these partners began to update and expand their offerings with the addition of cashback programs, card-linked offers, toolbar extensions, and more. There are so many different low-funnel partners offering similar services that it can be hard to determine which will be the best fit for a given brand. On top of it all, as the ease of use increases with toolbar extensions and sites that can automatically apply discounts at checkout, assessing the true value of these partners has become a greater source for debate as well.
Types of Low-funnel Partners
Partners offering coupons and cashback can be classified in multiple ways. In the affiliate industry, the nomenclature includes a variety of terms that we use to define these publishers. For clarity and continuity, it makes sense to define these categories before going any further. The three main types can be categorized as: coupon, cashback, and loyalty.
Coupon
A partner that offers discounts or deals via coupon codes or text links for the brands they promote.
Cashback
A partner that offers cashback for purchases made with the brands they promote.
Loyalty
A partner that promotes any of the above offers, but has them protected and only accessible to their unique members. The signup process for these sites can be as simple as creating a username and password or could require payment or employment with a certain organization like with employee perks platforms.
It’s important to note that some partners will blur the lines between these categories. Honey, the multinational coupon site, for instance, offers not only coupons but cashback as well. However, as you must create an account to use Honey, it’s categorized as a loyalty partner.
Successfully Partnering With Low-Funnel Partner
Partners like Honey can make it difficult for brands to determine how to group publishers in their affiliate programs, especially when tiered payout structures are involved. This is when the small differences between low-funnel partners can begin to have a greater impact on a brand's affiliate ROAS and overall bottom line. At Hamster Garage, these dilemmas are part of our daily work. Depending on the offer that a brand has available to affiliates, we’ve developed processes around how to increase efficiency with these partners; squeezing the highest amount of converting traffic from their channel at the lowest cost.
Product Discounts: coupon codes are the most popular type of offer in the affiliate space. Particularly among retail or subscription-based brands, offering coupon codes is an easy and effective way to entice customers to make a purchase. If revenue and/or sales are the Northstar KPIs for a brand, a discount code is a reliable way to drive growth. Additionally, as nearly all low-funnel partners are able to promote discounts, offering coupons will allow a brand to onboard with all of them. Therefore, if a brand is willing to discount its products, and puts a high emphasis on overall revenue growth, a strong promo code will yield the best results.
If efficiency is the overarching goal, increasing the volume of well-aligned low-funnel partners promoting a lesser discount can help drive sales without causing too much of a spike in CAC. These efficiency goals must be balanced with maintaining a competitive offer, as discounts that are lower than any evergreen brand-wide promotions will begin to disinterest affiliates. This is particularly important with Loyalty partners, as their members will be expecting exclusivity and discount amounts that can’t be found everywhere. Exclusivity in the actual text of the code itself can also make an impact on a coupon campaign’s performance. In many cases, partners will be able to accept a lower discount if the coupon code was created exclusively for their audience’s use.
CPA Increases
Brands may not be aware that discount codes are not required to work with all low-funnel partners. In many cases, a strong CPA is all that is needed to obtain value from low-funnel partnerships. This is where cashback programs have the advantage. Cashback partners will pass back a portion of the CPA they receive from a brand as a reward for their users making a qualifying purchase. Brands with higher basket values that may not be able to financially justify offering a discount can still reap the benefits of low-funnel partnerships in this way.
Additionally, whether a brand is offering discount codes or not, low-funnel partners often structure their websites to favor brands that are earning them the highest commissions. Sites may list “Featured Brands” in their header to showcase these vendors. Naturally, it follows that when a brand has increased visibility on-site it results in higher click and conversion volume. Conducting outreach to low-funnel partners that are underperforming can create easy wins if the brand is open to testing with increased payout opportunities. Most low-funnel publishers will gladly feature a brand on their homepage or include their offer in a newsletter in exchange for a boost in their CPA. This is another great way to only pay for performance and ensures that a positive return is maintained.
Free Gift Offerings
The other type of promotion that will entice high-value, low-funnel partners is running a “free gift with purchase” campaign. Coupon sites are built with the knowledge that not all brands will be offering a discount code. Offering some type of free gift with a qualifying purchase will be enough to incentivize a transaction. Coupon and loyalty programs will be able to promote these offerings as effectively as they do with a discount code.
