Massive ROI improvement for an online meat purveyor during the first Holiday Season of the Covid 19 pandemic. The blue bars show revenue and the orange line is our commission rate that was on a decline from June onward.
My former employer was D'Artagnan Foods, a meat purveyor who started a web business somewhere in the 2000s. They are primarily a restaurant supplier and the founder has famous chef friends like Thomas Keller, Daniel Boulud, and the late Anthony Bourdain. The ecommerce division had impressive growth in the 2010s but in that time competitors like Butcher Box, Crowd Cow, & Porter Road entered the market.
D'Artagnan started an affiliate program with Pepperjam / Partnerize long before I joined in May 2019. I was hired purely for SEM with a touch of SEO oversight and some paid social activity.
By my 5th month on the job there were some nice wins in the SEM channel but the director who hired me resigned and took another role.
With the leadership change I took partial ownership of the affiliate program..
This was Fall 2019 with the Holiday peak season approaching.
Fast-forward a few more months to March 2020 and Covid 19 erupts, restaurants close & grocery store shelves empty.
Fortunately, there was the high margin ecommerce business to fall back on.
With the lift in web orders due to people preferring delivery over in-person shopping, also came fairly unprecedented media spend, a chunk of which was affiliate related.
The affiliate program pretty much ran itself for a while using the default settings set up by the network account manager.
Whenever there is an "out of the box" set up, one can pretty much assume things aren't as favorable to the advertiser as they could be. This has long been true with Google & Facebook.
Network Fees Versus Advertiser Commissions
Affiliate networks make money based on a small percent of revenue. Affiliates get anywhere from 3%-25% for doing the promoting and generating revenue.
Then there are network fees which are more locked in with the contract to the network, in this case Pepperjam. And rightfully so as they provide tracking, pay commissions and provide a platform to connect all the dots, reporting and so on. The network fee is a small, performance based commission the affiliate network gets. There are other ways they make money such as fixed account management fees but a percent based model on revenue driven is typical.
All Eyes Were on The Affiliate Program
When the pandemic emerged, more people than ever shopped the website via affiliate and other channels. The affiliate costs were at record highs and leadership wanted to know what the network did other than collect a check.
This is an extreme example but illustrates the problems with fee based models. Even though an extremely unpredictable global event happened which caused many consumers to shop online, the affiliate network got paid fairly nicely despite not directly causing any of the uplift.
So, we realized that to play the game, network fees come with the territory & there is little wiggle room. Where could change things up were the commission rates we paid to publishers & sub networks.
From "One Size Fits All" to a More Tailored & Strategic Approach
As hinted at earlier, the affiliate program was set up by Pepperjam so each affiliate essentially was paid the same. This was a very safe - it's easy to set up on part of the network/account manager, and if the client isn't any wiser, they why work harder implementing a complex commission structure?
In essence with every partner getting the same rate, some were paid more generously than others while others genuinely could have been paid more.
Content affiliates work hard creating content, they also drive a higher percentage of new customers & should be commissioned higher based on that.
One of the first proper optimizations I put in market was dropping coupon affiliates down, leaving loyalty in the middle & then moving content/editorial up a notch.
Affiliate Optimization Levers
There are many other things one can do to make programs smarter such as -
Paying more or less commission on certain SKU's
Commissioning differently if the customer is new or returning
Commissioning less if a coupon code is used
Wrapping It Up - ROAS Improved 72%
If you look at the chart above, I was able to dramatically reduce our average commission rates while still having an excellent Q4. The reduced rates resulted in some big ROAS gains if you compare December to the prior "default" state. No revenue was lost - I was closely monitoring the share of revenue from this channel to make sure it didn't fall below the expected range.
Yes covid did make things advantageous but that didn't last. Again my former employer sold meat to people who cook at home. Eventually things like travel and dining out got back to normal so some of the things I did that were more ruthless about ROI would be a little pennywise and dollar foolish since we were looking to continue growing after the pandemic had leveled off.
If you're in charge of a program and have everyone at the same rate then it probably makes sense to dig in & be more targeted in your approach. Get in touch for assistance.