Note. This is an interview that was originally published in a Norwegian “affiliate marketing magazine”. After working as an Affiliate Marketing Manager for several years in an eyewear company, I gained a lot of experience in dealing with different types of affiliate publishers. After it became highly popular, I decided to translate it in order to reach out to a bigger audience. After all, only 0,0007 % of the world can speak Norwegian.
What is the best way to look at “Discount Code Marketing” as an affiliate marketing advertiser?
Most online retailers will at some point consider using discount codes as part of their marketing strategy. The idea that you can give away a small discount in exchange for a customer can be quite tempting. On the other hand, you will always be in danger of giving away a discount to a customer that initially planned to purchase a product or service regardless of the discount. In other words: are you really willing to throw out a discount code to the “open market” and hope that it some way can improve the conversion rate?
Let me give you a (quick) background story
You might ask yourself: “Who is that guy who wants to educate me about affiliate marketing?”. Fair enough. My name is Amund Igesund and have worked with affiliate marketing for ten years. All of them as a publisher, but “only” two of them as Global Affiliate Marketing Manager in Motion Global. We own a number of online stores within sunglasses, contact lens and eyeglasses.
After taking over the affiliate responsibility in the business, we have achieved good results in the form of cost optimization, increased sales and recruitment of content publishers. In late 2018, we won the “Best Affiliate Campaign in APAC” at the prestigious International Performance Marketing Awards together with Revlifter as a direct result of a successful discount code strategy.
In this article, I will use what I have learned as a publisher and advertiser to make you understand why developing a “discount code strategy” is crucial for your affiliate program.
Overall Affiliate Strategy: Reward publishers based on their value creation
When I took over as Affiliate Manager in Motion Global, I first started to investigate the dynamics of our affiliate sales. I was quite surprised at how many sales came through cashback and discount code publishers. When I double-checked the numbers from Google Analytics and saw that too much of the affiliate sales were recorded as “last click sales”, I quickly understood that things had to change.
The reason for that is simple: if you don’t have publishers who give you the first introduction click to your online store, you are actually in danger of having a negative ROI on the overall affiliate marketing channel. That might sound harsh, but let me explain why that can be the case.
The examples: Why Certain Affiliate Publishers Create More Value Than Others
Let me first give you a few examples of how affiliate marketing can work and why it`s very important to label and value your publishers in different ways.
Example 1: People who wear contact lenses usually tend to compare prices before they make a new bulk order. That person will go to a price comparison website and see that your shop sell the cheapest Dailies Total 1. This person has never heard of your store before but chooses to purchase because you got the best price on the market.
Example 2: A customer has decided to buy some new Ray-Ban sunglasses for the summer season. After adding the sunglasses in the shopping cart, he or she discovers the “Your discount code here?” box in the checkout page. After going into Google and typing in “YourShop Discount Code”, he finds a discount for 5 % on Retailmenot.com. He then proceeds to your shop and finalizes the purchase.
It might already be obvious, but let me quickly conclude:
In example 1, we are getting a new, valuable customer. In example 2, we are simply losing money.
How to ensure that your Affiliate Marketing Strategy drives new customers and/or increases conversion rates?
Let me tell you what steps I took and why they have been successful.
# 1: Segmentation of publishers = segmentation of commission
We have already stated that different types of publishers play a different role in the customer journey. You could easily see that from the two examples I just gave. Publishers that recommend your products or services through information sites, blogs or social media profiles are called “content publishers“. Discount code sites are called “discount publishers” – and websites that share their commission with customers (Ebates, anyone?) are called “cashback“.
When I arrived at Motion Global, we gave all publishers equal commissions. This is not a very good strategy. There are two obvious reasons for this:
1) We had excessively high costs through the discount and cashback segments.
2) We had no opportunity to recruit content publishers organically as the commission we gave was not close to being competitive.
The new structure was as follows (note that the numbers are not necessarily true):
– Previously, we gave 10% to all publishers.
– I put all coupon and cashback publishers down to 5%.
– The cost cut gave us an increased budget to go out and recruit content publishers who believed that the original commission was not high enough. In other words: we were able to give certain content publishers up to 20 %, which was required to “get them on board”.
This is a strategy that has not only saved us too much money but also helped us gaining an awful lot of new customers and content publishers.
#2: Discount codes should ONLY be given if it comes in exchange for increased exposure
You should not accept that publishers receive discount codes unless they actively do something to promote them. Most discount code websites own one or more of the following marketing channels:
– An “e-mail” database
– Profiles on social media (Facebook, Twitter, Instagram, etc.)
– A front page where they push “special offers”
In other words, we must at least be exposed through one of these channels in order for a discount code publisher to receive a unique discount code. Often we provide unique discount codes so that the customer understands that the offer is exclusive and temporary.
For instance, if you choose to run an exclusive discount through Retailmenot, you can name the code “RETAILMENOT8” and make it applicable to 8 % of your full product range for a week straight.
#3: How to create discount codes that increase revenue?
The last major change I made was to change the type of discount codes we issued. Previously, we had a trend to give out discount codes that yielded between 5 and 10% on the entire purchase – without any clear conditions nor limitations.
I quickly checked the average order value in every market that we operated in. Based on that number, I made a rule that every single discount code would only be applicable to purchases that exceeded this amount. Please let me give you an example from Norway [again: the numbers are fake]:
The average order value was 1000,- NOK.
The T&Cs for the discount codes given would then look like this:
“DISCOUNTCODE10” will be applicable on our full product range, but only on orders above 1199,- NOK.
In this way, we were able to ensure that all purchases that went through that discount code increased our average order value.
Should I allow discount codes to be a part of my affiliate strategy?
Yes, you should.
Discount codes should be part of any affiliate strategy. If you say no to the discount code pages, you will automatically reject some of the largest and most active publishers on the market. However, you need to do things right.
Keep in mind that giving discount codes can be very expensive because it actually incurs a triple charge. Example of a “cost calculation” for a discount code publisher:
– The publisher itself will typically get 5 % of the sale.
– The affiliate network should be given between 25-35% “override” (ie a mark-up of 25-35% of the 5% that publisher gets – see full calculation below).
– 8% discount code to the customer.
This is how it looks like if the customer buys a product for 100 USD:
5 USD to the publisher.
1.5 USD to the affiliate network (30% of 5 USD).
8 USD discount is given to the customer.
This gives a COS (Cost of Sale) of USD 14.5 = 14.5%. Expensive.
That said, working with discount code publishers is both voluntary and expensive, but can be a competitive advantage if you know what you are doing. If you sit passively on the sidelines and throw out one discount code after another, you will most likely lose money.