Optimizing With Low-funnel Partners for Incremental Growth
It would be impossible to talk about low-funnel partnerships without mentioning incrementality. Incrementality is a popular term in performance marketing. It is used to understand the value of a performance-based partnership and, oftentimes, it is used subjectively. Someone may say: “I don’t see the incrementality of that partner.” What this essentially means is they don’t believe the sales that are being attributed to this partner are a direct result of the actions the partner has taken to promote the brand. For example, partners that utilize toolbar extensions to automatically apply offers at checkout often face scrutiny from brands regarding their incrementality. It is hard to determine if the customer would still have made the purchase had they not been presented with an offer during checkout.
Luckily, this is something that we deal with every day and have, therefore, developed systems that allow us to think analytically and determine how incremental a partner’s revenue stream is. There are two ways that can test incrementality.
A/B Conversion Rate Testing
This test compares traffic exposed to an upper-funnel partner’s content with traffic exposed to a lower-funnel partner’s coupon or deal.
To run this test, a brand will compare conversion rates from a predetermined high-funnel partner. The first conversion rate that should be looked at will include traffic driven by that partner where no coupon code is shown to the consumer during the purchase process. The brand will then look at the conversion rate of the upper-funnel partner’s traffic when consumers have been shown a coupon from the low-funnel partner that is being tested. This second conversion rate should be higher. If it’s high enough to offset the cost of the discount with the increase in sales, then it can be determined that the low-funnel partner is driving incremental sales.
Commission Testing
The second test compares a partner’s performance at its normal CPA with its performance when that CPA has been lowered. As such, the beneficial byproduct of this test is an optimization of the partner’s efficiency.
The test is simple and, given the partner’s traffic volume, can provide meaningful results in as little as a few weeks. A brand will lower the CPA paid out to the partner over a predetermined period – if the partner is not driving consistent traffic, this testing period will need to be lengthened. When the pilot is over, compare the partner’s performance with their performance from the previous period. If there is no significant drop in revenue, clicks, and transactions, this means that the partner is likely not actively promoting the brand and is letting it run, more or less, on autopilot. The CPA decrease has not caused them to lower their cashback amount or stop promoting the brand’s coupon codes. Similarly, it could mean that their users were going to submit the transaction regardless of the offer available to them. Either way, if the end result is no change in performance, we can determine that the partner is less incremental. If the partner’s performance drops during the testing phase, however, the traffic that the affiliate was bringing in will be considered more incremental.
It should be mentioned that paying attention to other partners' performance, as well as other promotional channels' performance, is crucial. If there was a drop in the partner’s performance during the testing period, but all other channels similarly suffered due to outside factors it should not be concluded that that partner is more incremental.
If there is no negative change in conversions due to the decreased payout, the brand can continue to drop the partner’s CPA. This is how we achieve increased efficiency through incrementality testing. Initially, the decrease should not be larger than 20%; 10% of the order sale amount down to 8% of the order sale amount, for example. Dropping commissions in large increments will often upset affiliates and can result in broken partnerships. However, if a publisher is not committing time and resources to actively promote the brand, a slightly lower payout should not be met with pushback. If multiple decreases have been made and there is still no significant or distinguishable change in performance, it is reasonable to conclude that the conversions from that affiliate are not incremental.
Should Low-funnel Partners Be in Every Affiliate Program?
Under the wide umbrella of partnership marketing, low-funnel partners may not be the best fit for every brand’s program. Ultimately, it comes down to what the brand’s goals are and what will make the most fiscal sense. If a brand is looking to grow its program, well-aligned low-funnel partnerships are critical to increasing volume. Given the size of these partners and how long they have consistently been producing results for top brands, however, they should at least be considered when brands begin to grow a partnership program.
Low-funnel partners make up of some of the biggest names in universe of affiliate partners. They have the ability to drive large amounts of revenue through affiliate partnerships even for brands that do not offer coupons or deals. With the ease of optimization for these partners, even if the affiliate is not driving highly incremental revenue, they can still be a high-margin channel that brings in consistent conversions.
Thanks to Owen for reviewing this article.
