January 26, 2016

Performance Marketing Strategies Put To The Test


January is a time for reflection: a new year, new ideas, and a new gym membership. As I don’t consider shopping for discounted cheap chocolates the day after Valentine’s Day a holiday, we can safely say that the holiday season is now behind us. And as always, there is much to learn other than to avoid the strange uncle every year on Thanksgiving.

In the midst of the holiday season, Schaaf-PartnerCentric had a merchant approach us for advice regarding the best way to capitalize on the affiliate feeding frenzy surrounding Black Friday and Christmas season. The way they saw it, there were 2 potential methods to increase revenue: doubling the commission payout to publishers promoting, or running a contest such as a $50 bonus paid to publishers making their first sales.

On the surface, the reasoning seems quite valid. It is the busiest time of the year, so publishers must be pushed to promote the brand. How can we influence affiliates to promote more than usual? Well, the age old idiom of offering the mule a carrot can encourage behavior with rewards.

Unfortunately in the barnyard of performance marketing, this logic does not always apply. In order to test this theory, we conducted an experiment with a large program during another large retail event: Back to School Events.

In previous years, we had given all publishers a significant commission increase over the holidays. After enough instances of pushing new program terms and insertion orders, the Account Manager began to wonder if this was actually effective. Eventually, the decision was made to divide publishers into 3 groups:

Group 1: Publishers were offered a new $7 off $70 coupon code.

Group 2: Publishers were offered a commission increase, however they had to manually accept the increase.

Group 3: Publishers received nothing.

After the Back to School event came and went, the results were in and quite definitive. Group 1 which had the new $7 off $70 coupon code saw the largest YOY increase in sales. Their sales were up much more than the program average – nearly 15% Year Over Year – which was a huge figure for a program that size. Their Conversion Rate and Average Order Size also increased due to the higher $70 threshold in the coupon. Publishers also created more blog posts, placements and newsletters since the coupon was a new, exciting offer.

Meanwhile, Group 2 saw only 20% of the publishers actually accept their commission increase. Of the publishers that accepted the increase, their sales growth was not significantly any better than Group 3, the publishers who received nothing. Across these other two groups the Year over Year growth was near 1%.

Publishers quote by Nick Montrose

Publishers in Group 1 not only saw their sales increase dramatically, but also responded to the new coupon code with promotional content. Publishers generally want to provide the best products and offers to their readers, and the discount code was highly motivating to them while also appealing to customers.

Based on this study, the recommendation would be to provide the content, in this case a coupon code, that not only interests the customer but also solves a problem for the publisher. In a sort of win for John Maynard Keynes and demand side economics, providing a discount for customers spurred more spending by increasing their buying power with the lower prices.

So perhaps by using the carrot, you can indeed lead a mule to water. But if you want the mule to drink, you will need something to spur that thirst, and a discount on water just may be the solution.