How to Avoid Affiliate Cannibalization #13

Hey all,

Thanks for your patience this week. I was beyond thrilled to welcome a new addition to our family this week! Our second little one and our first boy, Gray DeGrange!

We are over the moon and mom and baby are doing well and finally HOME!

Now onto knowledge drops from your friend Tye and the Round Barn Labs team...

One of the most popular questions asked in the affiliate marketing industry...

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How to Avoid Affiliate Cannibalization 😲

and a more effective way to frame the problem and the solution...

DTC Ecomm brands & retailers often ask us about affiliate marketing partners cannibalizing sales.

Unfortunately, most consultants, agencies, networks, and software solutions don’t know how to help Ecomm brands, marketing leaders and affiliate managers address this challenge.

How do brands mitigate that risk?

Well first off, is there a better way to frame and discuss the problem in a way that is more accurate and less Hannibal Lector scary?

Yes!

Let’s take a bite into this juicy topic! (😀 sorry I couldn't help myself dad jokes already)

Broadly labeling affiliate verticals as non-incremental is a MISTAKE e.g. "coupon sites are non-incremental" or "loyalty partners just take credit for sales I would have gotten anyway!"

Is cannibalization possible? Yes.

Is it always the case in affiliate marketing or in particular affiliate types? No.

So how do you prevent this/mitigate as much as possible?

💪 1. Foundation: Building & testing effective sources of truth is foundational setup and test on Impact and tools like TripleWhale and Northbeam.

🔬 2. Ensure your attribution model aligns with your business and marketing and it is as accurate as possible, it's never perfect.

🤝 3. Agreement on a method: multi-touch > last click can provide a more holistic view of efforts and not overcount lower funnel affiliate partners or paid search at the expense of other channels.

This is an oversimplification for illustrative purposes generally applying credit to not just last click is a win for most e-comm brands.

Bonus: Check out this great breakdown of model options from Avinash Kaushik

🔓 4. Server to Server time baby - Recommend server-to-server tracking over pixel, and comparing data sources for large discrepancies >15%. Cookies going bye-bye = loss of fidelity with pixel tracking on many platforms, browsers, and mobile.

💯 5. Cohort analysis is your friend - surprised how few talk about running a cohort analysis by marketing channel, or in the case of affiliate marketing, partner ID to see: AOV, Revenue, ROAS, CAC/CPA, % New customers, Repeat purchase, Conversion Rate over time. Some fun bonus material on cohorts and their power if analyzed appropriately from Reforge

🧠 6. Make your promo codes smarter - Impact enables you to set up rules on coupon codes that pay out only on valid codes. I would also check out Vigilance to learn more about traffic and improve the monitoring of toolbars.

There is no need to pay out on codes you do not intend to so long as your terms are set up well. Generally speaking, it’s fair to offer affiliates what you’re already offering customers on your site at a bare minimum.

💣 7. Attribution & Incrementality > Cannibalization

1. Cannibalization as a term assumes nefarious intent, while that can exist, it is very rare. Utilizing monitoring tools such as Impact and Brandverity as well as having high quality active affiliate management can avoid this.
2. Attribution is the accurate credit applied to partner and marketing channels based on your agreed upon model e.g. last click, multi-touch, custom, first touch last touch.
3. Incrementality answers the question of whether a marketing channel is adding value if it was removed
4. Price accordingly - rather than throwing the baby out with the bathwater (removing all x type partners) the beauty of the affiliate marketing practice is you can adjust your commission rates and payouts so long as you provide notice and follow network and insertion order agreement terms & conditions.

🔥 Conclusion:

Cannibalization happens yes - partners taking credit on purchases from other channels or from organic. But it's often not a partner problem and more often a tracking, attribution, pricing, and incrementality problem. It can be managed well if you take the steps above.

Email with additional questions. This is discussed often but very few address it head on with real solutions. Tis also quite complex so take with a grain of salt and understand your business, cash flow, burn rate, CAC, LTV, MER, customer journey, and marketing mix is unique.

If you want to chat about it more - email me back, I want to help you solve this sometimes misunderstood and scary problem. Affiliate your friend and so am I!

Tye