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Calculating a competitive CPA is an incredibly important part of any successful affiliate programme and yet it's one of the first hurdles merchants fall at.
With more and more companies launching affiliate programmes, there is a huge amount of choice for affiliates, and if you expect them to promote your programme over your competitors, you need to set the right CPA and continually review it.
Continuing on from the trend in my last post , here are your seven tips for this week, this time on the subject of how to set the right CPA for your affiliate programme....
1) Forget CPA, think EPC – Good affiliates aren’t blinded by a big flashy CPA; it has to translate into a competitive Earnings Per Click (EPC). If your site doesn’t convert it won’t matter how high the CPA is, you still won’t be competitive.
2) Align your channels – If you see affiliate marketing as an opportunity to get sales at a discount CPA you will never realise its true potential. You should always compare your affiliate CPAs to those you are achieving in display and search activity.
If, for example, you run a search campaign, it’s worth bearing in mind that search affiliates will keep an eye on your bid prices. If they see huge discrepancies between the price you’re willing to pay per click, and the effective EPC they earn on your affiliate programme, expect to receive a call demanding a higher CPA.
3) Communicate with affiliates – These are the people you are trying to motivate so speak to them directly. If you’re just about to launch a programme, then ask your network to connect you with strong affiliates in your sector. If your goal is to offer a compelling CPA then most affiliates will be happy to give you their feedback.
4) Understand the true value of a sale/customer – This sounds obvious, but to be able to offer the best CPA possible you need to understand exactly what the customer or sale is worth to you. The best affiliate programmes are often those where the merchant has factored in the lifetime value of the customer and passed this onto the affiliate.
5) Watch the competition – Checking out your competitors' CPAs is an easy job as the information tends to be readily available. Because of EPC’s significance, it is important to dig a little deeper. Make sure you speak to your affiliate network, who should be able to provide you with average EPCs for your sector.
6) Watch the paid search space – Affiliates have more choice than ever when it comes to where they send their traffic, and it’s not just confined to CPA-based models. More and more affiliates are comparing the returns available from contextual advertising options such as Google Adsense to those available through affiliate networks.
If the keyword prices on generic terms are incredibly high, and your CPA does not reflect this, then you may see your affiliates switching to the more profitable contextual advertising.
7) Consider hybrid models – These are becoming more popular and often work by providing affiliates with a CPC rate for all traffic sent and a CPA. Under this model the merchant shares more of the risk in terms of their site converting by guaranteeing the affiliate income on the click, and then a higher bounty if their traffic converts to sales.
Duncan Jennings is the managing director of eConversions, a specialist paid on performance search marketing company.