Where’s the loyalty? Should retailers pay affiliates commission for existing customers?
Affiliate marketing is often viewed as a method to acquire new customers – which it does – but it’s not the only thing it’s good for. The assistance of established affiliate channels can not only bring new customers, they also retain existing customers.
Whilst paying affiliates more for customers may not initially sound appealing to retailers, in the long run it could prove more beneficial. As important as it is to attract customers, the most valuable ones are those who return. Maximising the potential of the affiliate channels by recognising both new and existing customers could help your brand’s long term customer retention strategy.
Acquisition or Retention?
The current commission structure rewards affiliates for directing customers to the retailer. However, commissions are only awarded when a new customer buys through the affiliate, not when an existing customers buys with them.
With this commissioning format, affiliate networks are often perceived as an acquisition channel, rather than a retention tool.
However, a successful affiliate platform doesn’t just bring new customers – they keep them. In a world of tech savvy customers, who are willing to switch providers more easily than before, the ability of an affiliate to bring back customers is something to value.
Additionally, understanding how your customers behave and through which mediums they interact with your business is valuable insight for you brands long term retention strategy.
Where is the loyalty?
The question retailers must then ask themselves is: where does customer loyalty lie? Is it with the retailer or with the affiliate channel? By ignoring returning customers through affiliate platforms, retailers cannot see where their long term customers are coming from.
When affiliates are not rewarded for existing customers, the retailer is effectively saying that the customer is loyal to the brand – the affiliate channel isn’t responsible for bringing in the customer. If this were the case, why is the customer engaging with the brand through an affiliate? With the customer choosing to purchase via the affiliate channel, the affiliate must have some involvement in the customer’s purchasing journey and their decision to purchase.
Incentivise Customer Retention
What can retailers do? If your affiliates are successfully retaining customers for you, reward them for it. By incentivising returning customers, affiliates will encourage affiliates to retain your customers too.
With comparison sites only on the rise, customer behaviour in recent years is revealing the declining prevalence of brand loyalty. Particularly for the insurance industry, customers are increasingly turning to comparison sites to find the best deal.
Consumers want “the lowest cost for the best [product] for their needs“, and they’re willing to do extensive research – up to a certain point. In 2013, 81% of consumers who used price comparison sites were searching for car insurance, while 50% searched for home insurance and 44% for energy. Those figures are only going up.
In a market and time where switching providers is increasingly common, retaining loyal customers is vital. Understanding where customer loyalty resides will enable retailers to focus their financial efforts in the right direction.
Whilst commission on returning customers needn’t be as high as acquiring new customers, implementing some financial incentive for affiliates will encourage them to retain your customers. If the affiliate is an established platform attracting healthy traffic, they clearly have loyal users who return for their services. Their increased efforts in converting returning customers is a win-win situation for both the retailer and the affiliate.
Affiliate channels are most definitely a tool to bring in new customers. However, this does not mean that acquisition cannot run alongside retention. By encouraging your affiliates to also emphasise customer retention with financial incentives, you could expand the revenue generated through affiliate channels.