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  1. #1
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    LCC Method in cooperation with Google, bannering and e-mail marketing
    We use the LCC method to pay-out commission to our affiliates. Around all fora their is now the discussing of a hybrid model where you maybe not only pay the last affiliate, but also the previous because he had an added value to the sales process.

    Although this sound fair, in my opinion this would make commission structure intense complex because of all variables that you should take into account. For example time before sale, how many channels did the customer went through, what percentages would you determine, etc...

    So that is no option. But now an interesting one. Would you let your affiliates "compete" with your own Google, bannering or e-mail campaign? With this mean if a consumer goes to your store, inside the cookietime of the last affiliate, via a Google adwords campaign of your own. Why would you pay-out the affiliate? The last cookie is placed by Google. With this you will have a better control of your CPO, but it will have impact on the sales generated by your affiliates which can have a negative effect on you program?

    I am wondering what the opinion of other affiliate managers is on this field? Could you use the LCC method and take all online marketing campaigns in perspective? Also your own Google, bannering and e-mail campaigns?

    Gr,

    Ralph

  2. #2
    The Seal of Aproval rematt's Avatar
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    Quote Originally Posted by remkes
    Would you let your affiliates "compete" with your own Google, bannering or e-mail campaign? With this mean if a consumer goes to your store, inside the cookietime of the last affiliate, via a Google adwords campaign of your own. Why would you pay-out the affiliate? The last cookie is placed by Google.
    Ralph the reason that you would pay the affiliate with the last cookie is that Google is not an affiliate, they are a search engine. Most network and merchants terms refer to the first or last "affiliate" cookie, not cookies that represent additional advertising channels.

    The use of affiliate dollars to fund other non affiliate marketing channels is a very poor practice that cheats affiliates out of legitimately earned commissions.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  3. #3
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    Thanx Rematt, for your candid remark ;-) Personally I am wrestling with the subject. On the one hand I see your point. Budget for Google is separate from your budget for affiliation, just like offline marketing budget is.

    On the other hand, as an merchant, you want to keep the CPO under control. And if a consumer in the cookie period, which is for example 30 days, clicks on day 15 on a Google Adwords campaign and on day 25 a banner campaign which you pay on CPM bases. What is the value of the affiliate in the purchasing process of the consumer? Should he for example get the full 100% of the commission? Or is he entitled of a percentage of the 100% commission?

    In the case you pay the affiliate 100% commission the CPO is not only the affiliate commission, but also the Google and CPM amount. Ergo your CPO is much higher than you get out of your statistics of your affiliation program shows you......

    Or is this something a merchant should take all in account and lower the commission levels?

  4. #4
    The Seal of Aproval rematt's Avatar
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    Quote Originally Posted by remkes
    On the other hand, as an merchant, you want to keep the CPO under control. And if a consumer in the cookie period, which is for example 30 days, clicks on day 15 on a Google Adwords campaign and on day 25 a banner campaign which you pay on CPM bases. What is the value of the affiliate in the purchasing process of the consumer? Should he for example get the full 100% of the commission? Or is he entitled of a percentage of the 100% commission?
    Ralph, short of polling your customer base, there's really no way to know how much each marketing channel contributed to the sale. I'll concede that if the consumer clicked an ad after leaving the affiliate site, the affiliate probably wasn't 100% responsible for the sale. However, how many sales are made with no referrer information? Just suppose that an affiliate WAS responsible for some of those sales but the consumer washed their cookies prior to their purchase or used the machine at the office during lunch hour to make the purchase. So if it's fair to reduce an affiliates commission based on multiple channel referrals, wouldn't it also be fair for a merchant to establish a pool of commissions for a percentage of non referred customers to be split among all affiliates assuming that some of those customers were in fact referred by affiliates?

    OK, so that probably wouldn't work. But it does help illustrate that you can't possibly try to protect every dollar AND be fair to all channels. A merchant could devise a system where they pay based on contribution, but how would they realistically know what drove that customer to make the purchase. Hell, for all we know it was their next door neighbor that finally convinced them. Now you need to send him a check too.

    Quote Originally Posted by remkes
    In the case you pay the affiliate 100% commission the CPO is not only the affiliate commission, but also the Google and CPM amount. Ergo your CPO is much higher than you get out of your statistics of your affiliation program shows you......

    Or is this something a merchant should take all in account and lower the commission levels?
    I'd say that this is really something that you need to take in to account or remove the channel conflicts. By remove I mean, if you are doing extensive PPC, then restrict the PPC of your affiliates. However you need to look at where the majority of your conversions from PPC are coming from. I'll bet you have the main keywords covered, but I'm also willing to bet that you only have a small percentage of the long tail keywords covered. It's quit possible that it would make more sense for the merchant to only bid their trademarks and allow affiliates to bid everything else. A strategy like this would give you the low hanging fruit while keeping your PPC costs as low as possible while eliminating the channel conflict.

    I guess what I'm really trying to say is that there is no easy solution that all are going to find equitable. Probably the most economical marketing channel that you can avail yourself of is the affiliate channel. It's the only one where you compensate only on a sale. And let's face it, you don't necessarily compensate on every sale that an affiliate is responsible for or contributes to for a variety of reasons. So trying to tweak the compensation model to allow for an even greater return is just plain greedy and probably would doom your program.

    I can almost guarantee you that a solution that has a variable commission rate based on contribution will fail. I don't really believe that most affiliates are willing to put that much additional trust in a network or merchant. There are too many merchants that would take advantage of a compensation plan like the one that you've described and there are way too many ways for the affiliate to get screwed.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  5. #5
    ABW Ambassador Akiva's Avatar
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    This is something that is around since the beginning of affiliate marketing (circa 1995). The short answer is that you need to set your commission rates to take into account how many times a consumer will leave and return to your site.
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