Gen3 took over management of a footwear retailer and one of their immediate issues was how to best compensate for thin profit margins within their affiliate program. One of their hottest-selling products was also one with the smallest margin, and its popularity was causing detrimental effects on overall program ROI. Thus, the challenge was to mitigate the advertiser’s profitability concerns while still providing competitive payouts to their affiliate partners.
After analyzing historical performance, Gen3 got a firm sense of which publishers were the most valuable to the advertiser in terms of driving incremental sales, as well as the profitability of those sales at the website level. Affiliate commissions were then adjusted based on this data on a case-by-case basis, ensuring each affiliate site was converting at a rate that was beneficial to the advertiser’s bottom line. In short, the publishers that were worth more were paid more.
To best maximize the channel potential of the popular brand, we then took our cost cutting efforts to the next level and reduced the commission rate for these shoes by 50% versus a year earlier. To further reduce costs, we also made strategic choices to reduce the commission rates of certain publishers based on data that suggested reduced payouts would have a minimal impact on sales volume.
Leveraging the custom strategic approach developed for this advertiser, Gen3 was able to grow the program’s sales in year one by 176% while simultaneously reducing costs by 9%. Since that time, Gen3 has further reduced total costs by 19.3% YoY, while growing total sales by 38% on an annualized basis.